Institutional investors and companies seek “new conversation” on engagement

Launch of major consultation document

A group comprising leading institutional investors and companies has launched a major consultation looking at how shareholders engage with companies.

A group chaired by industrialist Sir John Egan and including some of the UK’s leading responsible investment figures is seeking a “new conversation” between the parties.

The idea is to formulate a set of guidelines for how engagement should be conducted.

It follows the Kay Review earlier this year and tweaks to the Stewardship Code that came in this month.

“The group concluded not only that improvements were needed to process of holding engagement meetings, but that these should be accompanied by a ‘new conversation’ between companies and their owners,” the consultation document states (Link).

The document is called ‘Improving Engagement Practices by Companies and Institutional Investors’ and grows from the 2020 Investor Stewardship Working Party’s discussion with company chairmen.

The Institute of Chartered Secretaries and Administrators (ICSA) has now been asked to develop a good practice guide.

There are four key issues considered:

1. Quality of meetings: more purposeful and better joint handling of media issues. Companies frustrated by investors presenting a “divided” face on performance and governance.
2. Quality of information: a lack of information about the stewardship approaches of different asset managers.
3. Resource limits: investment community not making the best use of what it has. Index investors vital but often dismissed by companies.
4. Critical mass: the investment community needs to build a critical mass of stewardship investors – those who are capable of engaging firms in constructive dialogue.An appendix contains a series of questions for both companies and investors to consider. On the investor side these centre on purpose, participants, preparation, ‘agenda, minutes and follow up’ and ‘frequency and length’.

The document also includes a proposal for a mechanism to co-ordinate company feedback on investor meetings.

Egan, the former CEO of car firm Jaguar and airports operator BAA and a former president of the Confederation of British Industry body, commented: “The steering group is firmly of the view that the health of the engagement process is one of the drivers which increases alignment between a company and its owners, and that transforming the engagement interaction can create value for both parties.”

The consultation is open until November 30 and the group aims to issue its guidance in March 2013.
Steering Group
-Sir John Egan, Chairman
-Rients Abma (Eumedion)
-Peter Butler (Governance for Owners)
-Amra Balic (BlackRock)
-Geoffrey Cooper (CEO, Travis Perkins)
-Frank Curtiss (RPMI Railpen)
-Seamus Gillen (ICSA)
-Mark Goyder (Tomorrow’s Company)
-John Higgins (Ram Trust Services)
-Jonathan Lloyd (Tesco)
-Michael Mitchell/John Gollifer (Investor Relations Society)
-Liz Murrall (Investment Management Association)
-Graham Elliott Shircore & Anita Skipper (Aviva Investors)
-Daniel Summerfield (USS Investment Management
-Jocelyn Brown (Financial Reporting Council)
-Alastair Cowie (Department for Business, Innovation and Skills)