ICGN Global

Governance
Principles

Influence Connect Inform

Published by the International Corporate Governance Network 2017. 5th Edition

All rights reserved. Dissemination of the contents of this paper is encouraged. Please give full
acknowledgement of the source when reproducing extracts in other published works.

ICGN, the contributors and the editor of this publication accept no responsibility for loss
occasioned by any person acting or refraining from action as a result of any views expressed in
these pages. No one should act upon such information without appropriate professional advice
after a thorough examination of the particular situation.

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 978-1-907387-21-0

© International Corporate Governance Network

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ICGN GLOBAL GOVERNANCE PRINCIPLES

ICGN Global
Governance
Principles

About ICGN
Established in 1995, ICGN Members include institutional investors with global assets under
management in excess of US$26 trillion and present in over 45 countries. Our mission is to promote
effective standards of corporate governance and investor stewardship to advance efficient markets
and sustainable economies world-wide. As such, ICGN offers an important investor perspective on
corporate governance to help inform public policy development and the encouragement of good
practices by capital market participants. For more information on ICGN, please visit www.icgn.org

3
Preamble
The ICGN Global Governance Principles (GGP) serve as ICGN’s primary standard for well-governed
companies, and have been developed in consultation with ICGN Members which includes investors
responsible for assets under management in excess of $US26 trillion. Last updated in 2013, the GGP
are reviewed periodically to ensure relevance with regulatory or market-led developments relating to
high standards of corporate governance. They embody ICGN’s mission to promote effective standards
of corporate governance and investor stewardship to advance efficient markets and sustainable
economies world-wide.

The GGP is focused around company governance and how board directors should promote
successful companies, thereby creating sustainable value creation for investors while having regard
to other stakeholders. The GGP should be read alongside the ICGN Global Stewardship Principles
(GSP) (see Annex) which set out best practices in relation to investor governance and stewardship
obligations, policies and processes. These two documents promote ICGN’s long-held position that
both companies and investors share a mutual responsibility to preserve and enhance long-term
corporate value, and thereby contribute to sustainable capital markets and societal prosperity.

Sustainability implies that the company must manage effectively the governance, social and
environmental aspects of its activities as well as its financial operations. In doing so, companies should
aspire to meet the cost of capital invested and generate a return over and above such capital. This
is achievable sustainably only if the focus on economic returns and strategic planning includes the
effective management of company relationships with stakeholders such as employees, suppliers,
customers, local communities and the environment as a whole.

The GGP apply predominantly to publicly listed companies and set out expectations around corporate
governance issues that are most likely to influence investment decision-making. They are also relevant
to non-listed companies which aspire to high standards of corporate governance practice. The GGP
are relevant to all types of board structure including one-tier and two-tier arrangements.

Both non-executive and independent non-executive directors (also known as ‘outside directors’) are
referred to throughout the GGP. This recognises the different approaches to board composition in
various markets regarding the role of executive officers, non-executive directors and independent non-
executive directors. The latter refers to directors who are free from any external relationships which may
influence the directors’ judgement.

ICGN notes that in controlled companies (where there is a dominant shareholder or block such that
they ultimately have the majority power) the governance considerations are primarily concerned with
protecting the interests of minority shareholders. In this regard, many of the recommendations in the
GGP will apply but others may be less relevant.

Ownership of equity has provided the traditional investor focus on governance, however many
investors offer a range of investment strategies, which can include corporate bonds or other fixed

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ICGN GLOBAL GOVERNANCE PRINCIPLES

income instruments as well as equities. Increasingly, holders of debt securities also recognise the
importance of good corporate governance to protect their fixed income investments. Therefore the
GGP are of relevance to a company’s core financial stakeholders, which can include both long-term
bond holders and long-term equity investors. In many areas the interests of creditors and shareholders
overlap. But conflicts can also exist, and creditors and shareholders may not always define good
governance the same way. The GGP focus primarily on areas where shareholder and creditor
interests in governance are aligned. In areas of conflict shareholders and creditors may have different
governance preferences; in such situations the GGP focus primarily on the shareholder perspective.

The GGP are intended to be of general application, irrespective of national legislative frameworks or
listing rules. As global recommendations, they should be read with an understanding that local rules
and cultural norms may lead to different approaches to governance practices. National codes reflect
local standards and explanation is encouraged where there is divergence from the GGP against
this framework. Members of the ICGN support the flexible application of GGP and the specific
circumstances of individual companies, shareholders and the markets within which they operate
should be recognised.

First initiated at the founding of the ICGN in 1995, this is the fifth edition of the GGP. The Principles are
supplemented by ICGN Guidance on a range of governance themes which are issued periodically to
elaborate on key concepts and practices. Both the GGP and the more specific Guidance pieces are
often used by ICGN members as benchmarks in assessing investee company governance practices,
in voting guidelines and are referenced by academia. ICGN Principles and Guidance also serve as an
international source of best practice which influences corporate governance regulatory developments
and standard setting around the world.

ICGN Principles and Guidelines are freely and publicly available on the ICGN website (www.icgn.org).

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6
ICGN GLOBAL GOVERNANCE PRINCIPLES

Contents

Part 1: ICGN Global Governance Principles

Part 2: Guidance

2.1 Board role and responsibilities 11

2.2 Leadership and independence 14

2.3 Composition and appointment 16

2.4 Corporate culture 19

2.5 Risk oversight 20

2.6 Remuneration 21

2.7 Reporting and audit 24

2.8 Shareholder rights 29

Annex: ICGN Global Stewardship Principles 33

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8
ICGN GLOBAL GOVERNANCE PRINCIPLES

Part 1:
ICGN Global
Governance
Principles

Principle 1: Board role and responsibilities

The board should act on an informed basis and in the best long-term interests of the company
with good faith, care and diligence, for the benefit of shareholders, while having regard to
relevant stakeholders, including creditors.

