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12 February 2018 • Articles

Board Agenda

Investors to focus on boardroom skills and experience in 2018

Boardroom skills and experience will be the key issue for investors in 2018, according to new  research.

Morrow Sodali, the corporate governance consultants, found that 59% of investors consider skills and experience in the boardroom their biggest ESG (environmental, social and governance) focus for this year.

Climate change is the second most important at 54%, while risk management and opportunities comes in third, at 41%. Cynthia Ayers, head of Morrow Sodali UK, told Board Agenda that the 59% represented “exponential growth”.

“That is starting to change,” said Ayers. “With [events like] Carillion there are questions: where was the board, was there sufficient scrutiny?”

Ayers said investors were becoming much more active in their approach to corporate governance. She said this was being driven by recent scandals but also by a switch to placing assets in passive funds.

“The only way you can influence the valuation of a company if you are a passive investor is through corporate governance,” said Ayers.

She suggested boards may not be aware of how much of their company’s capital is held in passive funds, and questioned the level of preparedness in boardrooms for activist investors.

“I know boards go through a crisis plan and risk management, but I wonder how many have vulnerability to activism on their agenda,” said Ayers.

Morrow Sodali also found that 68% of the investors questioned placed a “high” degree of importance on the quality of disclosures on business strategy”, and 66% said the composition of the board was of “high” importance.

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