Discontent among shareholders' rights groups is already brewing as the government today announced its new corporate governance reforms.
Business secretary Greg Clark set out the measures, which will force all listed companies to reveal the pay ratio between bosses and workers, name and shame on a public register those which receive significant shareholder opposition to executive pay packages, and establish employees' representative bodies within businesses.
But several groups which represent private shareholders have said the reforms do not go far enough, and have expressed outrage that the Investment Association (IA) – the trade body for the asset management industry – will be charged with overseeing the executive pay register.
“It's madness for the government to be asking the Investment Association to be overseeing the register,” said Peter Parry, director of the UK Shareholders' Association (UKSA). “The asset management industry has been damningly criticised by the Financial Conduct Authority (FCA) over the last couple of months.”
In its report on the UK's asset management industry, released in June, the FCA recommended that it be given powers by the government to regulate the sector. Many took this as a sign that the IA had been deemed by the watchdog as unfit to take a regulatory role.
The IA also raked up doubts as to its motives on corporate governance late in 2015 when it fired its chief executive Daniel Godfrey, after he pushed for reform on retail issues such as fees and fund performance.
On Twitter, the UKSA's chairman John Hunter compared the IA's new role to a fox being charged with overseeing a chicken coop. Several bodies have pointed out that asset managers are commercial entities which aim to make a profit, and their interests may not align with those of private shareholders.
Executive pay. Investment Association to keep register of baddies. Let's appoint foxes to keep a register of poor chicken coop builders.— UK Shareholders (@UKshareholders) August 25, 2017
But Chris Cummings, chief executive of the IA, said: “Our members, who manage the pensions of 75 per cent of UK households and own over one third of the FTSE, believe that not all company boards that receive big shareholder dissent are currently doing enough to address investor concerns.
“This public register will help sharpen the focus on the those who must do more, enabling our members to hold the country's biggest businesses to account and leading to better-run companies.”
Clark added: “Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”
Regardless of the body overseeing the new register, Cliff Weight at ShareSoc pointed out that such information is already available in the public domain and doubted that the reforms would have any substantive impact.
“Retail shareholders have been locked out, again,” he said.