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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
  • financed by its initiator VIP and other sponsors with a background of “Equity and Advisory” interests.

VIPsight International

Welcome to VIPsight Europe - United Kingdom


Raj Thamotheram  


17 July 2016


by Luca Gori

The victory of the LEAVE campaign in the recent so-called BREXIT referendum in the UK will have far-reaching consequences in the dynamics of the soccer player market in the British Isles. It will affect not only the Premier League but also all the clubs in the minor leagues, including those – for now at least –in Scotland. At this juncture, however, it should be said that the amended rules are unlikely to be retroactive, and furthermore, that the changes will be introduced by amendments to the book of rules.

Certain implications are short term while others will be more long-term.

The most immediate impact has very little to do with regulations but follows the drop in the value of the pound sterling in the wake of the referendum. In the short term it will have a bearing on English clubs and their purchases from non-UK clubs. That said, however, for as far reaching as the devaluation of the pound may be, the wealth of Premier League clubs and the revenue that big and not so big clubs earn from TV broadcasting rights places them in a position of great strength unequalled anywhere in the rest of Europe. A team that finds itself in the mid-lower half of the Premier League still has a budget that in other countries is only enjoyed by a few select clubs.

There are two significant consequences in the regulations concerning the transfer of foreign minors aged 16 -18 and procedures regarding granting foreign players work permits.

Article 19 of FIFA’s Laws of the Game on player status and transfer bars juvenile players who have not yet reached their 18th birthday from access to the international transfer market. This rule is waived for transfers within the European Union (EU) and the European Economic Area (EEA), in which case the minimum age is lowered to 16.

BREXIT would bar young promising European-level players from this matrix of transfer to English clubs and is an issue of considerable significance. Many English teams have made sizeable payouts all over the continent of Europe throughout the years to secure young talent and a great many players in question have risen to the occasion, and made the investment worthwhile.

The second consequence is that Brexit puts an end to the free circulation of workers bearing an EU passport. This is another thorny issue for if the post-BREXIT rules that will come into force had been applied in the past, at least 100 Premier League players would have been denied a work permit.

The rules of the Premier League under which work permits are issued to foreign players are few but require strict observance of certain basic principles. Permits to foreign players are only issued to those who, in the two years prior to their purchase, were capped for a certain percentage of matches, the actual percentage being calculated on the basis of the FIFA ranking of the national team in question. The player must have been capped to play in at least 30 percent of his country’s internationals in the previous two years if his country’s side is ranked among FIFA’s top ten. In the sides rated from 11 through 20, the percentage rises to 45 percent and so on up, the lower the ranking the higher the percentage required. All European players were by definition workers free to circulate but post BREXIT, Europeans will be equally as foreign as a player from Brazil or Senegal.

In the long term as things stand now, the new situation will take a couple of years at least to run smoothly and will probably lead to clubs investing more in home-grown players, especially juveniles who, obviously, don’t need a permit. They will be the focus of future investment and the price of the best will probably rise even higher.

There will be less European talent purchased which will have some detrimental effect on the technical skills on which the championship has based and developed its strength. It may be that limiting the number of foreign players that English clubs can purchase has the effect of raising a player’s purchase price if the purchasing club is English.



6 June 2015

Fidelio Overture – Re-writing the Chairman's role description

Author: Gillian Karran-Cumberlege


At Fidelio we have great confidence in what a talented and effective Chairman can achieve. This is confirmed on a daily basis as we engage with Chairmen on Board composition through our search mandates and also through our advisory work of Board Development. The Chairman, who is independent and non-executive, is surely the rock on which good governance is founded.  So, while conducting recent research, we have been surprised by the extent to which these key tenets of the Chairman’s role are evolving.

Regional differences
The role of Chairman is, of course, defined on a national level by company legislation and the relevant Corporate Governance code. In Germany quoted companies have two Chairmen – one of the Supervisory Board and one of the Management Board. In the US it is not uncommon to have a combined Chairman and CEO. The Board might be unitary in the UK but neither the Corporate Governance Code nor investors have any time for a “unified” Chairman/CEO role. Quite the contrary.

