The Pensions and Lifetime Savings Association believes that companies with good corporate governance, an engaged workforce and a diverse breadth of experience and perspective at board level perform better and deliver higher returns for our pension fund members. As long-term investors representing 16 million savers, our members have a key interest in better corporate governance leading to more successful companies. So we welcome the Business, Enterprise and Industrial Strategy Select Committee’s inquiry into this subject.
Our position on the three key areas of interest to the Committee is as follows:
Directors’ duties – We are supportive of the current iteration of Directors Duties but believe that these are poorly understood, enforced and reported against. More needs to be done to raise awareness of Directors’ long-term responsibilities. Regulators should monitor reporting of how these responsibilities have been fulfilled.
Executive remuneration - Our members are concerned by rising levels of executive pay in relation to the wider workforce and believe the justification for this increase is weak. We support measures to empower engaged shareholders and require disclosure of intra-company pay ratios.
Boardroom diversity - We believe that in a global economy, a broad range of experience and perspectives is helpful to understanding diverse markets and guarding against ‘group think’.
As a broader issue, covering all three themes, we would like to see better discussion of companies’ working practices, stakeholder relationships and corporate culture - and how these relate to the wider purpose and strategy of the business – in the strategic report section of annual reports.
The PLSA provides resources and analysis for pension funds in order to support their stewardship activities and deliver better corporate governance, including:
Our corporate governance policy and voting guidelines for key resolutions at company AGMs, which are reviewed and updated annually;
An annual review of AGM voting at FTSE 350 companies, assessing stewardship levels and identifying emerging corporate governance issues; and
Our ‘Understanding the worth of the Workforce’ toolkit, helping our members to engage with investee companies on issues relating to working practices and corporate culture.