Included in this issue: ICSA and Investment Association publish guidance on stakeholder engagement by boards; UK’s largest companies urged to increase transparency around workplace diversity and more...

ICSA and Investment Association publish guidance on stakeholder engagement by boards

ICSA: The Governance Institute (ICSA) and The Investment Association (IA) have published guidance to assist company boards think about how to ensure they understand and weigh up the interests of their key stakeholders when taking strategic decisions.

The guidance is designed to take board through the different elements involved in understanding and assessing the impact of a decision on key stakeholders. It is divided into seven sections dealing with: directors' duties; stakeholder identification; the composition of the board; induction and training of directors; how the board can ensure that it takes account of the impact on stakeholders in its discussions; the mechanics of engagement; and reporting and feedback. The authors believe that a focus on each of these elements is crucial and that each company's approach will be different and must be informed by its purpose, culture and values.

The guidance does not set out a comprehensive range of different approaches that should be considered but does set out some "core principles" which should guide boards (see below). The guidance also contains useful illustrative examples of how some companies have gone about achieving each of the different elements.

The guidance also notes the publication of the government's White Paper on Corporate Governance reform (click here for our overview of the proposals) in which it recommends that the UK Corporate Governance Code be amended to require listed companies to have either a designated non-executive director, a formal employee advisory council or a director appointed from the workforce, or to explain why they do not. The guidance covers each of these approaches.

The core principles state that:

• Boards should identify, and keep under regular review, who they consider their key stakeholders to be and why.
• Boards should determine which stakeholders they need to engage with directly, as opposed to relying solely on information from management.
• When evaluating their composition and effectiveness, boards should identify what stakeholder expertise is needed in the boardroom and decide whether they have, or would benefit from, directors with directly relevant experience or understanding.
• The chair, supported by the company secretary, should keep under review the adequacy of the training received by all directors on stakeholder-related matters, and the induction received by new directors, particularly those without previous board experience.
• The chair, supported by the board, management and company secretary, should determine how best to ensure that the board’s decision-making processes give sufficient consideration to key stakeholders.
• Boards should ensure that appropriate engagement with key stakeholders is taking place and is kept under regular review.
• The board should report to its shareholders on how it has taken the impact on key stakeholders into account when making decisions.
• The board should provide feedback to the stakeholders with whom it has engaged, which should be tailored to the different stakeholder groups.

ICSA and the IA state that, if necessary, the guidance will be updated following the government's corporate governance reforms expected to come into effect in June 2018, to reflect the new reporting requirements and potential UK Corporate Governance Code changes. In any event, they will review it in the second half of 2019 to reflect companies' experience of applying the guidance in practice.

UK’s largest companies urged to increase transparency around workplace diversity

The Business Minister, Margot James, has urged the UK's largest companies to increase transparency around diversity policies and targets. The call to action comes ahead of the first meeting of the Business Diversity and Inclusion Group which has been formed to coordinate action to increase diversity and inclusion in business and build on the work of a number of government-backed reviews led by senior business leaders into workplace diversity.

The group will seek to establish what information listed companies could disclose to help tackle barriers in the workplace. The Financial Reporting Council is currently considering various proposals as part of a review of the UK Corporate Governance Code. We expect the consultation on changes to the Code to be published later this year.

ESMA updates Q&A on interpretation of the Market Abuse Regulation

ESMA has published a further update to its Q&A on the EU Market Abuse Regulation (MAR). A new Q&A relates to Insider lists (Art 18, MAR) and clarifies that persons who act on behalf or account of an issuer and who come into possession of inside information have their own duty, distinct from that of an issuer, to keep an insider list. Conversely, where a third party keeps an insider list on behalf of an issuer, the issuer remains primarily responsible for it.

LSE publishes 2018 dividend procedure timetable

The London Stock Exchange (LSE) has issued its 2018 dividend procedure timetable. This sets out the requirements relating to the timing of announcements, record dates, ex-dividend dates and payments for dividends in 2018. Listed companies and those with securities quoted on AIM should comply with this timetable when declaring and paying dividends to shareholders.