Despite regional differences, across all these jurisdictions the role of the Chairman has increased in importance since the Financial Crisis. Even in the US some institutional investors are very publicly looking to the Chairman to counteract the influence of an over powerful CEO.

"The chief executive may get the glory and the salary, but leading the board is an increasingly important role, requiring subtlety, maturity and an iron grip on the agenda."

Management Today, 2nd June 2014

Indeed a broad consensus has emerged across developed economies and mature capital markets that the Chairman should be independent and non-executive.

The argument is compelling. The Chairman sits at a juncture where interests collide. It is easier for a Chairman to interpret and navigate these conflicting interests, if he or she is not closely aligned to the executive or a major investor. And not having executive responsibilities allows the Chairman to retain the necessary objectivity and distance to ensure that he or she is fulfilling the duties to the shareholders and acting in the long-term interest of the company. 

But here’s the rub. When we look closely at what regulators and shareholders expect from a good Chairman, we end up with some surprising answers.

Integrity and competence are, of course, hugely important criteria for a good Chairman. If anything the emphasis on these qualities has increased. But arguably the focus on integrity and competence means that independence and non-executive status are not paramount.

Corporate Governance safeguards

So why are these critical governance safeguards being allowed to drop?

Definitions are important. At Fidelio, we understand competence in this context as the ability to be an effective Chairman. This implies good chairing skills as well as a firm grasp of business and probably also a successful track record in business. Increasingly, however, competence is being equated with sector expertise. This is particularly true in financial services where regulators are insisting on a very high degree of industry expertise including at Board level.

Given the inability of a number of bank Boards to avert collapse in the recent financial crisis, we understand this regulatory insistence. But, as we have flagged in previous Overtures our very real concern is that a Board of industry experts with deep sectorial expertise and very similar backgrounds is not well placed to fend off “group think”.

The expectation that the Chairman should be deeply familiar with the operational business of the company has other consequences. It increases the likelihood of a non-independent appointment to the role of Chairman. The appointment of a highly-regarded CFO to Chairman in 2010 within a leading UK bank is a case in point.

One reason that the Chairman needs to demonstrate a deep familiarity with the business is because key stakeholders expect it. Indeed, in recent years, the Chairman has become much more of an established point of contact for regulators, as well as shareholders.

This has the advantage of freeing up the CEO which is no bad thing but we have been struck at how the time commitment for the Chairman has increased. Indeed across the FTSE 100 there is a strengthening presumption that the Chairman only has time for one major Chair role, which may require a commitment of 2 or 3 days a week. 

This heavy time commitment is also reflected in Chairman’s remuneration in particular at the top of the FTSE or the DAX. At Fidelio we have been intrigued to see investors using remuneration as a rough and ready guide as to whether a Chairman is executive or not.

Tone from the top

Another driving force behind this increasing time commitment is the expectation of both regulators and investors that the Chairman sets the tone from the top. It can be argued that a good Chairman has always done this.

But, as regulators start to focus upon and even “measure” culture, we see Chairmen taking a much greater interest in tools of change management and culture building that previously would have been left to the executive team.

In his speech at a recent think-tank dinner a highly regarded former UK Chairman described in detail one of the best known cultural change programmes in UK corporate history. His mastery of HR transformation techniques was impressive.

"Good boards are created by good chairmen. The chairman creates the conditions for overall board and individual director effectiveness."

FRC Guidance on Board Effectiveness, 2011

Thus for a variety of reasons we are finding the role of the Chairman in many large complex companies is becoming more and more “executive”. By and large investors and regulators are willing to compromise on the non-executive status of the role to ensure a Chairman who is effective and active in driving cultural and regulatory change. After all for many organisations, particularly in financial services, this represents the licence to operate.

And this brings us to the question of independence. Of course institutional shareholders want the Chairman to safeguard their interests.

Recent IPOs suggest the emergence of a common structure. Private Equity (PE) owners, bringing a portfolio company to market, now frequently retain a sizeable holding post-IPO and very often will appoint a Chairman who also serves as an advisor to the PE parent.  This is clearly not an independent appointment but it can be a very effective one if the Chairman has deep business expertise (former FTSE 100 CEO) and / or deep relationships with other strategic investors.

