British shareholder groups, along with foreign investors, are to set up the Investor Forum in an effort to improve corporate governance and encourage businesses to focus on long-term strategies.
The Forum, which is expected to be set up by the end of June, will allow investors to join together and put pressure on companies that have poor corporate policy.
Catherine Howarth, chief executive of the charity ShareAction, commented, “After a lengthy gestation, we welcome news that the Investor Forum will launch next June.
“ShareAction wants to see the Forum operate in a transparent and accountable way and will be taking a close interest in the model of governance devised for the Forum itself.”
The implementation of the Forum follows a recommendation in John Kay’s review of equity markets. His review, which was published in 2012, urged longer term thinking in the investment world.
According to the Financial Times, the Forum will operate by setting up an engagement group, led by one or more investors in each company, with the assistance of a secretariat. Concerns about a company will be passed on to all shareholders, presenting them with an opportunity to voice their opinions on the issue.
Simon Howard, chief executive of UK Sustainable Investment and Finance (UKSIF), said, “We believe the Investor Forum can have a significant long-term impact on how shareholders engage with companies.
“While investors may have varying views and interests they all care about long-term risks to the investments they manage stemming from poor governance, including excessive pay. We think that the Forum can work given the professionalism of those involved.”
Sacha Sadan, director of corporate governance at Legal & General Investment Management, will implement the Forum and has been an active member of UKSIF.
The new initiative has received the support of the three main shareholder bodies in the UK: the Investment Management Association (IMA), the Association of British Insurers (ABI) and the National Association of Pension Funds (NAPF).
Daniel Godfrey, chief executive of the IMA, said, “The new Investor Forum will aim to promote a change in the culture of investment managers as well as tackling issues at companies.
“In essence, this means creating a shared recognition by investors, asset managers and companies that the most important thing is for companies to have strategies for long-term competitive advantage because that is what leads to sustainable wealth creation for shareholders, employees, communities and the wider economy.”
Godfrey added that if companies are “going off the rails” in strategy or in any key area, the Forum will be able to bring together the widest possible range of shareholders in order to demand and achieve a positive outcome.
The Investor Forum could lead to environmental, employee and community issues taking a more prominent role in corporate governance as well as companies considering how their polices will impact the future.