Investor Forum to promote shareholder activism

shareholder activism
Shareholder activism: Standard Life has abstained and opposed BP’s executive remuneration package.

Some of Britain’s biggest long-term investors have collaborated in acts of shareholder activism to tackle excessive executive pay, poor management and lax corporate governance at London-listed companies.

In a move hoped to have a dramatic impact on corporate culture, an Investor Forum has been created so shareholders can focus action on pay and auditing, and promote long-term, strategic decision-making.

And to give the new structure some bite, the forum is looking to establish an engagement action group at each company, so shareholders can co-ordinate their agitation over poor management, performance and policy.

 

Lobby groups

The forum is backed by three major industry lobby groups: the National Association of Pension Funds, the Association of British Insurers and the Investment Management Association.

Their move follow the recommendations of Prof John Kay, whose review of UK equity markets last year revealed how financial intermediaries and short-termism were distorting corporate priorities, to the detriment of pension funds and other long-term investments.

It also comes as the provisions of the Enterprise & Regulatory Reform Act 2013 increasingly take effect, giving shareholders of quoted companies a binding vote on directors’ remuneration and exit payments.

Taken together, the Act and the Investor Forum provide a potent set of new powers which, in the context of increased shareholder activism over recent years, could establish a greater sense of engagement and responsibility among senior executive team.

 

Reluctant

But that’s only provided shareholders choose to use these powers. The investor base is not only fragmented, but some large shareholders are reluctant to agitate or co-operate with others. While the dissent of large shareholders tends to grab media attention, boards can usually rely on the support of a majority.

For instance, Standard Life has abstained or voted against BP’s remuneration package at seven of the company’s last eight AGMs, without success. Indeed, at its AGM earlier this year, the BP board won the vote on executive pay with the largest majority in seven years.

But Baillie Gifford partner James Anderson, who chairs the forum working group, believes this is a game-changer. He told the Financial Times: “The Investor Forum will drive cultural change and act as a mechanism for investors to work together more effectively.”

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peterbatt

Peter a journalist with 30 years experience of freelance writing, UK national newspaper and magazine production roles, and business development. In 2007, he developed and launched a mainstream-style green consumer magazine in the UK, called GreenerLiving, as a means of promoting sustainable change ‘within the system’. GreenerLiving closed during the post-crash recession, but Peter went on to become managing editor of the international ethical business title, Ethical Performance. However, Peter felt that the CSR sector has not succeeded in changing corporate priorities anywhere near fast enough, and so I decided to leave the treadmill of corporate employment and debt accumulation to focus on my own projects. Now poorer but a billion million times happier, he writes on political, economic and social issues – usually seriously, but sometimes as satire. He's currently writing Psychopath Economics, a book about the logic of social and economic power, belief systems, and the rise and fall of societies. Peter is convinced that ordinary people must educate themselves and exercise their economic leverage if we are to avoid social and environmental destruction.

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