Investor pragmatism

Indeed, Fidelio has been struck at how European investors are pragmatic in accepting a company’s duty to comply with the local Corporate Governance code or to explain.  Investors and regulators are typically prepared to relax the independence and non-executive criteria if the Chairman has obvious integrity and brings proven and relevant business experience. This is frequently on an interim basis but can also be permanent.

There is, however, a very clear proviso. If the Chairman is not independent, there needs to also be a credible bench of independent directors and in particular a lead or senior independent director.

The role of the Chairman is undoubtedly growing in importance externally for both shareholders and regulators. The Chairman is also growing in influence internally. This is both expanding and changing the Chairman’s role description which may well entail the Chairman becoming more executive and less independent.

On the whole we see investors taking a practical stance. Provided safeguards are in place, shareholders and regulators are focussed on the best person for the role. No bad thing and arguably a sign of dynamic and even robust governance.



24 November 2014



Chairman, thank you for the opportunity to speak in support of my nomination to join the Board of BHP Billiton (BHPB).

Ladies and gentlemen, my platform for election is the climate change and energy challenge we face, specifically its implications for BHPB shareholders.

I would like to congratulate Andrew Mackenzie and his team on the action they have taken since I raised these matters at last year’s AGM. With the articulation of a new climate change policy and extensive scenario analysis, BHP Billiton is setting the standard for the global resource industry, which is most encouraging.

But having claimed leadership, the Company must now face up to the real challenge. Despite the progress of the last 12 months, I believe that has yet to occur.

Climate change is happening faster and more extensively than officially acknowledged. The transition to low-carbon society will also occur faster than anticipated, posing serious risks for BHPB, but opening up unprecedented opportunities provided the need for rapid transformation is recognised in time.

The new policy is based on the Intergovernmental Panel on Climate Change’s (IPCC) assessment of the climate science. The IPCC conclusions are extremely important, confirming the science at a higher confidence level.

But the IPCC also has great weaknesses. The assessment is a consensus which only occurs every five or six years, meaning that much of the latest science is omitted and the outcome is inherently conservative. Further, it’s conclusions are damped-down politically.

Most importantly the IPCC does not quantify the big risks. These are the “tipping points”, caused by non-linear feedback loops, where the climate may flip from one relatively stable state to another far less conducive both to human development and to the economic stability so essential for BHPB’s prosperity. These are high-impact and what were thought to be low-probability risks. Unfortunately, these risks are now becoming reality in the Arctic, Antarctic, in the Oceans and elsewhere. Once they take hold, they may be irreversible.

This requires that prudent risk management go beyond the conservative IPCC view, recognize these big risks and take urgent action. But the Company’s risk management approach does not convey much sense of urgency. Likewise, the scenarios disclosed this year are too conventional.

The new climate policy has some serious inconsistencies:

  • Limiting climate change to the lower end of the IPCC scenarios”, is inconsistent with avoiding dangerous impacts on shareholder value.
  • The view that: “ Under all current scenarios, fossil fuels will continue to be a significant part of the energy mix for decades” is dangerously optimistic unless there is far greater urgency given to making solutions such as Carbon Capture and Storage (CCS) work, and there is no sign of that.
  • Whilst the Company claims leadership, its industry associations, the Minerals Council of Australia, and the Business Council of Australia, continue to undermine any sensible policy development.
  • BHPB has gone with the corporate herd in not contesting the Australian government’s climate denialism and winding back of sensible policy
  • Most importantly, by not acknowledging the urgency for change, major opportunities for shareholder value creation are being missed. The strategy adopted under "an enhanced incremental change from Business-as-Usual (BAU)" approach, which is, I believe, BHPB’s current position, is far different from that which should be adopted if urgent action is really accepted.

The prosperity of BHPB depends upon a stable and growing global economy. Growth now depends upon a rapid transition to a low-carbon world. Stability requires urgent action to make that transition in good order. It is no use waiting for the market, or government policy, to dictate the change, otherwise it will be to late, with the risk of substantial shareholder value destruction. Rather, proactive leadership is required to seize what is the greatest value creation opportunity in human history.

