GlobeTax - Corporate Governance

Resources > Corporate Governance

Corporate Governance

Guidance & Policies for Issuers

Welcome to the Corporate Governance pages at GlobeTax.com. GlobeTax provides industry background materials which show how and why issuers, the companies you all invest in, and shareholders should take a more active approach to withholding tax.

Here's a simple test: Two shareholders invest in the same company. Investor A is in the same country as the company. Investor B is not. When the company declares a dividend, investor A gets 100% of the declared dividend. Investor B only gets 65% of the declared dividend.

Consider the following:

The CFO of the company knew that the company has significant shareholders, some of whom, like you, are "foreign";
The CFO knew, or should have known, that you would get less than your domestic counterpart;

Relevant Questions:

Is this fair and equitable?
Did the board of directors anticipate the disparity of shareholder's benefits?
Has the company delivered value fairly?
What action can investors take?
What action/policies should issuers take/adopt?
What is best practice?

The effect of withholding tax on dividend income is "of increasing interest" to all participants in the investment chain. Investors can come from anywhere in the world today, and they will include an assessment of how their target company treats them when it comes to maximizing yield. At the same time, Issuers are in an increasingly competitive environment to attract investor funds. As investors are also increasingly holding their stocks "long," dividend yield is an important factor to optimize. Issuers themselves are under good governance pressure to be seen to be doing the best possible job for their investors in order to retain the existing ones longer (to reduce overall funding cost) and gain news ones more easily. These two pressures are being looked at with a regulatory eye also by those with best practice in mind.

Many investors also do not have the ability to attend Annual General Meetings to make their feelings felt. So, in addition to Issuers and investors, proxy voting companies are also beginning to take a view on whether withholding tax should be an agenda item that affects how votes may be cast. GlobeTax develops and runs shareholder value programs for forward thinking Issuers who can then answer questions at Annual General Meetings, and insure that they have active plans to make sure that investors get their maximum returns.

There are three elements to consider in terms of withholding tax and good corporate governance:

The letter and spirit which identifies what you have to do versus what would be good practice and commercially intelligent to do;
The Legal angle which identifies what is likely to happen if no action is taken - does this create risk and liability?
The Probity angle which asks, and answers the question of what can be done and what should be done.