The Institute of Company Secretaries of India Governance

The Institute of Company Secretaries of India Governance, risk management and compliance: Global perspective Gearing up for global interface 31 August 2018 Tim Sheehy Director General, ICSA

Governance practices are global - the drivers • Growth in worldwide pensions - (US$26 bn in 2007 to US$41 bn in 2017) has put pressure on funds to ensure sustained growth through good governance • Organised institutional investors through stewardship codes are defining engagement in the major capital markets • Sustainability and the social contract to operate are the key issues • Corporate secretaries can be in the driver’s seat

Issues for pension funds • Pension design, towards a direct contribution model • Bigger impact from evolved regulations • Governance issues are challenging • Culture makes a difference • Sustainability and long- horizon investing • Technology rising • © 2018 Willis Towers Watson.

Organised institutional investors • Large institutional investors (pension funds, sovereign wealth funds) now exert significant pressure for better governance - Calipers, ACSI, Blackrock, Canadian Pension plan • 30 -year horizon and cannot sell out of large companies • Driving force behind the emergence of Stewardship Codes – UK, Italy, Japan, Brazil, Canada, EU, Kenya, Malaysia, Singapore – 14 in all

Current trends in engagement • High expectations for companies to engage with their institutional investors • Investors want access to the Chair and a regular dialogue • ESG is the growth topic as is risk management and cyber risk • Trends are the same whether in developed or developing markets

Methods of engagement: ICSA/OECD research Individual meeting 0% Email 10% 8% General meetings Collective engagement 20% 8% Analyst roadshow 30% 8% 6% Proxy solicitor 40% 4% 7% 3% Proxy advisor 50% 60% 3% Emerging (320) 5 years ago Telephone 9% 5 years ago 9% 8% 8% 9% 6% 7% 5% 5% 3% 9% 8% 4% 5% 1%2% Developed (734) Now 10% 9% 5% 5% 9% 3% 4%

Topics discussed: ICSA/OECD research

Engagement and social contract: today’s governance ‘issue’. • Social impact, climate change, and diversity…are among the phrases and issues being raised by today’s major institutional investors. Forbes magazine • “The large influx of capital into passive index funds–now [comprising] 42 percent of all publically traded funds–has put more pressure on the Black. Rocks, the Vanguards…to align themselves with…long-term strategic investment as opposed to short-termism. ” Forbes magazine • 3 Ways Shareholder Engagement Has Evolved Pw. C 1. Investors expect direct engagement with the board 2. Long-termism has become the golden standard 3. Best practices guidelines for engagement are everywhere

ASX Principles – just one example Principle 3: return of the social contract? • Current: A listed entity should act ethically and responsibly” • Proposed: A listed entity should instill and continually reinforce a culture across the organisation of acting lawfully, ethically and in a socially responsible manner.

The corporate secretary in the driver’s seat • Issuers and investors engage via the company secretary in many companies • Institutional investors, aside from performance, focus on the governance of who they invest it…and often turn to the chair and company secretary for insight • The company secretary occupies that unique position as the link between the board, management and shareholders • The company secretary is best placed to be the champion of good governance within their organisation