Widespread concern that companies will ignore the corporate governance recommendations put forward by the Hampel committee has spurred the National Association of Pension Funds to establish its own tough stance on corporate governance.
The association, which represents investors with total assets of more than #300bn, fears scandals over fat-cat pay, and the independence of auditors and non-executive directors will encourage the government to intervene with legislation.
Sir Ronald Hampel, ICI’s chairman, is due to publish his long-awaited report next week, but many observers believe he will advise companies to take a pragmatic approach to the implementation of his corporate governance code.
Last week the DTI confirmed it was considering drafting a new Companies Act that would, among other things, legislate to increase the rights of shareholders at agms.
John Rogers, NAPF’s director of investment services, said: ‘We need to try and persuade the government we are taking these issues seriously.’
The association has issued a document highlighting areas of concern.
Rogers called it an ‘aide memoire’ rather than a rule book that would be used by chief executives to alert shareholders three months in advance of contentious changes being put forward at an agm.
‘We hope companies will see that giving a full explanation of the changes they are about to make is the best way forward.’
The aide memoire argues the effectiveness and independence of the audit process is a concern to investors. ‘A pressure point has developed where non-audit fees exceed audit fees and no explanation is offered,’ it states.
Boards are then asked to explain their actions.
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