Shareholders stand to benefit from an increased focus on succession planning for senior management and boards of directors, according to AMP Capital’s Corporate Governance Report for 2013.
The report states shareholders are increasingly interested in how succession planning drives the quality of leadership and equips companies to capitalise on emerging opportunities and tackle short and long term challenges.
Quality of leadership is one of the many intangible factors AMP Capital considers when assessing investment opportunities.
AMP Capital Corporate Governance Manager Karin Halliday said shareholders who take an active interest in the more intangible drivers of value, such as leadership and succession planning, can make better informed investment decisions.
“A board needs to know where a company is heading and whether they have the right management in place to take them there. Shareholders play a valuable role in engaging with boards and shining a light on such issues.
“Simply asking directors about governance issues such as succession planning elevates the importance of these topics and encourages directors to address them,” said Ms Halliday.
“The same thing happened with CEO pay when the ‘Two-Strike’ rule was introduced. While companies know how they will remunerate and what management skills they need, the increased scrutiny has led to constructive dialogue with shareholders.”
The report also provides an update on the benefits of board gender diversity. AMP Capital has found the number of companies it invests in that have no women directors has fallen from 60 per cent to 34 per cent in the last four years.
Ms Halliday welcomed the improved diversity. “In my assessment, boards that have no women are more likely to have other governance issues such as board composition concerns, related party issues and remuneration concerns,” she said