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€3trn investor group sets out to improve quality of engagement

Goal to make engagement “more rewarding” for investors and companies

A group of major institutional investors with combined assets of around €3trn has set up a working party to improve the quality of engagement between investors and companies in the UK.

The investors involved include Aviva Investors, BlackRock, Governance for Owners, Railpen Investments, the Universities Superannuation Scheme and Ram Trust, the investment firm founded by corporate governance pioneer Bob Monks.

Their new Stewardship Working Party has been put together with think tank Tomorrow’s Company.

The group says it aims to identify engagement styles and practices that seem to be most effective and to share that intelligence with the aim of making engagement more rewarding for investors and companies alike.
And it intends to make a significant contribution to the 2012 revision of the Financial Reporting Council’s Stewardship Code that is expected to take effect fromOctober 1. The seven-principle code was launched in 2010 as an attempt to codify engagement between institutional investors and companies.

The new project will interview directors of leading companies to provide companies’ feedback on stewardship and their criteria for good stewardship.

And it will look at how companies judge the quality of stewardship by investors – including examining sources of frustration for companies and asking what changes they would like to see in the process.

The group also intends in due course to share its work with, and get feedback from, other institutional investors.

The development comes amid increasing scrutiny on the relationship between investors and companies, with Prime Minister David Cameron this weekend saying shareholders should have more of a say in executive pay. Link