The Danish government has asked a special committee on corporate governance to draft a list of recommendations covering how institutional investors can engage with investee companies.
“It is in the interest of Danish competitiveness if institutional investors use their influence to ensure good corporate governance. I have therefore asked the committee to develop a set of recommendations to strengthen active ownership,” said Danish Business and Growth Minister Troels Lund Poulsen.
According to Poulsen’s ministry, the inspiration for the recommendations comes from the UK’s Stewardship Code of 2010. That Code aims to enhance the quality of engagement between investors and listed UK companies for the sake of improving stock returns.
The impetus for the ministry’s move is a roundtable that it hosted with Danish investors and companies in 2014.
At the roundtable, it emerged that while institutional investors often vote at the annual general meetings(AGM) of Danish companies, they are reluctant to engage directly with them beforehand.
The ministry said that while such limited engagement was understandable from a resource standpoint, it meant that “Danish companies don’t get the input from investors that is beneficial and in the interest of their competitiveness.” Another problem was the reliance on engagement agents by some investors, as this, from the standpoint of companies, could sometimes lead to one-way communication, it said.
To address these issues and improve the quality of investor-company engagement, the corporate governance committee will now make recommendations. In doing so, the committee will be expanded to eleven members from nine currently. One of the committee’s members is Dorrit Vanglo, Chief Executive of the Danish pension scheme Lønmodtagernes Dyrtidsfond (LD).