Principle 2: Leadership and independence

Board leadership calls for clarity and balance in board and executive roles and an integrity of process
to protect the interests of minority investors and promote success of the company as a whole.

Principle 3: Composition and appointment

There should be a sufficient mix of directors with relevant knowledge, independence, competence,
industry experience and diversity of perspectives to generate effective challenge, discussion and
objective decision-making.

Principle 4: Corporate culture

The board should adopt high standards of business ethics, ensuring that its vision, mission
and objectives are sound and demonstrative of its values. Codes of ethical conduct should be
effectively communicated and integrated into the company’s strategy and operations, including risk
management systems and remuneration structures.

Principle 5: Risk oversight

The board should proactively oversee, review and approve the approach to risk management
regularly or with any significant business change and satisfy itself that the approach is
functioning effectively.

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Principle 6: Remuneration
Remuneration should be designed to effectively align the interests of the CEO and executive
officers with those of the company and its shareholders to help ensure long-term performance
and sustainable value creation. The board should also ensure that aggregate remuneration is
appropriately balanced with the needs to pay dividends to shareholders and retain capital for
future investment.

Principle 7: Reporting and audit

Boards should oversee timely and high quality company disclosures for investors and other
stakeholders relating to financial statements, strategic and operational performance, corporate
governance and material environmental and social factors. A robust audit practice is critical for
necessary quality standards.

Principle 8: Shareholder rights

Rights of all shareholders should be equal and must be protected. Fundamental to this protection
is ensuring that shareholder voting rights are directly linked to the shareholder’s economic stake,
and that minority shareholders have voting rights on key decisions or transactions which affect their
interest in the company.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

Part 2:
Guidance to
the Principles

Principle 1: Board role and responsibilities

The board should act on an informed basis and in the best long-term interests of the
company with good faith, care and diligence, for the benefit of shareholders, while having
regard to relevant stakeholders, including creditors.

Guidance

1.1 Responsibilities b) monitor the effectiveness of the

company’s governance, environmental
The board is accountable to shareholders
policies, and social practices, and
and relevant stakeholders and
adhere to applicable laws;
responsible for preserving and enhancing
sustainable value over the long-term. c) embody high standards of business
In fulfilling their role effectively, board ethics and oversee the implementation
members should: of codes of conduct that engender a
corporate culture of integrity;
a) guide, review and approve the
company’s mission and purpose, d) oversee the management of potential
its corporate strategy and financial conflicts of interest, such as those
planning, including major capital which may arise around related party
expenditures, acquisitions and transactions;
divestments;

11
 e) oversee the integrity of the company’s should clearly explain such procedures to
accounting and reporting systems, shareholders, including how they assess
compliance with internationally stakeholder input, and provide guidance
accepted accounting standards, the relating to compliance with disclosure and
effectiveness of systems of internal other relevant market rules.
control, and the independence of the
external audit process; 1.3 Commitment
f) oversee the implementation The board should meet regularly to
of effective risk management discharge its duties and directors should
and proactively review the risk allocate adequate time to board meeting
management approach and policies preparation and attendance. Board
annually or with any significant members should know the business, its
business change; operations and senior management well
g) ensure a formal, fair and transparent enough to contribute effectively to board
process for nomination, election and discussions and decisions.
evaluation of directors;
1.4 Directorships
h) appoint and if necessary remove,
the chief executive officer (CEO) and The number, and nature, of board
develop a CEO succession plan which appointments an individual director
should be regularly reviewed; holds (particularly the chair and
executive directors) should be carefully
i) align CEO and senior management
considered and reviewed on a regular
remuneration against appropriate
basis and the degree to which each
performance criteria with the longer-
individual director has the capacity to
term interests of the company; and
undertake multiple directorships should
j) conduct an objective board be clearly disclosed. This consideration
evaluation on a regular basis, should reflect the nature of existing
consistently seeking to enhance board board commitments, as well as any
effectiveness including an external commitments relating to foundations or
review once every three years. charities. While ICGN generally seeks
to avoid prescriptive caps, normally, an
1.2 Dialogue individual director should not hold more
than 3 or 4 directorships of any sort, and

The board, particularly non-executive this should be substantially less for a
directors, should make available director with executive responsibilities, as
communication channels for meaningful well as for the board chairman and key
dialogue on governance matters with committee chairs.
shareholders, creditors and other
stakeholders as appropriate. Boards

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ICGN GLOBAL GOVERNANCE PRINCIPLES

1.5 Induction 1.8 Access to management

The board should have in place a formal The board should have a process where
process of induction for all new directors directors, including independent non-
so that they are well-informed about the executive independent directors, can
company as soon as possible after their have access to a company’s executive
appointment. This includes building an management and other relevant senior
understanding of its strategy, business management.
operations, regulatory obligations and
other fundamental business drivers.
Directors should regularly refresh
their skills and knowledge, through
training as required, to discharge their
responsibilities.

1.6 Committees
The board should establish committees
to deliberate on issues such as audit,
executive and non-executive director
remuneration and director nomination.
Where the board chooses not to establish
such committees, the board should
disclose this and the procedures it
employs to discharge its responsibilities
effectively in an independent manner.
The duties and membership of such
committees should be fully disclosed.

1.7 Advice
The board should receive advice on its
responsibilities under relevant law and
regulation, usually from the company
secretary or an in-house general counsel.
In addition, the board should have access
to independent advice as appropriate and
at the company’s expense.

