The Financial Reporting Council (FRC), UK’s independent regulator “responsible for promoting high quality corporate governance and reporting to foster investment,” is also in charge of the Stewardship Code for institutional investors.
The FRC, 230 pension schemes, fund managers and service-providers have signed up for the Stewardship Code, including “most of the major investors in UK equities.” According to Financial News (Shareholders: Turn up to meetings!, 12/14/2011), the FRC not only warned companies about executive pay but also chided institutional investors over their habit of skipping AGMs.
Institutional shareholders, the likes of BlackRock, Legal & General Investment Management or Fidelity, do not as a rule attend companies’ annual general meetings.
This means that at even the very largest companies’ AGMs the floor is usually dominated by small shareholders, whose questions and views can be quite idiosyncratic.
A recent exception was Standard Life Investments’ attendance at last month’s BSkyB AGM, where chairman James Murdoch faced down a substantial rebellion by shareholders over the tenability of his position thanks to the phone-hacking allegations at News Corporation.
News Corporation, which is the major shareholder in BSkyB, is also the owner of Dow Jones, the publisher of Financial News.
At the Sky meeting on November 29, Guy Jubb, SLI’s head of corporate governance, attended the meeting in person and set out the reasons his firm was voting against Murdoch’s re-election. But such public stands by big shareholders are rare in the extreme.
The FRC’s report said: “While recognising the practical constraints, attendance at selected meetings can be a powerful and visible demonstration of the exercise of stewardship, as well as adding value to the meeting itself.
“The FRC therefore applauds the efforts of the few institutional investors who are prepared to attend meetings and encourages others to do likewise.”
Wouldn’t it be great if the U.S. had a Stewardship Code and institutional investors started showing up to annual meetings? I don’t think it is realistic to expect them to show up to meetings for all their companies but making a substantial effort to attend more would be a real plus. I could move such meetings to be real deliberative processes, serve to educate both retail investors and management as to issues of concern, encourage directors to participate, and could demonstrate that such meetings are taken seriously.