Investment Association committee lists three issues to grill companies on at AGMs

Mar 29, 2019
Framework sets out addressing companies on diversity, excessive pension payouts and poor-quality audits

Britain’s upcoming AGM season could be a sparky affair, after 15 asset managers at the Investment Association’s (IA) corporate governance and engagement committee have decided on three topics to put to public companies at shareholder meetings.

The committee, chaired by Jessica Ground, global head of stewardship at Schroders, is helping to set the framework for the grilling of companies on diversity, excessive pension payouts to bosses and poor-quality audits – as these are regularly cited by investors – and try to force change. On the committee are Britain’s biggest asset manager Legal & General Investment Management and Schroders.

This indicates something of step-up in the IA’s campaigning efforts as Britain’s corporate governance and stewardship increasingly come under the spotlight.

The IA says if no action is taken ahead of each company’s AGM, it will warn members of any specific concerns through its Institutional Voting Information Service (Ivis), which uses blue, amber or red color codes to alert members to the seriousness of the issue.  

Red represents the highest level of warning and is reserved for companies where shareholders have the most significant and serious concerns. Ivis will also issue a red warning against companies that have no women or only one woman on their board. It will further issue an amber – or second-highest warning – to companies not on course to meet the requirements of the Hampton-Alexander Review for 33 percent of women on their board by 2020 and highlight any board with 25 percent or less female representation.

Boardroom diversity remains at the top of many asset managers’ list of concerns and has been increasingly under the spotlight amid efforts to ensure women make up at least a third of boards and leadership teams at FTSE 350 companies by 2020.

Andrew Ninian, director of stewardship and corporate governance at the IA, says: ‘Investors want to see greater diversity in the companies they invest in to ensure our savers and investors are getting the best returns possible.’

The IA says it is particularly concerned about companies where it considers diversity is treated in a tokenistic way. It recently wrote to the boards of 69 FTSE 350 companies, which it said were lagging in their diversity efforts.

Greater UK shareholder activism on this level is a trend that has already been growing. The IA’s analysis of voting trends during the 2018 AGM season showed that shareholder rebellions rose by more than a quarter last year, landing 120 companies on the IA’s Public Register, which tracks significant shareholder dissent, compared with 110 companies over the same period in 2017. In total, 237 individual resolutions were added to the Public Register in 2018 – a jump of 25 percent from 2017.

Significantly, 29 repeat offenders appeared on the register in 2018 for the exact same resolution as the previous year.

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