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Principle 2: Leadership and independence
Board leadership calls for clarity and balance in board and executive roles and an integrity
of process to protect the interests of minority investors and promote success of the
company as a whole.

Guidance 2.3 CEO succession to Chair

The practice of a company’s retiring CEO
2.1 Chair and CEO remaining on the board as a director
The board should be chaired by an should be discouraged, regardless of
independent non-executive director. any cooling off period, or in the event this
There should be a clear division of practice does take place, the retiring CEO
responsibilities between the role of should not serve on board committees
the chair of the board and executive that require independent representation.
management. The chair should be If, exceptionally, the board decides that a
independent on the date of appointment. retiring CEO should succeed to become
chair, the board should communicate
appropriately with shareholders in
2.2 Lead Independent Director advance setting out a convincing
The board should appoint a Lead rationale and provide detailed explanation
Independent Director (sometimes referred in the annual report. Unless extraordinary
to as Senior Independent Director), even circumstances exist there should be a
when the company chair is independent. break in service between the roles (e.g. a
The Lead Independent Director provides period of at least two years).
shareholders and directors with a
valuable channel of communication 2.4 Constructive dialogue
should they wish to discuss concerns
relating to the chair. The board should The chair is responsible for leadership of
explain the reasons why its leadership the board and ensuring its effectiveness.
structure is in the best interests of the The chair should ensure a culture of
company in the annual report and keep openness and constructive dialogue
the structure under review. that allows a range of views to be
expressed. This includes setting an
appropriate board agenda and ensuring
adequate time is available for discussion
of all agenda items. There should also
be opportunities for the board to hear
from an appropriate range of senior
management.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

2.5 Independence d) has or had close family ties with any of

the company’s advisers, directors or
The board of a widely-held company senior management;
should comprise a majority of
independent non-executive directors. e) holds cross-directorships or has
Controlled companies should preferably significant links with other directors
have a majority of independent non- through involvement in other companies
executive directors, or at least, three or bodies;
(or one-third) independent directors, on
f) is a significant shareholder of the
the board.
company, or an officer of, or otherwise
associated with, a significant
2.6 Independence criteria shareholder of the company;
The board should identify in the annual g) is or has been a nominee director
report the names of the directors as a representative of controlling
considered by the board to be independent shareholders or the state;
and who are able to exercise independent
h) has been a director of the company
judgement free from any external
for such a period that his or her
influence. The board should state its
independence may have become
reasons if it determines that a director is
compromised. There is no fixed date
independent notwithstanding the existence
that automatically triggers lack of
of relationships or circumstances which
independence; the norm can differ in
may appear relevant to its determination,
varying jurisdictions between 8-12 years
including if the director:
after which a non-executive director
a) is or has been employed in an executive may no longer be deemed independent.
capacity by the company or a subsidiary Companies should be guided by local
and there has not been an appropriate norms, and directors with longer tenure
period between ceasing such should not be classified as independent
employment and serving on the board; in terms of committee appointments
or other board functions requiring
b) is or has within an appropriate period
independence.
been a partner, director or senior
employee of a provider of material
professional or contractual services to 2.7 Independent meetings
the company or any of its subsidiaries;
The chair should regularly hold meetings
c) receives or has received additional with the non-executive directors without
remuneration from the company apart executive directors present. In addition,
from a director’s fee, participates in the non-executive directors (led by the
the company’s share option plan or a lead independent director) should meet
performance-related pay scheme, or is as appropriate, and at least annually,
a member of the company’s pension without the chair present.
scheme;

15
Principle 3: Composition and appointment
There should be a sufficient mix of directors with relevant knowledge, independence,
competence, industry experience and diversity of perspectives to generate effective
challenge, discussion and objective decision-making.

Guidance 3.3 Director nomination disclosure

The board should disclose the process
3.1 Diversity for director nomination and election /
The board should disclose the company’s re-election along with information about
policy on diversity (including gender, board candidates which includes:
ethnicity, cognitive and social) in relation a) 
board member identities and rationale
to its senior management and board for appointment;
(both executive and non-executive).
Companies should report on current b) 
core competencies, qualifications,
board diversity, measurable targets and professional background;
and progress made in achieving such c) 
recent and current board and
targets. This should include reference to management mandates at other
how diversity is being achieved through companies, as well as significant
appropriate succession planning in the roles on non-profit / charitable
executive and board levels. organisations;

d) 
factors affecting independence,
3.2 Tenure
including relationship/s with controlling
Non-executive directors should serve for shareholders;
an appropriate length of time to ensure
e) 
length of tenure;
they bring an objective perspective to
the board without compromising the f) 
board and committee meeting
independence of the board. The length attendance; and
of tenure of each director should be
g) 
any shareholdings in the company.
reviewed regularly by the nomination
committee to allow for board refreshment Consolidating this disclosure in a
and diversity and retention of corporate skills matrix can be an efficient way to
knowledge. identify how key skills are accounted for
within the board as a whole. Company
disclosure could provide information on
the board recruitment process, including
on the use of external advisors, search
and selection criteria and diversity.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