Ladies and gentlemen, the Board has recommended against my appointment on the grounds that my experience and expertise do not meet the requirements of a BHPB Non-Executive Director. There is no question that the existing directors are extremely competent in any conventional sense. However, these are not conventional times and those self-same conventional skills are, in my view, blinding the Board to the great changes already taking place in the climate and energy arena. The policy inconsistencies I have raised suggest that the Board is in need of further diversity and unconventional perspectives to complement its conventional skills.

I believe I am well-equipped to meet those needs.

So I appeal to you directly for shareholder support. Thank you for your consideration, and thank you, Chairman, for the opportunity to speak to the meeting.


27 August 2014

Whose standards count?

Why should investment professionals care about the ‘#Occupy’ protests? The majority of the public – ie, our customers – share some of the protesters’ views, even if they are not on the streets. One potent driver is the huge growth in income inequalityover recent decades. With this comes disgust with politicians for being the primary ‘enablers’.

We should be grateful that the public has not yet seen that we, institutional investors, have also actively contributed by choosing to ignore intra-firm income inequality. Put in corporate governance jargon, investors have, often as a matter of principle, ignored quantum.

This situation demonstrates the disproportionate influence of the mind-sets and power of the ‘1%’, and the lack of thinking, learning and good governance in practice among investors.

Second, it shows that there is still a disconnection between what the public is encouraged to think it is getting from the investment world and what is actually ‘under the lid’.

Third, investors could easily become a much bigger part of the solution if concerned stakeholders were to act strategically.
Let me take each in turn. To paraphrase the UK Labour Party’s spin master, Peter Mandelson, investors have been ‘intensely relaxed about executives becoming filthy rich’ and, indeed, we have made a virtue about being uninterested in pay inequality and quantum. This paradigm, set by advocates of free market capitalism, has gone global and the only question we ask is “is executive pay aligned with shareholder value?”.

But even with this rather limited goal, we have failed miserably. Several of the original advocates of the shareholder value model, such as Alfred Rappaport, have rejected the current interpretations. With notable exceptions, most investors have not engaged intellectually, let alone acted on operational implications. Since rising pay inequality is the norm at the very firms that are supposed to be the guardians of executive pay, this may not be so surprising.

Of course, investors are not the sole advocates of this mind-set. The media has reinforced hero worship of ‘celebrity CEOs’ who are often corporate shareholder-value advocates. And academics have shown an astonishing lack of intellectual curiosity. For example, I know of no serious study into the effect of growing pay disparity on employee engagement, which is allegedly a core priority.

Similarly, experienced practitioners know that egregious pay deals are good indicators of weak boards, yet this link too has received little serious attention. Nor has it been for the lack of expert warnings about the impacts of pay deals that incentivise the wrong priorities and behaviours. According to the Bank of England’s well respected director of financial stability, Andrew Haldan: “The problem lies in serious imbalances between privatised returns and socialised risks... This calls for fundamental reform.”

To summarise, like the fantastic emperor’s cloak in the fairy tale, it has been ‘obvious’ that internal pay equity is ‘irrelevant’.

My second point is about the huge gap between what the public is encouraged to think it is getting from the investment world in terms of ‘stewardship activity’ and what is actually happening. Much has been made of Say on Pay in the US and the Stewardship Code in the UK, and they certainly have much potential. But the dominant insider narrative is that these are initiatives which will work but ‘just give them time’. There is little evidence this is true: time is not the key missing ingredient. Even more importantly, and given the very high levels of social disquiet, industry attitudes would seem to be more reflective of complacency or conflicted leadership intent than pragmatism.

Third, we are now very close to the tipping point, with several actors playing the child who says the emperor is naked. In a survey commissioned by St Paul’s Institute, even finance professionals think finance and corporate executives are over-paid. Clients of private equity firms are forcing through performance deals which are more aligned with the interest of end beneficiaries and this trend will spread to other asset classes. Unions are waking up to the fact that, through member-nominated trustees of pension funds, they are enfeebling workers without even delivering decent investment returns. Religious asset owners are being pressured not to let the secular investment service tail wag the dog on this investment belief issue. But perhaps the best indicators of the coming tipping point are the fact that the business-friendly website businessinsider.com has articulated the best case for action and even CNN has taken on the task of educating its viewers.

"it was first published at IPE"