Government receives Commons governance grilling
Making shareholder votes binding will not be enough to tackle runaway executive remuneration, MP Jon Cruddas has argued in Parliament.
In a speech given in Parliament last week, the Dagenham Labour MP recommended greater transparency for remuneration, to make shareholders more accountable to those whose money is invested in pension funds.
Prime minister David Cameron has previously claimed shareholder votes on pay will be made binding, rather than advisory.
But PW subsequently revealed, using PIRC analysis, there have been fewer than 20 cases where companies’ remuneration packages have been voted down since the introduction of the advisory vote 10 years ago.
Cruddas cited this figure in his speech, and warned current legislation hinders rather than supports the responsible investment of pension funds by forcing them to focus on quarterly returns over long-term governance.
He called Cameron’s proposal welcome, but added: “More searching questions need to be asked about how shareholders are using the rights they already have.
“Most pension funds do not exercise voting rights themselves but delegate to fund managers, whose own duties are unclear.
“[Corporate governance think-tank] FairPensions’ report argues that fund managers do have fiduciary duties under common law — a view shared by the Law Commission — but this is not generally accepted by the industry.”
Christine Berry, policy officer at FairPensions, said: “We welcome Jon’s timely intervention in the debate about responsible capitalism.
“The big investors who manage our savings can and should be more responsible and accountable when it comes to their exercise of voting rights. The focus now needs to move on to how we make this a reality.”