3.4 Shareholder nominated directors should disclose the process for evaluation
and, as far as reasonably possible, any
The board should ensure that material issues of relevance arising from
shareholders are able to nominate the conclusions and any action taken as
candidates for board appointment, a consequence. Extending a director’s
subject to an appropriate threshold of tenure for additional terms should be
share ownership. Such candidacies premised on satisfactory evaluations of
should be proposed to the appropriate his/her contribution.
board committee and, subject to an
appropriate nomination threshold,
be nominated directly on the 3.7 Nomination committee
company’s proxy. The board should establish a nomination
committee comprised of a majority of
3.5 Elections independent non-executive directors.
The main role and responsibilities of
Accountability mechanisms may require the nomination committee should be
directors to stand for election on an described in the committee’s terms of
annual basis or stand for election at reference. This includes:
least once every three years, with annual
elections recognised as best practice. a) 
evaluating the composition of the
Shareholders should have a separate board taking into account the board
vote on the election of each director, with diversity policy;
each candidate approved by a simple
b) developing a skills matrix, by preparing
majority of shares voted.
a description of the desired roles,
experience and capabilities required
3.6 Evaluation for each appointment;
The board should rigorously evaluate c) 
leading the process for board
the performance of itself (as a collective appointments and putting forward
body), the company secretary (where recommendations to shareholders on
such a position exists), the board’s directors to be elected and re-elected;
committees and individual directors prior
d) 
upholding the principle of director
to being proposed for re-election. The
independence by addressing conflicts
board should also periodically (preferably
of interest (and potential conflicts
every three years) engage an independent
of interest) among committee
outside consultant to undertake such
members and between the
evaluations. The non-executive directors,
committee and its advisors during the
led by the lead independent director,
nomination process;
should be responsible for performance
evaluation of the chair, taking into account
the views of executive officers. The board

17
 e) 
considering and being responsible
for the appointment of independent
consultants for recruitment or
evaluation including their selection and
terms of engagement and publically
disclosing their identity and consulting
fees; and

f) 
entering into dialogue with
shareholders on the subject of board
nominations either directly or via the
board; and

g) 
proactively leading and being
accountable for the development,
implementation and continual review
of director succession planning.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

Principle 4: Corporate culture

The board should adopt high standards of business ethics, ensuring that its vision, mission
and objectives are sound and demonstrative of its values. Codes of ethical conduct should
be effectively communicated and integrated into the company’s strategy and operations,
including risk management systems and remuneration structures.

Guidance 4.4 Employee share dealing

The board should develop clear rules
4.1 Anti-corruption regarding any trading by directors
The board should ensure that and employees in the company’s own
management has implemented securities. Individuals should not benefit
appropriately stringent policies and directly or indirectly from knowledge which
procedures to mitigate the risk of bribery is not generally available to the market.
and corruption or other malfeasance.
Such policies and procedures should be 4.5 Behaviour and conduct
communicated to shareholders and other
The board should foster a corporate
interested parties.
culture which ensures that employees
understand their responsibility for
4.2 Whistleblowing appropriate behaviour. There should be
The board should ensure that the appropriate board level and staff training
company has in place an independent, in all aspects relating to corporate culture
confidential mechanism whereby an and ethics. Due diligence and monitoring
employee, supplier or other stakeholder programmes should be in place to enable
can (without fear of retribution) raise staff to understand relevant codes of
issues of particular concern with regard conduct and apply them effectively
to potential or suspected breaches of a to avoid company involvement in
company’s code of ethics or local law. inappropriate behaviour.

4.3 Political lobbying 4.6 Reincorporation

The board should have a policy on Boards should carefully assess a range of
political engagement, covering lobbying impacts if considering reincorporation or
and donations to political causes or related corporate transformations. These
candidates where allowed under law, include specific governance and investor
and ensure that the benefits and risks protections, as well as broader systemic
of the approach taken are understood, issues relating to tax, financial markets
monitored, transparent and regularly and economic impact.
reviewed by the board.

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Principle 5: Risk oversight
The board should proactively oversee, review and approve the approach to risk
management regularly or with any significant business change and satisfy itself that the
approach is functioning effectively.

Guidance 5.4 Dynamic process

The board should ensure that risk is
5.1 Proactive oversight appropriately reflected in the company’s
Strategy and risk are inseparable and strategy and capital allocation. Risk
should permeate all board discussions should be managed accordingly in a
and, as such, the board should consider rational, appropriately independent,
a range of plausible outcomes that could dynamic and forward-looking way. This
result from its decision-making and actions process of managing risks should be
needed to manage those outcomes. continual and include consideration of a
range of plausible impacts.

5.2 Comprehensive approach

5.5 Risk committee
The board should adopt a comprehensive
approach to the oversight of risk which While ultimate responsibility for a
includes material financial, strategic, company’s risk management approach
operational, environmental, and social rests with the full board, having a risk
risks (including political and legal committee (be it a stand-alone risk
ramifications of such risks), as well as any committee, a combined risk committee
reputational consequences. Fundamental with nomination and governance,
to this is the board’s agreement on its risk strategy, audit or other) can be an
appetite, and the board should seek to effective mechanism to bring the
publicly communicate this in basic terms. transparency, focus and independent
judgement needed to oversee the
company’s risk management approach.
5.3 Risk culture
The board should lead by example
and foster an effective risk culture that
encourages openness and constructive
challenge of judgements and assumptions.
The company’s culture with regard to
risk and the process by which issues are
escalated and de-escalated within the
company should be evaluated periodically.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

Principle 6: Remuneration
Remuneration should be designed to effectively align the interests of the CEO and
executive officers with those of the company and its shareholders to help ensure long-
term performance and sustainable value creation. The board should also ensure that
aggregate remuneration is appropriately balanced with the needs to pay dividends to
shareholders and retain capital for future investment.

