Promoting good corporate governance and sustainability policy

Eumedion supports the proposal that requires companies with at least 250 workers to publish information on the gender pay gap. This follows from Eumedion’s response to the European Commission's proposal for a directive on the principle of equal pay for equal work.

In the proposed directive provisions are introduced with the aim of combating inequality in pay between women and men. In its response, Eumedion indicates that inexplicable pay differences between women and men are unacceptable and that it sees fair and equal pay as an essential part of good employer practices. Eumedion also indicates that the primary responsibility for complying with the legal provisions on equal pay rests with the company board(s) but that shareholders also have a role to play. Eumedion points out that a necessary condition for fulfilling this role is that shareholders have sufficient information. Eumedion therefore welcomes the proposal that requires companies with at least 250 workers to publish information on the gender pay gap. Eumedion indicates that shareholders can include that information in their dialogues with companies and raise this topic at shareholders meetings. In addition Eumedion indicates in its response that the aforementioned proposal would help institutional investors to comply with their own reporting obligations under the regulation on sustainability-related disclosures in the financial services sector (SFDR). Eumedion points out that currently the data needed to report on this is not available. Furthermore Eumedion advocates that the information on the gender pay gap is included in the management report.

The position paper ‘Towards a global, investor focused standard setter for corporate non-financial reporting’ that Eumedion published today, calls on the IFRS Foundation (‘Foundation’) to expand its mission. The Foundation should establish a separate standard setting board for non-financial reporting, next to the existing International Accounting Standards Board for financial reporting. The Position Paper concludes an extensive consultation following the publication of Eumedion’s Green Paper ‘Towards a global standard setter for non-financial reporting’ published on 30 October 2019 (‘Green Paper’).

The Green Paper provided a sound starting point for a broad discussion with stakeholders. Nine respondents provided us with written feedback. The subsequent evaluation of all the input received, also provided a firm basis for the other stances in the position paper. Most notably that investors struggle to assess how a company creates long-term value and how a company lives up to the valid needs of society where non-financial performance matters; that enforceable and consistent international standards are needed to ensure that non-financial reporting is faithfully represented; and that the auditor should provide more assurance on the management report: reasonable assurance on certain non-financial key performance indicators, and limited assurance on the entire management report. Eumedion publised a feedback statement on 24 July.

The position paper further acknowledges the EU’s strong commitment to a sustainable future. Eumedion would welcome a leadership role of the EU that clearly recognises the global nature of the challenges faced; the need for, ultimately, global reporting standards; and the necessity of a governance structure of the standard setter that fosters international buy-in from jurisdictions whose commitment to a sustainable future is similar to the EU’s.

In the above light, Eumedion is pleased that the EC Commissioner Mr. Dombrovskis recently reiterated his stance that ‘… non-financial reporting standards would be open, transparent and inclusive, as we want to avoid fragmentation of global capital markets’. Eumedion remains confident that the IFRS Foundation involvement herein will remain part of the discussion on how to realise this vision.

We are also pleased to learn from the minutes of the IFRS Foundation Trustees & Due Process Oversight Committee as published last Friday, that the Trustees decided, as part of a strategic review, that a consultation paper will be published following ‘the increasing demand for global standards that provide comparable, decision-useful and auditable information to investors and other interested stakeholders’.