WiredGov Newswire (news from other organisations)
 Printable version
|
 E-mail this to a friend
|
Institutional Investors’ engagement with Companies needs more encouragement from Stewardship Code, says IoD
Responding to the Consultation on a Stewardship Code for Institutional Investors, the Institute of Directors (IoD) makes the following comments.
We are broadly supportive of the concept of the Stewardship Code as a means of promoting engagement between shareholders and boards. However, we suggest the following improvements:
Institutional Investors with more than 1 per cent of Market Cap must boost their engagement with company boards
-
While it is right that there should be a strong emphasis in the code on disclosures being made by institutional investors for the benefit of beneficial owners, there is currently too little emphasis given to getting investors to engage directly with company boards.
-
To correct this flaw the IoD proposes that institutional investors making an investment in a listed company beyond 1 per cent of the market capitalisation should write directly to the chairman of that company and provide details of the policy and mechanics of their stewardship activities in respect of investee companies.
-
The IoD also proposes that institutional investors with more than 1 per cent of Market Cap should provide an indication of their initial thinking on the main engagement issues to the company’s chairman.
Securities Lending and Borrowing issues need more attention
-
Currently the Code does not discuss the securities lending and borrowing practices of institutional investors. This concerns us because such practices may exert a negative impact on the ability of investors to exercise a stewardship role over their investee companies.
The IoD proposes that the Code should state the following:
-
It is bad practice to borrow shares for the purpose of shareholder voting;
-
Institutional shareholders should have a clear and disclosed policy with respect to the lending of shareholdings;
-
Lending policy should be mandated by the ultimate beneficial owners of the shares;
-
Where lending activity may alter the risk characteristics of a portfolio, the investor’s investment policy should state the extent to which this is permitted;
-
The returns from lending should be disclosed separately from other investment returns when reporting to clients or beneficiaries.
Commenting on the Stewardship Code, Miles Templeman, Director-General of the IoD, said:
“We are supportive of the concept of the Stewardship Code as a way of boosting shareholder engagement with company boards. However, we think that there is still not enough emphasis given to getting large investors to engage directly with company boards. This should be addressed in the Code by encouraging investors with stakes in excess of 1 per cent under to build a direct dialogue with company chairmen.”
To read the full IoD response to the consultation, click here: www.iod.com/stewardshipcode.
- The IoD (Institute of Directors) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with upwards of 45,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
- The IoD offers a wide range of business services which include business centre facilities (including ten UK regional centres three in London, Reading, Birmingham, Cardiff, Manchester, Nottingham, Edinburgh and Belfast and one each in Paris and Brussels), conferences, networking events, virtual offices and hotdesking, issues-led guides and literature, as well as free access to business information and advisory services and a comprehensive Information Centre. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board-level and director-level training and individual career mentoring programmes.
- In addition, the IoD provides an effective voice to represent the interests of its members to government and key opinion-formers at the highest levels. These include ministers, constituency MPs, Select Committee members and senior civil servants. IoD policies and views are actively promoted to the national, regional and trade media.
- For further information, visit our website: www.iod.com
- You can also keep up to date with the latest views from the IoD on twitter.com/The_IoD and at blogs.iod.com