Guidance 6.3 Performance

Performance related elements (such as
6.1 Level LTIPs) should integrate risk considerations
The board is responsible for ensuring so that there are no rewards for taking
that remuneration is reasonable and inappropriate risks at the expense of
equitable in both structure and quantum, the company and its shareholders.
and is determined within the context Performance related elements should be
of a company’s values, internal reward rigorous and measured over timescales,
structures and competitive drivers while and with methodologies, which help
being sensitive to the expectations of ensure that performance pay is directly
stakeholders and societal norms. correlated with sustained value creation.
Companies should include provisions
in their incentive plans that enable the
6.2 Structure company to withhold the payment of
Remuneration should be structured in a any sum (‘malus’), or recover sums paid
simple manner and balance salary levels (‘clawback’), in the event of serious
appropriately in comparison with the level misconduct or a material misstatement in
of benefits such as bonuses, deferred the company’s financial statements.
stock options or long-term incentive plans
(LTIPs). The use of restricted stock with
long-term vesting and holding periods
brings the benefit of simplicity compared
with metric-based performance
awards (such as LTIPs). Remuneration
Committees are encouraged to consider
whether restricted stock could be
introduced alongside, or as an alternative
to LTIPs, as long as their use is consistent
with the company’s capital allocation
model, and provided that award size is
reduced materially to take account of
the greater certainty of vesting due to
absence of performance hurdles.

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6.4 Disclosure 6.6 Remuneration policy
The board should disclose clear and Shareholders should have an opportunity,
understandable remuneration policies where a jurisdiction allows, to a binding
and reports which are aligned with the vote on executive remuneration policies
company’s long-term strategic objectives. (usually every three years), particularly
Such disclosure should facilitate where significant change to remuneration
comparability and accountability, and structure is proposed.
include reference to how awards were
deemed appropriate in the context of the 6.7 Annual remuneration report
company’s underlying performance and
long term strategic objectives. It should Shareholders should have an advisory
also indicate whether remuneration vote on the annual remuneration report.
consultants were involved in the process. In the absence of local legal requirements
Disclosure should refer to executive for a binding vote or equivalent, and in
officers, directors and the CEO, and be cases where a significant minority of
reported on an individual basis, whilst shareholders (e.g. 25%) vote against a
also taking into account the company’s report, a binding vote should be triggered
overall approach to human resource the following year.
strategy. This extends to non-cash items
such as director and officer insurance, 6.8 Employee incentives
pension provisions, fringe benefits and
The board should ensure that the
terms of severance packages if any.
development of remuneration structures
for company employees reinforce, and do
6.5 Share ownership not undermine, sustained value creation.
The board should disclose the company Performance-based remuneration for
policy concerning ownership of shares staff should incorporate risk, including
by the CEO, non-executive directors measuring risk-adjusted returns, to
and executive officers. This should help ensure that no inappropriate or
include the company policy as to how unintended risks are being incentivised.
share ownership requirements are to be While a major component of most
achieved and for how long they are to be employee incentive remuneration is likely
retained. The use of derivatives or other to be cash-based, these programmes
structures that enable the hedging of an should be designed and implemented in
individual’s exposure to the company’s a manner consistent with the company’s
shares should be discouraged. long-term performance drivers.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

6.9 Non-executive director pay d) 

appointing any independent
remuneration consultant including their
The board should ensure that pay for a selection and terms of engagement
non-executive director and/or a non- and disclosing their identity and
executive chair is structured in a way consulting fees; and
which ensures independence, objectivity
and alignment with shareholders’ e) 
maintaining appropriate
interests. Performance-based pay should communication with shareholders
not be granted to non-executive directors on the subject of remuneration either
and non-executive chairs. directly or via the board.

6.10 Remuneration committee

The board should establish a
remuneration committee comprised
of a majority of independent non-
executive directors. The main role and
responsibilities of the remuneration
committee should be described in the
committee terms of reference. This
includes:

a) 
determining and recommending to the
board the company’s remuneration
philosophy and policy which
should take into account pay and
employment conditions within the
context of the company as a whole
and its human resource strategy;

b) 
designing, implementing, monitoring
and evaluating short-term and long-
term share-based incentives and other
benefits schemes including pension
arrangements, for all executive
officers, directors and the CEO;

c) 
ensuring that conflicts of interest
among committee members and
between the committee and its
advisors are identified and avoided;

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Principle 7: Reporting and audit
Boards should oversee timely and high quality company disclosures for investors and
other stakeholders relating to financial statements, strategic and operational performance,
corporate governance and material environmental and social factors. A robust audit
practice is critical for necessary quality standards.

Guidance 7.3 Affirmation

The board should affirm that the
7.1 Comprehensive disclosure company’s annual report and accounts
The board should present a balanced present a true and fair view of the
and understandable assessment of the company’s position and prospects. As
company’s position and prospects in appropriate, taking into account statutory
the annual report and accounts in order and regulatory obligations in each
for shareholders and other stakeholders jurisdiction, the information provided in
to be able to assess the company’s the annual report and accounts should:
financial performance, business model, a) 
be relevant to investment decisions,
strategy and long-term prospects. While enabling shareholders to evaluate
shareholders are a primary audience for risks, past and present performance,
company reporting it is also of relevance and to draw inferences regarding
to creditors who provide risk capital and future performance;
bear the residual risk of the company.
b) 
enable investors, who put up the
risk capital, to fulfil their stewardship
7.2 Materiality responsibilities to assess company
The board should disclose relevant and management and the strategies
material information on a timely basis adopted;
so as to allow shareholders to take into
c) 
be a faithful representation of the
account information which assists in
events it purports to represent;
identifying risks and sources of wealth
creation. Issues material to shareholders d) 
generally be neutral and report
should be set out succinctly in the annual activity in a fair and unbiased way
report, or equivalent disclosures, and except where there is uncertainty.
approved by the board itself. Prudence should prevail such that
assets and income are not overstated
and liabilities and expenses are
not understated. There should be
substance over form. Any off-balance
sheet items should be appropriately
disclosed;

