Colin Melvin, chief executive of Hermes Equity Ownership Services, has become the latest leading figure to query the effectiveness of the investor forum idea that was one of the Kay Review’s key recommendations.
The mooted forum was “very unlikely to me to deliver stewardship” Melvin said, adding: “This idea of CEOs of finance firms coming together seems rather impractical.”
His remarks came during a lecture entitled ‘Finance, business and the public good’ organised by the Tomorrow’s Company think tank. They follow similar reservations about an investor forum expressed by the likes of Invesco Perpetual’s Head of UK Equities Neil Woodford and Standard Life Investments.
The forum, which is endorsed by Business Secretary Vince Cable, is the subject of a working group put together by trade bodies the Investment Management Association (IMA), the National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI).
An investor ‘forum’ has existed in one form or another since at least the mid-1970s with varying degrees of success and designations. Most recently, in 2011, the trade body-backed Institutional Shareholders Committee morphed into what is now the Institutional Investor Committee.This committee quietly revised its terms of reference in May this year. It would now focus on policy issues and specifically “not seek to coordinate direct investor engagement with companies, this being considered more appropriately coordinated by investors themselves”. The Kay Review stipulated that the new forum should be “formally independent of any existing body” with its own secretariat.
Stephen Cohen, CEO at activist investor Governance for Owners, says a forum for collaborative engagement is “long overdue” but warns it will only help if asset owners “actively embrace the need to engage”.
Hermes’ Melvin went on to say that he is working on a project with the NAPF on a set of pay principles, following work with companies and pension funds Railpen and the Universities Superannuation Scheme, which should see the light of day “in the next couple of months”. He also argued that Europe’s planned financial transaction tax (FTT) was “not going to make things better” for asset owners, predicting that costs would ultimately be passed on to investment principals by their agents in the market.
Hermes EOS, which engages with companies on behalf of 35 clients globally with more than £125bn in assets, is owned by the BT Pension Scheme, the largest UK pension fund.