A group of the UK’s largest pension funds including Brunel Pension Partnership, Church of England Pension Board, People’s Pension, Brightwell and Railpen have launched a campaign to boost shareholder oversight of the companies in which they invest.
The Governance for Growth Investor Campaign (GGIC) warns that the British government’s sweeping overhaul of listing rules in its bid to try and attract more innovative and high-growth companies to UK has watered down longstanding shareholder rights that will ultimately dent investor enthusiasm.
Arguing that sustainable growth requires robust governance, the GGIC wants the government to defend important shareholder tools. For example, it argues the case for reinforcing effective reporting and high-quality audits for large private companies and clearer disclosure on voting outcomes by companies with unequal voting rights. Other issues on the GGIC agenda include clarification that companies should allow for both virtual and in-person AGM attendance.
Investor efforts to try and reverse the tilt away from their ability to influence corporate governance is also under way in the US where CalPERS’ chief executive Marcie Frost defended the role of much-criticised proxy advisory firms at a recent board meeting.
She argued their work provides valuable research and strengthens corporate governance on issues like director independence, executive compensation, and ESG.
Governance and investment go hand in hand
The UK’s latest investor group argues that shareholder power actually acts as a draw to institutional investment because governance and growth go hand-in-hand – investors will seek opportunities in the UK’s capital markets if they know they can positively shape the companies they invest in.
“We want to work with ministers to help change the mood music on the UK and tell an optimistic story that gets people excited about investing in Britain because of its governance standards,” says Caroline Escott, who leads the £34 billion Railpen’s investment stewardship work globally. “At a time when government is urging UK pension schemes to boost the economy, it’s fundamental that we have a seat at the capital markets and corporate governance policymaking table to make the case for sustainable growth.”
“Strong governance shouldn’t be viewed as a barrier to growth but a catalyst for it,” continues Wyn Francis, chief investment officer at the £37 billion Brightwell. “Well-run companies that are transparent and accountable are more likely to succeed over the long-term. That’s how we deliver sustainable returns for members and support a thriving UK economy. This initiative is about making sure our voice is heard in shaping the future of capital markets because good governance isn’t just good practice, it’s good business.”
The campaign group will shine a light on the evidence that effective corporate governance and shareholder rights help companies perform better because they are well-run, transparent, and accountable.
“Well-managed companies that make decisions in the best interests of all shareholders are more likely to grow sustainably, avoid costly mistakes, and attract long-term investment,” states the report accompanying the GGIC launch.
Policy goals and next steps include campaigning to give UK capital allocators a seat in key capital markets and corporate governance policymaking forums.
The pension funds will also campaign to remove the “artificial divides” between private and public markets: whether a company is private or public, it needs to have effective governance and investor rights mechanisms to help it grow and scale. The pension funds want to streamline and consolidate private markets disclosure standards and measures taken to ensure UK pension schemes get the right information and appropriate governance rights they need to support companies to thrive and grow sustainably.
The investors argue that high-growth companies in particular benefit from listening to their shareholders, and to markets, to scale and thrive. For this to happen, UK pension scheme shareholders need effective tools, including access to companies and shareholder rights, to help them work in partnership with UK companies to achieve long-term sustainable growth.