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ICGN GLOBAL GOVERNANCE PRINCIPLES

e) 
be verifiable so that when a systematic e) 
the principal risks to the company’s
approach and methodology is used business model and the achievement
the same conclusion is reached; of its strategic objectives, including
risks that could threaten its viability.
f) 
be presented in a way that enables
comparisons to be drawn of both the
entity’s performance over time and 7.5 Integrated reporting
against other entities; and The board should provide an integrated
g) 
recognise the ‘matching principle’ report that puts historical performance
which requires that expenses are into context, and portrays the risks,
matched with revenues. opportunities and prospects for
the company in the future, helping
shareholders and stakeholders
7.4 Solvency risk
understand a company’s strategic
The board should confirm in the annual objectives and its progress towards
report that it has carried out a robust sustainable value creation. Such
assessment of the state of affairs of the disclosures should:
company and any material risks, including
a) 
be linked to the company’s business
to its solvency and liquidity that would
model;
threaten its viability. The board should
state whether, in its opinion, the company b) 
be genuinely informative and include
will be able to meet its liabilities as they forward-looking elements where this
fall due and continue in operation for will enhance understanding;
the foreseeable future, explaining any
c) 
describe the company’s strategy, and
supporting assumptions and risks or
associated risks and opportunities,
uncertainties relevant to that and how
and explain the board’s role in
they are being managed. In particular,
assessing and overseeing strategy
disclosure on risk should include a
and the management of risks and
description of:
opportunities;
a) 
risk in the context of the company’s
d) 
be accessible and appropriately
strategy;
integrated with other information, for
b) 
risk to returns expected by example remuneration, that enables
shareholders with a focus on key shareholders to obtain a picture of the
consequences; whole company;

c) 
risk oversight approach and e) 
include information around risks
processes; and opportunities associated with
environmental, social and governance
d) 
how lessons learned have been
matters which are material to the
applied to improve future outcomes;
company’s strategy and performance;
and

25
 f) 
use key performance indicators that 7.8 Audit rotation
are linked to strategy and facilitate
comparisons; The engagement partner should
be named in the audit report and
g) 
use objective metrics from external audit rotation should be promoted at
standard setters to allow for appropriate intervals both at the audit
comparisons between companies partner and firm level. The company
or apply evidence-based estimates should publish its policy on audit firm
where external metrics do not exist; rotation. If the auditor resigns then
and the reasons for the resignation should
be publicly disclosed by the resigning
h) 
be strengthened where possible
auditor.
by independent assurance that is
carried out annually having regard to
established disclosure standards. 7.9 Shareholder approval of auditor
appointment
7.6 Internal controls The selection of the external auditor
should be subject to shareholder approval
The board should oversee the
and the board should consider and report
establishment and maintenance of
to shareholders on the independence of
an effective system of internal control
the auditor on an annual basis.
which should be measured against
internationally accepted standards of
internal audit and tested periodically for 7.10 Auditor communications
its adequacy. Where an internal audit
The audit committee should engage
function has not been established, full
with the company’s auditor to discuss
reasons for this should be disclosed
any risks or other concerns that were
in the annual report, as well as an
significant to the audit process, including
explanation of how adequate assurance
any significant questions or disputes
of the effectiveness of the system of
regarding accounting practices. The
internal controls has been obtained.
audit committee report should include a
summary of its discussions with auditors,
7.7 Independent external audit including how any major concerns
were addressed, to enhance investor
The board should publish the report
confidence in the audit process.
from the external auditor which should
provide an independent and objective
opinion whether the accounts give a true
and fair view of the financial position and
performance of the company.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

7.11 Non-audit fees b) maintaining oversight of key

accounting policies and accounting
The audit committee should, as far as judgements which should be in
practicable, approve any non-audit accordance with generally accepted
services and related fees provided by the international accounting standards,
external auditor to ensure that they do and disclosing such policies in the
not compromise auditor independence. notes to the company’s accounts;
The non-audit fees should be disclosed
in the annual report with explanations c) agreeing the minimum scope of the
where appropriate. Non-audit fees should audit as prescribed by applicable
normally be less than the audit fee and, if law and any further assurance that
not, there should be a clear explanation the company needs. Shareholders
as to why it was necessary for the auditor (who satisfy a reasonable threshold
to provide these services and how the of shareholding) should have the
independence and objectivity of the audit opportunity to discuss the results
was assured. of the completed audit should they
wish to;
7.12 Audit committee d) assuring itself of the quality of the
audit carried out by the external
The board should establish an audit
auditors and assessing the
committee comprised entirely of
effectiveness and independence of
independent non-executive directors. At
the auditor each year. This includes
least one member of the audit committee
overseeing the appointment,
should have recent and relevant financial
reappointment and, if necessary, the
expertise. The chair of the board should
removal of the external auditor and
not be the chair of the audit committee,
the remuneration of the auditor. There
other than in exceptional circumstances
should be transparency in advance
which should be explained in the annual
when the audit is to be tendered so
report. The main role and responsibilities
that shareholders can engage with the
of the audit committee should be
company in relation to the process
described in the committee’s terms of
should they so wish;
reference. This includes:
e) ensuring that contracts with the
a) monitoring the integrity of
auditors do not contain specific limits
the accounts and any formal
to the auditor’s liability to the company
announcements relating to the
for consequential damages or require
company’s financial performance, and
the company to use alternative
reviewing significant financial reporting
dispute resolution;
judgements contained in them;

27
 f) assuring that a robust system of
internal financial controls is in place
to provide for reliable financial and
operational information;

g) engaging, when appropriate, new

audit firms to improve market
competition and broaden the pool of
credible audit service providers;

h) having appropriate dialogue with the

external auditor without management
present and overseeing the interaction
between management and the
external auditor, including reviewing
the management letter provided by
the external auditors and overseeing
management’s response; and

i) reporting on its work and conclusions

in the annual report.

