With all the excitement in the UK around the Chancellor’s Autumn Statement, the report of the Collective Engagement Working Group, which looks set to transform the dialogue between FTSE-listed companies and their major shareholders, received little attention when it was published this week. The new Investor Forum and “engagement action groups” are likely to play a significant role in the continuing debate on executive remuneration.
The Collective Engagement Working Group was formed earlier this year in response to the Kay Review on equity markets and long-term decision making (published in 2012). Its report published on 3 December 2013 will lead to the creation of an “Investor Forum”, which will operate on the following basis:
- The Forum will be operated by a central secretariat.
- Participation will be open to a wide range of investors, including major institutional investors in the UK and abroad and sovereign wealth funds.
- Companies will be expected to organise an annual strategy meeting with institutional investors (AGMs are now seen as addressing the needs of small shareholders).
- Engagement action groups will be set up where a pattern of concerns emerges from participants and will be disbanded when the issues have been resolved.
- These arrangements are not meant to replace existing practice – for example, the ABI may continue to organise collective meetings between investors and companies.
- The secretariat will be tasked with ensuring that concert party/insider information/market abuse issues don’t arise and will liaise with the Takeover Panel and the Financial Conduct Authority as necessary.
- This system is expected to be up and running by June 2014, with the Implementation Group reporting on progress by the end of March 2015.
While there is a clear desire on the part of the Working Group that these new structures do not get bogged down in routine remuneration matters, it is equally clear there will be pressure for some of the early engagement action groups to address institutional investors’ concerns about executive remuneration.