Saturday, 20 June 2009

Investor reforms

Legal & General arranged a press briefing this week to set out its views on corporate governance, shareholder activism and what reforms might be needed. Here's an article from The Times for example. Notably L&G has advocated at least two policy reforms that go beyond the recent ISC statement - annual election of all directors (not just committee chairs), and making the vote on remuneration reports binding. In fact both these ideas seem to be commanding increasing support from investors as far as I can tell.

A few thoughts on this - first, it really does demonstrate what a waste of everyone's time the ISC statement was, since it doesn't go as far as many members of its membership organisations want to. It is lowest common denominator stuff. Second, that means that surely these ideas ought to get a hearing in the Walker Review. If this is increasingly mainstream investor opinion of what reforms are needed it should not be hard for Walker to endorse it, or even go a bit further.

And that's the final point - what's the leading edge of the reform debate now? Mainstream investors are advocating reforms that were once on the periphery. What at the ideas that the still find a bit too much? A couple of mine that might be worth pushing are employee representation on remuneration committees, and disclosure of comparative information about pay across companies so investors can see how directors' pay increases compare with other employees. (it could also capture below board policy information in financial institutions too). Both definitely a bit too 'labour movement' for most investors, but now is the time to be pushing the debate on governance reform wider.

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