Pension funds and investors signing up to the Stewardship Code can look to new practical guidance published today by the National Association of Pension Funds (NAPF).
The Stewardship Code, strongly backed by the NAPF, aims to improve engagement between institutional investors and companies in order to help enhance long-term returns for shareholders, and ensure the efficient exercise of governance responsibilities.
The Code was launched in July by the Financial Reporting Council (FRC), and in its guide the NAPF encourages all pension funds to publicly disclose the following:
- Whether they support the Code’s Principles and to explain why they do not.
- Whether reference is made to the Code in their Statement of Investment Principles (SIPs) and Investment Management Agreements (IMAS).
- The review process and its frequency (eg. annual consultant assessment, manager report and/or meeting).
- The managers used by the scheme and whether they apply the Code.
David Paterson, Head of Corporate Governance at the NAPF, said:
“The FRC is developing its oversight of the Stewardship Code, and we strongly encourage pension funds to sign up to this important policy document.
“The Code represents a significant step forward for both investors and companies, which ultimately is likely to result in better governance of UK plcs.
“The discussions we have recently had with our members are encouraging. They show that many investors understand the importance of high standards of corporate governance within UK companies, and are committed to sign up to the Code.
“We hope that our guidance will provide valuable support to our members and will accelerate the take up of the Code by pension schemes.”
The FRC will issue a report in March 2011 which will include a review of the policy statements disclosed by the investors who have signed up to the Code.
Baroness Sarah Hogg, Chair of the FRC, added:
“The financial crisis provided plenty of evidence that short-term behaviour destroys long-term value.
“The Stewardship Code plays a key role in fostering the development of a clearly identifiable critical mass of committed shareholders which will underpin our continuing faith in the comply-or-explain approach to governance both here and more widely in Europe.
“While the Code is aimed primarily at fund managers, pension funds naturally have a long term focus and can have a beneficial impact on the behaviour of both boards and investment managers.
“We welcome the timely publication of this guidance by the NAPF to support asset owners in playing their central role in the ongoing success of the Stewardship Code.”
The guidance is available at: Guidance for Investors on the Stewardship Code
Notes to editors:
- David Paterson, Head of Corporate Governance, is available for interview.
- The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,200 pension schemes with some 15 million members and assets of around £800 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
Paul Platt, Head of Media, NAPF, 020 7601 1717 or 07917506683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]