NAPF urges dramatic shift in corporate governance policy

HOLDING individual board members to account for their actions is just one of a series of hardline calls being urged by the National Association of Pension Funds (NAPF) as it ramps up its corporate governance policy and voting guidelines.

The get-tough call is just one of a number of dramatic changes that the NAPF are making as it seeks to ensure that companies and shareholders move radically beyond a simple box-ticking approach and embrace their responsibilities in a much deeper and considered way.

The NAPF – which represents over 1,300 pension schemes and £900bn in assets that provide pensions for over 17 million people – announced its new stance as published its revised corporate governance policy and voting guidelines after consultating with its members.

The new policy revisions have fully taken into account the NAPF’s much wider view of corporate governance, which now looks way beyond the basics of the code to include sustainability.

The body says it hopes that the policy shift will encourage both companies and shareholders focus on individuals and succession as well as taking a wider view of risk by highlighting the need for reputational risks, such as a company’s approach to tax management, and emerging threats like cyber security and climate change, to be appropriately considered.

It also urges changes in the often highly contentious area of executive remuneration. Its policy now states more explicitly the issues it believes investors should consider more carefully when voting on remuneration policy, the remuneration report, and the chair of the remuneration committee.

Another key shift has been away from the corporate governance code to specific resolutions being voted on at an AGM. Its hoped this will motivate shareholders to give more consideration to how they use their voting rights and the way they exercise their voting rights on all resolutions.

Will Pomroy, NAPF’s corporate governance policy lead, said: “Members of the NAPF have a clear interest in promoting the success of the companies in which they invest. So it’s a natural role for the NAPF, and one it has long considered part of its core purpose, to articulate the expectations of pension funds and the investment management firms who manage the pension funds’ assets.

“We focus our efforts on maximising the long-term returns of our member’s assets, irrespective of the potential for short-term discomfort. We strongly encourage shareholders to make systematic use of all of the powers at their disposal to support the highest standards of governance at the companies in which they invest, and consequently to support the success of these companies for the benefit of their individual scheme members.”

The NAPF also said that it no longer advocated the use of abstentions as a general approach and now placed stronger emphasis on holding the individuals within the board to account on issues relevant to their area of responsibility.