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ICGN Sharpens Focus on Governance Ahead of G-20 GatheringSubmitted by: Subodh Mishra, Governance Institute

The International Corporate Governance Network is calling on key global leaders to consider strengthened governance practices and greater shareholder rights as a means of helping to address the credit crisis. In a Nov. 10 statement, the group said that ?while corporate governance failings were not the only cause? of the present financial crisis, better governance would ?be integral to an overall solution aimed at restoring confidence to markets? and shielding them from future crises.

The group, representing institutional investors holding roughly $15 trillion in assets, is directing its message at leaders of G-20 industrialized and emerging market nations who will gather Nov. 15 in Washington to coordinate efforts to solve the crisis.

?This is a real opportunity for governance,? said ICGN Chairman Peter Montagnon. ?The ICGN has campaigned vigorously for shareholder rights.?

ICGN officials say that a number of key corporate governance issues should be addressed in order to restore confidence to capital markets. Though it provides little in the way of specifics, the London-based group is calling broadly for greater market transparency, which it prefers to placing restrictions on such practices as short-selling and the use of derivatives. The group also cautions against abandoning ?fair-value? accounting standards and political interference in the setting of accounting standards.

These issues, along with a need for more competition in the credit ratings industry, will be a focus on the group?s engagement efforts going forward. But the primary focus will likely be on equipping shareholders with key rights, the need for which, it hopes, will resonate with G-20 leaders. In its statement, the group called for the following:

* The US debate on shareholder rights, particularly to appoint and dismiss directors should be expedited so that boards can be held to account. Weak shareholder rights limited their ability to hold boards to account, particularly in the areas of remuneration and risk management, which have been key to the development of the crisis;

* Giving shareholders a ?say on pay? is an essential part of the solution, not just in the US but in other markets where this does not yet happen;

* Globally, we need a regulatory framework that ensures fair and transparent markets which inspire confidence in financial reporting;

* Financial institutions should make greater narrative disclosure about their business models and how they manage the risks inherent to those models. This will foster productive dialogue with shareholders; and

* Voting arrangements must allow shareholders to exercise their votes across borders. At present the system does not function well and votes are lost. This is a severe handicap in a global market.

ICGN delegates will gather on Dec. 10 in Wilmington, Delaware, for the group?s mid-year meeting, the theme of which will be corporate governance and the financial crisis.

Full post as published by Institutional Shareholder Services -- Corporate Governance Blog on November 11, 2008 (boomark / email).