The Ethos Foundation, the Swiss governance body comprising more than 200 pension funds, says it will come down hard on executives sitting on the boards of their companies.
Ethos advises on CHF37bn of assets – around 3% of the Swiss market capitalisation.
The 16th edition of its proxy voting guidelines and corporate governance principles state that it will no longer accept members of executive management as board members.
Ethos is however not opposed to executive chairs at companies with a CEO, saying in these cases the chair “often has an increased time commitment, but his list of tasks is different than that of the CEO”.
Ethos will also refuse to discharge a board (i.e. remove from liability) when a company is in a “situation of capital loss, over indebtedness, in a definitive moratorium, or there is a material uncertainty on the ability of the company to continue as a going concern”.It will also refuse to re-elect an external auditor that has been in place for more than 20 years.
The recommendations are used by Ethos’ funds as well as the institutional clients of Ethos Services, in particular a large number of Swiss pension funds.
The Ethos voting guidelines are revised annually to take account of the latest developments in corporate governance.
It says they serve a “dual purpose”. First, they set out the position on essential issues of corporate governance of an institutional investor committed to sustainable development and responsible investment. Second, they allow a “systematic and consistent” exercise of share-owner voting rights aiming at promoting the long-term interests of a company’s shareowners and other stakeholders.