Myners plans ‘long-only, long-term’ investor governance activist lobby group

NAPF launches governance guidelines in response to governance debate

Paul Myners, UK financial services secretary, is pressing ahead with plans to establish a new UK corporate governance activist lobby group made up solely of long-term institutional investors. He said a new body would aim to raise the profile of corporate governance, engagement and “stewardship” as investment strategies to combat the problem of “ownerless corporations”. Speaking at a National Association of Pension Funds (NAPF) seminar on corporate governance, Myners said the independent industry group should be made up of “long-only, long-term” institutional investors whose pension clients would gain from better oversight of the companies their money is invested in. On the controversial governance issue of banking pay and bonuses, Myners said he had written to the chief investment officers of the biggest fund managers with shares in UK banks to ask them how they are challenging pay levels. The issue, he said, was one where pension trustees should also be testing their fund managers’ commitment. Additionally, the Minister urged the UK National Association of Pension Funds to ‘showcase’ responses to a letter it wrote in November to chairmen of Britain’s top 350 companies urging executive pay restraint and an alignment of company remuneration with the long-term interests of shareholders. David Paterson, NAPF head of corporate governance, said the association had only received a dozen responses so far.Regarding the proposed governance lobby group, Myners said he would like it to be chaired by a respected industry expert. Its role, he said, should be to speak with one voice for institutional investors and be unconstrained by industry influences. Myners has been critical of the Institutional Shareholders Committee (ISC), created by the UK Treasury to act as an investor governance vehicle following the 2001 Myners Report, calling it a “rather low profile entity”. The ISC is run jointly by the Association of British Insurers, the Association of Investment Companies, the Investment Management Association and the National Association of Pension Funds.
Responding to the governance debate, the NAPF has issued guidelines for pension trustees to set out the responsibilities of their fund managers and how they should report back on the matter. The guidelines encourage pension funds and fund managers to collaborate on driving governance changes at poorly run companies. The NAPF has also launched a new Corporate Governance PensionsConnection website featuring expert thinking on corporate governance issues and trailing specialist learning events. On the legislation front, the UK Financial Reporting Council (FRC) is currently consulting on a new Stewardship Code for investors, one of the major recommendations of last year’s Walker Review on governance at UK banks and financial institutions.