Key themes and developments on the agenda for businesses in December include government proposals on corporate governance reform, reports on improving board diversity, ending quarterly reporting and continuing preparations for GDPR. There are also some developments to look out for which are expected in early 2017.
Government proposals for corporate governance reform
Theresa May’s recent speech to the CBI set out the government’s vision for UK businesses, including corporate governance reform. The Prime Minister confirmed that there will be a green paper later this year on executive pay, accountability to shareholders, and ensuring the employee voice is heard in the boardroom.
Importantly, the speech seems to have marked a deliberate shift in emphasis with the Prime Minister stating that employee voice did not necessarily translate into direct worker board representation.
Improving diversity on boards: new recommendations
In the same speech, the Prime Minister indicated that some improvements in corporate governance could be achieved by voluntary improvements in practice, for example, in the representation of women on boards and in senior positions, or in broadening diversity.
The Hampton-Alexander Review has recently published a report on improving the gender balance in the leadership of FTSE companies. The Review builds on the work of the Davies Review in increasing the number of women on FTSE boards and extends its scope to include executive committees and direct reports to the executive committees of FTSE 350 companies. Among other things, the report recommends that FTSE 350 companies should aim for a minimum of 33% women’s representation on their boards by 2020.
The Parker Review Committee has also published a consultation version of a report into the ethnic diversity of UK boards. The report includes several recommendations that are intended to increase the ethnic diversity of FTSE 100 and FTSE 250 boards.
Action points: Comments on the Parker Review Committee consultation are requested by 28 February 2017.
Consider ending quarterly reporting
Mandatory quarterly reporting requirements were removed in 2014 and, as at 5 October 2016, just under a third of FTSE 100 companies and just over half of FTSE 250 companies had stopped publishing quarterly reports.
The Investment Association has published a public position statement calling on companies to cease quarterly reporting. Its members are concerned that the practice encourages senior management to focus on short-term fluctuations in performance, resulting in the risk of it managing the market, rather than managing the business.
Action points: If your organisation is still publishing quarterly reports, consider attending one of a series of roundtables that the IA is hosting to discuss the benefits and challenges of ending quarterly reporting.
New IA guidance on remuneration structures for 2017
The Investment Association has updated its principles for remuneration for 2017, which includes new guidance on appropriate remuneration structures.
Companies will welcome a more open and positive dialogue with shareholders, although it remains to be seen how much time shareholders will be able to commit to during the run-up to the AGM season. If the overall result is to strengthen the link between pay and performance, and give greater transparency to the process of setting executive reward, this will be welcomed by shareholders and government.
New non-financial annual statement required for years commencing after 1 Jan 2017
For financial years commencing on or after 1 January 2017, certain large listed companies will need to draw up a new annual statement relating to environmental, social and employee-related matters, respect for human rights, anti-corruption and bribery, under draft regulations to transpose into UK law the non-financial reporting directive amending the Accounting Directive (2013/34/EU). The UK regulations were laid before Parliament on 7 November and will come into force on the seventh day after they are made.
New e-privacy legislative proposal expected by end of 2016
The European Commission is expected to publish a new legislative proposal on e-privacy by the end of 2016. The Commission consulted earlier this year on the E-Privacy Directive as part of its flagship digital single market plans and published a summary report on the consultation in August.
The E-Privacy Directive concerns the processing of personal data and the protection of individuals’ privacy in the electronic communications sector. Among other things, it regulates telecoms companies’ and internet service providers’ handling of personal data and restricts the sending of unsolicited electronic direct marketing (for example, by email or text).
Continuing preparations for the General Data Protection Regulation
At the start of November, the government provided long-expected confirmation that the UK will opt into the GDPR in May 2018.
Matthew Hancock MP, the Minister of State for Digital and Culture, and Jonathan Bamford, Head of Strategic Liaison at the Information Commissioner’s Office, both spoke at Practical Law’s Future of Data Protection Forum. If you missed the event, we’ve summarised the key takeways, which include practical tips on preparing to comply with the GDPR.
This toolkit includes key resources designed to assist organisations with preparing for and complying with the GDPR.
Investigatory Powers Act expected to come into force by end of 2016
The government has stated that the Investigatory Powers Bill, which makes provision for the interception of communications, equipment interference and the acquisition and retention of communications data, including bulk personal datasets, needs to enter into force by the end of 2016.
The Bill has recently passed its third reading in the House of Lords and been returned to the House of Commons with 62 pages of amendments. The House of Lords has sought to introduce numerous additional safeguards into the interception, use and retention of communications data.
Criminal Finances Bill expected to receive Royal Assent Spring 2017
The Public Bill Committee Scrutiny Unit has been hearing oral evidence from witnesses on the Criminal Finances Bill. The common theme of the evidence before the committee was that the Bill should be expanded to include all financial crime, which had been the expectation prior to its publication.
The submissions are aligned with the Home Secretary, Amber Rudd’s, statement that the government is committed to developing “world leading legislation to combat financial crime”. In the same speech, she indicated that the government expects the Criminal Finances Bill to receive Royal Assent in spring 2017, with the powers commenced later in 2017.
New EU rules on competition damages claims expected to be implemented by end 2016
New EU rules to enable those affected by breaches of competition law to claim compensation must be implemented by 27 December.
The Damages Directive has a harmonising agenda, requiring minimum standards applicable in all member states. Implementation could have significant impact where private enforcement of competition law is not well developed, especially around issues such as disclosure and joint and several liability. It is likely that private damages actions will increase across the EU but the traditional popularity of the UK, Germany and the Netherlands as claimant-friendly jurisdictions is not likely to be significantly affected.
In a consultation in January, the Department for Business, Innovation and Skills (BIS) explained that, given the reforms introduced by the Consumer Rights Act 2015, implementation of the directive will require relatively small changes to substantive law and procedures in the UK.
Draft Finance Bill 2017 clauses to be published in December
Draft clauses for the Financial Bill 2017 will be published on 5 December. The consultation on the draft legislation is open until 30 January 2017.
Brexit: Supreme Court judgment expected early 2017
The Supreme Court granted permission for the government’s application to appeal the High Court’s judgment in R (Gina Miller and Deir Tozetti Dos Santos) v The Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin) to be heard on 5 to 8 December. Judgment is expected to follow in early 2017.
Last orders: consultations coming to a close in December
Consultations on the following matters are closing in December:
- The transposition of Article 30 of the Fourth Money Laundering Directive relating to the beneficial ownership of corporate and other legal entities.
- BEIS proposals on how the Small Business Commissioner should handle complaints by small businesses about payment issues with larger businesses.
- Business, Energy and Industrial Strategy (BEIS) Committee inquiry into the future world of work.
