Christine Phillips is partner at Fieldfisher LLP. This post is based on her Fieldfisher memorandum. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here), and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).
Boards of listed companies face increasing risk of campaigns from investors. Activist shareholders seek value creation, passive and institutional investors are encouraged to become engaged and active through the discharge of stewardship responsibilities and ESG issues are becoming increasingly important for investors.
Remuneration
The draft UK regulations (Companies (Directors Remuneration Policy and Directors Remuneration Report) Regulations 2019 (the “2019 Regulations”)) have now been published to implement the provisions of the Second Shareholder Rights Directive (EU Directive 2017/828 (“SRDII”) with respect to remuneration. SRDII is required to be implemented in member states on 10 June 2019 and the 2019 Regulations will come into force on this date. Most of the requirements on directors’ remuneration contained in SRDII were already provided for in the UK, including the requirement to produce a remuneration report and remuneration policy which are each subject to a shareholder vote (advisory in the case of the remuneration report and binding for the policy). The Companies Act 2006 requires a remuneration policy to be approved at least every 3 years or at the next AGM or general meeting if the remuneration report was not approved at the last AGM. The 2019 Regulations will require a new remuneration policy to be brought to a vote at the next general meeting or AGM if the company loses a vote on its remuneration policy.