The Emergence of 'S' as a Governance Topic

How did Governance and Stewardship evolve?

In prior times, ESG lived in a tiny office down a dark corridor, metaphorically speaking. Now, it is central to governance and stewardship and has the corner office with bright sunlight. The financial crisis led to an upsurge in regulation, ranging from capital adequacy to conduct rules. It's rare to hear business call for more government regulation. Yet, this is the plea heard in private conversations with some of the largest financial companies in the UK. They face undeliverable expectations to be at the forefront of solving rising inequality, racism and environmental disaster, they tell us. One CEO of a major FTSE-100 talks about how the To-Do list for corporates will continue to grow.

What is the social aspect of ESG?

Covid-19 allied to Black Lives Matter has swung the spotlight onto the 'Social' aspect of ESG. The shareholder-first approach is being subsumed into a multi-stakeholder approach. Hedge fund Chanos is shorting gig economy companies such as ride-hailing app Uber and online food-delivery platform Grubhub. It is betting that there is going to be a greater political focus on low-wage, precarious workers. FTSE100 financial companies continually review and upgrade how they treat their permanent employees. The board is accountable for the supply chain, says one prescient FTSe-100 board director. She says the rules are already clear, and that boards are already accountable for the supply chain. The gender pay gap reporting is now a regular part of the corporate landscape for all medium and large firms, helping highlight the need for action on diversity and inclusion.

50% of foreign multinational companies report no taxable profits in the UK. Big Tech schemes are the most newsworthy, yet just as prevalent at other large, global companies.

What are the tax reforms implemented by government?

Paul Polman, the former head of Unilever, is not alone in believing that companies should embrace having to pay their fair share of tax. Building a level playing field and a sustainable economy means governments imposing tax reform. The future will involve collaboration, consensus and communication between government and the corporate sector to an unparalleled degree, writes John Defterios. The effects of the pandemic have made even fervent small government activists mutate into advocates of big spending to stave off mass unemployment and depression, he says. Defterio: Many financial services companies are looking to cut their real estate footprint due to the permanent shift to increased home working. Ensuring the heightened role of technology makes for an inclusive economic recovery is one of the biggest challenges facing financial services.