Putting it simply, corporate governance consists of the policies, practices, and procedures that guide and control the firm. In essence, corporate governance involves balancing the interests of the many stakeholders in a company, including shareholders, corporate executives, customers, suppliers, financial institutions, government agencies, and other stakeholders.
In addition to providing the framework for achieving a company’s goals, corporate governance includes practically every aspect of corporate management, such as action plans and internal controls to corporate disclosure.
Here are five corporate governance hot topics on the agenda for 2021 that we describe briefly.
Focusing On Stakeholder Needs Rather Than Shareholders Is The Corporate Purpose
To ensure a higher level of participation in social and economic life, professors argue that management boards and supervisory boards have a duty to do so in law. Diversity, tax ethics, pay ratios within the business, and climate change are among the issues raised. It is also possible to define the corporate purpose in your articles of incorporation. Is there a social or environmental impact of the business?
AGMS Are Becoming Increasingly Digital
AGMs have become more digital after the COVID-19 pandemic. The significance of virtual AGMs was evident in 2020. The management board, supervisory board, and auditor still have a difficult time engaging in a live dialogue with the shareholders. Based on the extension to 1 August 2021 of the temporary COVID-19 Justice and Security Act in the Netherlands, many AGMs will possibly take place in 2021 in hybrid or entirely virtual forms once again.
Stronger Ties with Diversity
The Dutch government has probably decided that by 2021, a minimum quota of one-third women and one-third men will apply to supervisory boards or one-tier boards of Dutch listed companies, and for all large companies a suitable and ambitious target figure will apply to supervisory boards, management boards and junior management. In addition to reporting on the progress of these companies, SER will publish annual reports.
Accountability And Transparency Requirements Need To Be Strengthened
There are more developments related to ESG in addition to those related to diversity. EU legislators are working on amending the Directive in order to make non-financial and diversity information more readily available. The IFRS are also examining how they can improve their standards, particularly those relating to sustainability reporting. By following the new ESG (Social, Economic, and Governance) Regulation (SFDR), financial service providers will be required to disclose information about investment decisions and advice that negatively impacts sustainability factors by 10 March 2021. Concerning non-ESG matters, entities are required to enter information on its ultimate beneficial owners (UBO) in the UBO register. On their first entry into the commercial register, newly established companies are required to do so.
Companies Should Be Protected By More Rules
It is anticipated that a new law will come into force soon that would allow listed companies to invoke a cooling-off period in case of shareholder activism or hostile takeovers. As well, a bill on assessing investments and takeovers for national security risks has been proposed for consultation in 2020. As well, a bill on assessing investments and takeovers for national security risks has been proposed for consultation in 2020. A retrospective assessment of the bill is permitted as of 2 June 2020, the bill’s reference date.
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