28
ICGN GLOBAL GOVERNANCE PRINCIPLES

Principle 8: Shareholder rights

Rights of all shareholders should be equal and must be protected. Fundamental to
this protection is ensuring that a shareholder’s voting rights are directly linked to the
shareholder’s economic stake, and that minority shareholders have voting rights on key
decisions or transactions which affect their interest in the company.

Guidance a) 
appointment or removal of a director,
with or without cause, by a majority of
8.1 Share classes votes cast;

Ordinary or common shares should feature b) 

amendments to governing documents
one vote for each share. Divergence from of the company such as articles or
a ‘one-share, one-vote’ standard, which by-laws;
gives certain shareholders power or c) 
company share repurchases (buy-
control disproportionate to their economic backs);
interests, should be avoided. In the event
of the existence of such classes, they d) 
issuance of additional shares, noting
should be disclosed and explained and the board should be mindful of dilution
sunset mechanisms should be put into of existing shareholders and provide
place. Dual class share structures should full explanations where pre-emption
be discouraged, and, where they are in rights are not offered;
place, kept under review and should be e) 
shareholder rights plans (‘poison
accompanied by commensurate extra pills’) or other structures that act
protections for minority shareholders, as anti-takeover mechanisms. Only
particularly in the event of a takeover non-conflicted shareholders should be
bid. The board should disclose sufficient entitled to vote on such plans and the
information about the material attributes of vote should be binding. Plans should
all of the company’s classes and series of be time limited and put periodically to
shares on a timely basis. shareholders for re-approval;

f) 
proposals to change the voting rights
8.2 Major decisions
of different series and classes of
The board should ensure that shares; and
shareholders have the right to vote on
g) 
material and extraordinary transactions
major decisions which may change the
such as mergers and acquisitions.
nature of the company in which they have
invested. Such rights should be clearly
described in the company’s governing
documents and include shareholder
approval to authorise:

29
8.3 Conflicts of interest 8.5 Shareholder approval of RPTs
The board should ensure that policies Shareholders should have the right
and procedures on conflicts of interest to approve significant RPTs above an
are established, understood and appropriate materiality threshold, and
implemented by directors, management, this should be based on the approval of
employees and other relevant parties. a majority of disinterested shareholders. 
If a director has an interest in a matter The board should submit the transaction
under consideration by the board, then for shareholder approval in the notice of
the director should promptly declare such the meeting and disclose (both before
an interest and be precluded from voting concluding the transaction and in the
on the subject or exerting influence. company’s annual report):
The use of relationship agreements with
a) the identity of the ultimate beneficiaries
controlling shareholders is encouraged to
including, any controlling owner and any
ensure that real or potential conflicts of
party affiliated with the controlling owner
interest are avoided or mitigated.
with any direct / indirect ownership
interest in the company;
8.4 Related party transactions
b) other businesses in which the controlling
The board should disclose the process shareholder has a significant interest; and
for approving, reviewing and monitoring
related party transactions (RPTs) and c) shareholder agreements (e.g.
any inherent conflicts of interest which, commitments to related party payments
for significant transactions, includes such as licence fees, service agreements
establishing a committee of independent and loans).
directors. This can be a separate
committee or an existing committee 8.6 Shareholder questions
comprised of independent directors,
The board should allow a reasonable
for example the audit committee. The
opportunity for shareholders at a general
committee should review significant
meeting to ask questions about or make
RPTs to determine whether they are in
comments on the management of the
the best interests of the company and, if
company, and to ask the external auditor
so, to determine what terms are fair and
questions related to the audit.
reasonable. The conclusion of committee
deliberations on significant RPTs should
be disclosed in the company’s annual 8.7 Shareholder resolutions
report to shareholders. The board should ensure that shareholders
have the right to place items on the
agenda of general meetings, and to
propose resolutions subject to reasonable
limitations. Shareholders should be enabled
to work together to make such a proposal.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

8.8 Shareholder meetings place to make the protection effective

and affordable. Where national legal
The board should ensure that remedies are not afforded, the board
shareholders, of a specified portion of its is encouraged to ensure that sufficient
outstanding shares or a specified number shareholder protections are provided in
of shareholders, have the right to call a the company’s bylaws.
meeting of shareholders for the purpose
of transacting the legitimate business of
the company. 8.11 General meetings
Shareholder meetings should be clearly
8.9 Thresholds communicated in a timely way and allow
for all shareholder votes to be received by
Any threshold associated with proxy and counted and confirmed.
shareholder resolutions, shareholder
proposals or other such participation,
should ensure the matter under 8.12 Shareholder identification
consideration is likely to be of importance The board should ensure that the
to all shareholders. The threshold should company maintains a record of the
take into consideration the degree registered owners of its shares or those
of ownership concentration in order holding voting rights over its shares.
to ensure minority shareholders are Registered shareholders, or their agents,
not prevented from putting items on should provide the company (where
the agenda. anonymity rules do not preclude this)
with the identity of beneficial owners or
8.10 Equality and redress holders of voting rights when requested
in a timely manner. Shareholders should
The board should ensure that be able to review this record of registered
shareholders of the same series owners of shares or those holding voting
or class are treated equally and rights over shares. It is ultimately the
afforded protection against misuse shareholders’ responsibility to identify
or misappropriation of the capital themselves by ensuring they appear
they provide due to conduct by the on the shareholder register directly in
company’s board, its management their own name and in any call for vote
or controlling shareholder, including confirmation.
market manipulation, false or misleading
information, material omissions and
insider trading. Minority shareholders
should be protected from abusive actions
by, or in the interest of, controlling
shareholders acting either directly or
indirectly, and should have effective
means of redress. Proper remedies
and procedural rules should be put in

