SPEAKERS at the ABI’s investment conference yesterday urged company shareholders to sign up to the government’s new Stewardship Code, arguing that improving the long-term attitude of investors is crucial in order to hold at bay radical changes to governance regulation at a European level.
Peter Montagnon, who left the ABI earlier this year to become senior investment adviser to the Financial Reporting Council (FRC), said a collective display of long-termism would put the UK “in a strong position to push back on more radical alternatives” currently being mulled over by the European Commission.
Those alternatives “would almost certainly involve more direct regulation of companies and also of the markets with possible limits on the right of shareholders who put up capital”, Montagnon warned.
Alain Dromer, the new chair of the ABI’s investment committee, stressed the importance of proving that “institutional investors are determined to make it work and evolve over time” in order to avoid “yet another layer of regulation” from Brussels.
The Stewardship Code was published by the FRC in July in order to increase awareness among institutions of their role in overseeing company leadership. The FRC has given institutions until the end of the month to declare their support.
Employment relations minister Edward Davey underlined the importance of long-termism among shareholders with regard to takeovers, adding that the government is committed to tightening up the Takeover Code as part of its current review. Solutions may include “higher merger fees or a pre-notification requirement for some deals”, he said.
Also attending the conference were outgoing HSBC chairman Stephen Green, Cable & Wireless chairman Richard Lapthorne and Severn Trent chairman Sir John Egan.