State Street Global Advisors Calls For Review of Director Election Practices in Europe

Annual Election for Corporate Directors is Key to Effective Governance

Tuesday, June 5, 2018 12:45 pm EDT

Dateline:

London

Public Company Information:

NYSE:
STT
"Well-governed companies are better positioned to navigate challenging economic conditions while protecting shareholder interests"

LONDON, 29 May, 2018 - State Street Global Advisors, the asset management arm of State Street Corporation (NYSE:STT), released today a mini white paper, Board Accountability in Europe: A Review of Director Election Practices Across the Region. The report finds that shorter director terms result in more accountable boards that are responsive to shareholder interests; and the firm is recommending annual director elections as standard, and calling upon investors, companies and regulators to work together to achieve this.

Analyzing data collected from companies in 13 European countries[1], the paper finds disparate results for the length of company directorships. While the majority of these countries set legal limits on company board terms, the firm’s research found these terms were often too long, failing to meet traditional shareholder preferences for shorter election cycles.

Countries have seen success, however, when introducing corporate governance codes that impose shorter term lengths, as these were adopted and adhered to by the majority of organisations. But in countries that do not offer directives, the standard practice is for companies to use the maximum term permitted by law.

German corporates were shown to have the weakest board accountability, with directors standing for election only once every five years, in line with Germany’s statutory term limit. Germany is closely followed by France, Spain, The Netherlands and Belgium, where board terms are four years. Conversely, the UK, Ireland, Switzerland and the Nordics were found to have the strongest board accountability, with one year terms for directors.

“Well-governed companies are better positioned to navigate challenging economic conditions while protecting shareholder interests”, said Rob Walker, head of Asset Stewardship, EMEA, at State Street Global Advisors. “Without an annual director election process, shareholders are limited in their ability to hold directors accountable and improve board quality. Furthermore no matter how dissatisfied shareholders are, in some cases they have to wait several years to hold board members accountable. Changing these rules would provide an effective mechanism to fulfil our stewardship responsibilities and improve the quality of board oversight and company performance in the long-term.”

[1] UK, Ireland, Switzerland, Finland, Sweden, Norway, Denmark, Italy, Spain, the Netherlands, France, Belgium and Germany


About State Street Global Advisors

For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s third largest asset manager with nearly US $2.70 trillion* under our care. 

*AUM reflects approx. US$36B (as of March 31, 2018) with respect to which State Street Global Advisors Funds Distributors, LLC serves as marketing agent; SSGA FD, LLC and State Street Global Advisors are affiliated.

 

Investing involves risk including the risk of loss of principal. Risk associated with equity investing includes stock values which may fluctuate in response to the activities of individual companies and general market and economic conditions. This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information.

© 2018 State Street Corporation - All Rights Reserved


Contact:

Lauren Willington
+44 20 3395 6701
lauren_willington@ssga.com

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