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UK minister welcomes AGM activism

Ed Davey’s speech to insurance industry conference

Ed Davey, the UK’s new minister for corporate governance, has welcomed the shareholder activism seen during the recent annual general meeting (AGM) season.
This year’s AGMs were notable for investors taking on oil majors BP and Shell over their ‘tar sands’ operations in Alberta, Canada.
Davey, Minister for Employment Relations, Consumer and Postal Affairs, backed “open and honest” relationships between directors and shareholders, where investors are willing to speak up when they think the strategy is wrong.
“The activism that has marked the recent AGM season is a welcome sign,” Davey said in a speech at the Association of British Insurers Investment Conference. He added: “Owning shares is after all a responsibility and it should be seen as one.”
Discussing the planned Stewardship Code, Davey said it was important that all institutional investors disclose their voting records, which would boost transparency and aid scrutiny – the “bedrock of effective corporate governance.”
But in response to a question from a delegate from the Investment Management Association expressing doubts about voting disclosure, Davey acknowledged it was a complicated area and that “no decision has been made”.Davey said the UK would fight its corner on corporate governance at the European level, in the wake of the European Commission’s Green Paper on governance of financial institutions. He said: “We would resist any attempt to undermine best practice in the UK. We need to engage with the Commission.”
This view was shared by other speakers. Alain Dromer, the Aviva Investors CEO who chairs the ABI’s Investment Committee, called the Green Paper “yet another layer of regulation”. The IMA has said it is “too prescriptive and rules based”.
But HSBC Chairman Stephen Green said there were “ready ears in Brussels” for the UK’s comply or explain model, adding: “We should be trumpeting the virtues of the UK corporate governance regime.”
Peter Montagnon, Senior Investment Advisor at the Financial reporting Council and former director of investment affairs at the ABI, argued that the Stewardship Code could have a role in helping to “deflect some the more radical ideas bubbling away in Europe”.
As for the Stewardship Code’s guidance that institutional investors should be willing to act collectively with each other, Davey said the government wouldn’t be passing any new regulations to require it.