NAPF responds to Shareholder Rights Directive | PLSA
NAPF responds to Shareholder Rights Directive

NAPF responds to Shareholder Rights Directive

09 April 2014

Supports encouragement of long-term shareholder engagement but cautions against a ‘tick-box exercise’

Responding to today’s (Wednesday) publication of the European Commission’s Shareholder Rights Directive, Will Pomroy, Policy Lead for Corporate Governance at the National Association of Pension Funds (NAPF), said:

“We empathise with the Shareholder Rights Directive’s objective to encourage and facilitate long-term shareholder engagement with investee companies. More consistent shareholder rights across Europe, along with greater disclosures from asset managers to their clients, are welcome and should strengthen investor stewardship in the interests of both savers and companies.

“NAPF pension fund members have a clear interest in promoting the long-term success of the companies in which they invest; as such it is crucial they are equipped with sufficient information to assess how their investment managers have undertaken activities on their behalf. This greater transparency to clients should foster a stronger market among asset managers and enable pension funds increasingly to hold their managers to account for their stewardship activities.”

The NAPF’s Principles for Stewardship Best practice – designed to help pensions funds understand and fulfil their responsibilities as investors – cover many of the issues identified within the new Directive.

Pomroy commented: “It is right that pension funds should devise an investment policy that includes stewardship objectives, and one that empowers their agents to engage actively with investee companies to enhance and protect value on pension funds’ behalf.

“Whilst the objectives of the Directive are positive, and greater transparency around activities is beneficial, new disclosure requirements must be practical. Care needs to be taken to avoid unintentionally tying the hands of investors or creating a tick-box exercise at the expense of encouraging the right behaviours.”

On the proposed introduction across Member States of a power for shareholders to have the right to vote on the remuneration policy for directors, Pomroy commented that:

“With our members invested in companies across Europe, the extension of a shareholder binding vote on executive remuneration across the single market is very welcome.

“We believe that executive pay should be proportionate and aligned with shareholder interests and long-term sustainable value creation. It is also important that remuneration committees should be able to justify credibly pay differentials within the company.”

The NAPF looks forward to working with all parties to assess and develop the practicality of these new proposals.



Notes to editors

NAPF principles for stewardship best practice

Pension fund trustees should:

1.         Act at all times in the best long-term interests of the fund’s beneficiaries

Funds should seek to act as responsible owners and ensure their policy for dealing with conflicts of interest also covers investment matters such as voting.

2.         Develop an investment policy which includes an understanding of stewardship objectives and risks

This policy should encourage the incorporation of material non-financial risks, including corporate governance factors, within investment decisions and the exercising of stewardship responsibilities such as engagement and voting – to be set out within the funds’ Statement of Investment Principles (SIP).

3.         Set mandates for asset managers which explicitly include Stewardship

Day to day responsibility for stewardship can be delegated, but investment managers’ stewardship capabilities and policies should be a factor in manager selection and relevant criteria should be included within RFPs. Mandates should encourage integration of corporate governance and other material non-financial risks into investment decision-making; align interests through fees and pay structure; ensure adherence to high standards of stewardship and provide for useful and transparent reporting to the fund.

4.         Encourage and empower asset managers to engage with investee companies as a means of improving company performance to deliver investment returns

Funds should encourage collaboration between investment managers as a means of more effective engagement and voice. They should be clear about their managers’ approach and should expect a report on such collaboration.

5.         Review investment performance no more frequently than is necessary, and with reference to long-term absolute performance

Within the regular manager reviews, funds should ensure that managers are adhering to the funds’ stewardship policy. This may include questioning the effectiveness of managers’ engagement activity and how they plan to engage with key holdings which have performed poorly over a period of time.

6.         Provide information on Stewardship to beneficiaries, in a way which is clear and timely

Responsible investment and stewardship 

Trustees should endeavour to report annually to fund members on their stewardship policy and illustrate how it has been implemented in the past year and how its managers aim to address failings with investee companies in the coming year.


The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.


Lucy Grubb, Head of Media and PR, NAPF, 020 7601 1726 or 07713 073023, [email protected]

Eleanor Bennett, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]

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