Promoting good corporate governance and sustainability policy

Climate reporting and executive remuneration are the two Eumedion focus points for the 2021 AGM season. These topics tend to be discussed in the dialogues Eumedion facilitates in the run-up to the 2021 general meetings, and occasionally also at the general meeting itself. Earlier this week, the so-called Eumedion Focus Letter 2021 was sent to all Dutch listed companies. 

Eumedion expects Dutch listed companies to align their climate reporting as much as possible with the recommendations of the Task Force on Climate-related Disclosures (TCFD) and of the European Commission. Eumedion also urges companies to formulate ambitious greenhouse gas emission reduction targets and to report clearly on the progress made in that respect. Furthermore, Eumedion encourages companies to set a deadline for becoming a ‘carbon neutral’ company.

Eumedion also believes that executives should feel the 'pain' of the current corona crisis if the company is forced to apply for government support, lay off employees or (significantly) reduce or cancel the dividend pay-out. In such situations, Eumedion expects the supervisory board to temporarily reduce the executives’fixed salary, cancel the 2020 annual bonus and/or not grant (conditional) performance shares or options in 2021. 

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’.