31
8.13 Notice 8.16 Vote disclosure
The board should ensure that the The board should ensure that equal
general meeting agenda is posted on effect is given to votes whether cast
the company’s website at least one in person or in absentia, and all votes
month prior to the meeting taking should be properly counted and recorded
place. The agenda should be clear and via ballot. The outcome of the vote, the
properly itemised and include the date vote instruction (reported separately for,
and location of the meeting as well as against or abstain) and voting levels for
information regarding the issues to be each resolution should be published
decided at the meeting. promptly after the meeting on the
company website. If a board-endorsed
8.14 Vote deadline resolution has been opposed by a
significant proportion of votes (e.g. 25%
The board should clearly publicise a date or more), the company should explain
by which shareholders should cast their subsequently what actions were taken to
voting instructions. The practice of share understand and respond to the concerns
blocking or requirements for lengthy that led shareholders to vote against the
share holdings should be discontinued. board’s recommendation. 

8.15 Voting procedures 8.17 Vote confirmation

The board should promote efficient, Companies should confirm to
low-cost, timely and accessible voting shareholders (where the beneficial owner
procedures that allow shareholders to appears on the share register) whether or
participate and vote in general meetings not their votes have been validly recorded
either in person or in absentia, preferably and formally counted. This normally can
by electronic means, and should not only be provided where the institutional
impose unnecessary hurdles such as investors hold shares in their own names
share-blocking. Impediments such as rather than through pooled or omnibus
requiring voting by a show of hands at the accounts which commingle the securities
general meeting should be discontinued. of multiple investors.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

Annex: ICGN Global Stewardship Principles

The ICGN Global Stewardship Principles (GSP) monitoring of explanations by investors, a
set out best practices in relation to investor “comply or explain” system would lack an
stewardship obligations, policies and processes. ultimate means of enforcement or influence.
These Principles provide a framework to A stewardship code therefore plays a critical
implement stewardship practices in fulfilling an role in providing a market-based system for
investor’s fiduciary obligations to beneficiaries investors to hold companies to account for
or clients. A cornerstone of ICGN’s policy their corporate governance practices.
programme relates to investor responsibilities
• Providing a point of reference for regulators
and making effective stewardship a reality and
and standard setters seeking to establish
the GSP draw from ICGN’s policy work in this
or review their own stewardship codes by
area over the last twenty years.
providing an overarching model of stewardship
The ICGN GSP are drafted with a view towards which has been developed from international
application in either developed or developing experience that can be adapted to the
countries. The Principles offer several possible individual situations of countries or regions.
applications, including: The ICGN GSP are therefore intended to
complement (and not supersede) national or
• Serving as an international framework for
regional codes which reflect domestic realities,
global stewardship policies developed by
laws and governance standards. If there is a
investors seeking to signal their approach
difference or conflict between the ICGN GSP
to stewardship, either when investing in
and the local code, it is ICGN’s expectation
markets without codes or when they invest
that the investor in the local market should first
in multiple markets with differing codes. This
adhere to standards of stewardship articulated
enables investors with international portfolios
in the domestic stewardship code.
to efficiently communicate fundamental
stewardship standards in a global context. The following page highlights the seven
The GSP also provide a useful benchmark Principles.
for investors when periodically reviewing and
refreshing their in-house stewardship policies.

• Enhancing dialogue between companies

and investors by complementing Corporate
Governance Codes applied in a ‘comply or
explain’ context. In the event that a company
wishes to explain any deviation from a code
provision, shareholders should consider the
quality of the explanation and engage with
the company accordingly. Without the active

33
ICGN Global Stewardship Principles
Principle 1: Internal governance: foundations of effective stewardship
Investors should keep under review their own governance practices to ensure consistency with the
aims of national requirements and the ICGN Global Stewardship Principles and their ability to serve
as fiduciary agents for their beneficiaries or clients.

Principles 2: Developing and implementing stewardship policies

Investors should commit to developing and implementing stewardship policies which outlines the
scope of their responsible investment practices.

Principle 3: Monitoring and assessing investee companies

Investors should exercise diligence in monitoring companies held in investment portfolios and in
assessing new companies for investment.

Principle 4: Engaging companies and investor collaboration

Investors should engage with investee companies with the aim of preserving or enhancing value
on behalf of beneficiaries or clients and should be prepared to collaborate with other investors to
communicate areas of concern.

Principle 5: Exercising voting rights

Investors with voting rights should seek to vote shares held and make informed and independent
voting decisions, applying due care, diligence and judgement across their entire portfolio in the
interests of beneficiaries or clients.

Principle 6: Promoting long-term value creation and integration of

environmental, social and governance (ESG) factors
Investors should promote the long-term performance and sustainable success of companies and
should integrate material environmental, social and governance (ESG) factors in stewardship activities.

Principle 7: Enhancing transparency, disclosure and reporting

Investors should publicly disclose their stewardship policies and activities and report to beneficiaries
or clients on how they have been implemented so as to be fully accountable for the effective delivery
of their duties.

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ICGN GLOBAL GOVERNANCE PRINCIPLES

35
Contact
Email: [email protected]
Phone: +44 (0) 207 612 7011
Post: ICGN Secretariat, Saffron House, 6 -10 Kirby Street, London, EC1N 8TS, UK