Sustainability briefing |

Corporate governance and stewardship

Corporate governance and stewardship

Overview

At Travers Smith, good corporate governance is important to us and to our clients. You can find out about how we are approaching corporate governance in our own business here.
An accountable and inclusive corporate governance structure is an important feature of sustainable businesses. This site contains a range of guidance and resources to help your business, whether you are a company, an asset manager or a financial intermediary, to meet its regulatory obligations and to implement best practice procedures which promote transparency, accountability and inclusiveness in the business.

We have developed an ESG Corporate Reporting Framework to assist in navigating the increasingly complex reporting requirements for businesses. To request a copy, please register your interest here.

Key issues

Companies

For companies, good corporate governance is not just about the "core" requirements of the UK Corporate Governance Code or the QCA Corporate Governance Code, (for listed companies) or the Wates Principles (for larger private companies), as critical as these are.  It is also about ensuring that the rules, practices and processes put in place by companies (both listed and private) mean that they are appropriately managing the broader risks relating to regulatory compliance across their entire operation, ranging from bribery and corruption risk, human rights compliance, fair treatment of suppliers, and environmental protection, to the need to meet the broad swathe of investors’ ESG requirements, in order to create a long-term sustainable business.

Shareholders

Shareholders are concerned about fulfilling their stewardship obligations, and how to use their voting powers to promote sustainable business strategy and drive real change, which ensures that the ESG agenda is as important in ongoing relationships between shareholders and their investment portfolio as it is to their investment strategy and decisions.

Shareholders in listed companies

The 2020 Stewardship Code places ESG factors at the heart of effective stewardship for listed company investors: as stated in its introduction, “the new Code establishes a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.”

A considered and proactive approach is required by listed companies to respond to the investor ESG agenda. Listed companies are increasingly being called on to review and if necessary, improve their sustainability reporting so that investors can more easily understand the material ESG issues relevant to the company. There has also been an increased focus by the UK’s proxy advisors on the quality of ESG disclosures during the 2020 AGM season.

Shareholders in private companies

The private equity industry has embraced the responsible investment agenda, evidenced by the BVCA’s responsible investment toolkit which has been in existence for many years. Investors are increasingly proactive in managing ESG risks and promoting sustainable business principles during the life of the investment, and seizing the opportunities provided by good governance.

The Walker Guidelines on disclosure and transparency in private equity have increased the level of public narrative reporting for portfolio companies, helping to demonstrate that private equity investors are responsible owners and builders of businesses, and preparing investee companies for increased transparency and reporting obligations ahead of a possible listing on a public market.

Global litigation risk

Increasing transparency and a focus on the wider impacts of corporates (both at home and abroad) continue to be areas of focus for policy and law makers, as well as consumers and activist shareholders. Recent litigation based around the concept of parent duty of care and liability for the operations of subsidiaries (for example, Okpabi v Royal Dutch Shell and Vedanta v Lungowe) suggest a pressing need for tightened global risk management and governance arrangements in multinationals.

Corporate governance, and the corresponding reputational risk issues, therefore remain serious boardroom concerns.

Overview of relevant law and regulation

Our work

Our corporate governance offering to our clients includes:

  • advising on governance regulation and best practice for publicly-listed companies and large private companies
  • advising on corporate culture, directors' duties and reputation protection
  • advising on management of board level difficulties and succession
  • advising on management of hostile shareholders/approaches
  • developing robust policies and procedures, and advising on their effective implementation
  • delivering practical training on these topics (to boards, senior executive teams, legal teams and company secretaries)

Our Private Equity and Financial Sponsors team advises our investor and portfolio company clients throughout the lifecycle of the investment and on to their eventual exit. Advice provided both to management teams and investors on good governance and the pursuit of ESG goals in portfolio companies in line with the BVCA responsible investment guidelines, as well as compliance with narrative reporting requirements, is a key focus of that work.

Recent work

Examples of our work in this area include

Contacts and further reading

Sustainable business

Visit the Sustainable Business Hub to read more about ESG and Sustainable Business.

Sustainable business
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