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EM governance: Breaking through

2 Mar 2018

HOPES AND DREAMS

Better disclosure appears to be near the top of global investors’ wish-list when looking at the developing world for growth, while multiples on equities in the West appear a little high to some.

The treatment of minority shareholders is another concern, especially as most of the largest companies in the emerging markets are government controlled.

Streur wants to see greater transparency and disclosure of financial and non-financial data, particularly risk-orientated data. “That is going to be important for companies in emerging markets to attract a global investor base,” he adds.

Legal & General Investment Management (LGIM) corporate governance manager Jeannette Andrews puts more transparency in English as one change she would like to see.

“This is the language of corporate business,” she adds. “Improving company reporting on governance, environmental and social aspects in English and in a timely way will certainly be important to develop a culture of investor stewardship in these markets.”

Meloni adds that one area the emerging markets trail North America and Europe in is gender diversity.

“We need to improve the Corporate Governance Code, legislation and regulation. We are still behind, but I’m confident that in five to 10 years we are going to see a big improvement,” she adds.

It is not just reforming the composition and independence of company boards that is important to boost transparency. This has to go further to include the audit committee.

“The remuneration system has to be transparent,” Meloni adds. “At the moment we do not have full information about it. Sometimes we don’t know how the variable remuneration is fixed, so we don’t have a clear view on this. So the remuneration data has to be enhanced.

“There is a lot of improvement needed,” she adds.

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