Institutional Shareholders’ Committee

 
Press Release

 For immediate release: Monday 21 October, 09.00

INSTITUTIONAL SHAREHOLDERS’ COMMITTEE UNVEILS NEW STATEMENT OF PRINCIPLES ON SHAREHOLDER ACTIVISM

City institutions today gave new impetus to effective shareholder activism through the launch of new principles drawn up by the Institutional Shareholders’ Committee (ISC), whose associations represent virtually all UK institutional investors.

The principles are the first comprehensive statement of best practice governing the responsibilities of institutional shareholders and investment managers in relation to the companies in which they invest. 

They aim to secure value for ultimate beneficiaries –pension scheme members and individual savers – through consistent monitoring of the performance of those companies. This is to be backed up by direct engagement where appropriate.  The principles make it clear that if companies persistently fail to respond to concerns, institutional shareholders and investment managers, ISC members will vote against the Board at general meetings.

The principles set out best practice for institutional shareholders and investment managers, under which they will:

• Maintain and publish statements of their policies in respect of active engagement with the companies in which they invest;

• Monitor the performance of and maintain an appropriate dialogue with those companies;

• Intervene where necessary;

• Evaluate the impact of their policies; and

• In the case of investment managers, report back to the clients on whose behalf they invest

Lindsay Tomlinson of Barclays Global Investors, Chairman of the Institutional Shareholders’ Committee and Deputy Chairman of the IMA, said:

“These new principles are timely given the current focus on the need for shareholder responsibility and sound management of companies. We, as institutional investors, invest on behalf of millions of individual savers and we owe it to them to try and ensure that the performance of companies in which we invest is up to scratch.  This is a significant development for the ISC, as these new principles provide enhanced guidance to institutional investors, which up to now focused mainly on matters of corporate governance.  This approach has similar objectives to those of the Government, but we believe it will prove more effective than legislation.”

Ken Ayers, NAPF Investment Council Chairman, added:

 “Shareholder activism, for too long, has been an ad hoc affair. Now, for the first time, there are comprehensive guidelines available, based on best practice, and offering practical, tangible help to institutional investors. These guidelines make life easier for shareholders in developing their corporate governance strategies, and will help ensure best practice among the companies in which they invest.”

Daniel Godfrey, Director General of the AITC, comments:

“Shareholder activism needs to maintain a clear focus on its objectives.  It is about using the power of ownership to help companies develop and implement successful strategies, to maintain high standards of governance and to improve productivity thus maximising returns for the ultimate beneficiaries.  It is not about political correctness or box-ticking.  This statement sets out a blueprint for effective activism.”

Michael Deakin, Chief Investment Officer at Insight Investment and Deputy Chairman of the ABI Investment Committee, said:

“We don’t want to micro-manage companies, but we want to ensure that they are managed effectively and in the long term generate good returns for shareholders. These principles signal our firm determination to take that responsibility seriously. It will help everybody if we can work together to deal with problems before they arise rather than responding when it’s too late.”

The associations making up the ISC will encourage all their members to adopt and comply with the principles.  All will be taking steps over the coming months to ensure that they are taken up as widely as practicable, and that appropriate references are included in agreements between investment managers and their clients.

Attachment -  Statement of Principles

- Ends -

For further information please contact:

Leonie Edwards, ABI, 0207 216 7411, 07712 841184

Annabel Brodie-Smith, AITC, 0207 282 5580,  07798 624449

Clare Arber, IMA, 0207 8310898,  07939 071806

Andy Fleming, NAPF,  0207 808 1300, 07802 418067

Anthony Cardew, Cardew & Co, 0207 930 0777

Notes to Editors:

The Institutional Shareholders’ Committee (ISC) groups the Association of British Insurers (ABI), the Association of Investment Trust Companies (AITC), the Investment Management Association (IMA), and the National Association of Pension Funds (NAPF). It speaks for a membership that controls the vast majority of institutional funds in the UK.

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