04 December 2014
The National Association of Pension Funds (NAPF) has updated its Corporate Governance Policy and Voting Guidelines, to increase accountability.
The update aims to reflect and push forward current market best practice. In particular, it aims to promote the success of the companies in which they invest; and ensure that the board and management of these companies are held accountable to shareholders.
The policy and guidelines have been developed through consultation with NAPF members and revised to take into account the NAPF’s wider view of corporate governance, which looks beyond the essentials of the code to consider sustainability more broadly.
According to the NAPF, its ambition is that this policy will encourage both companies and shareholders to move beyond a box-ticking approach and approach their responsibilities in a more considered fashion.
Some of the specific changes within the code are as follows:
A focus on individuals and succession. This year’s updated policy places much greater emphasis on the importance of individual responsibility, and in turn the role of shareholders in ultimately holding accountable those individuals they have elected to the board.
A wider view of risk. We have highlighted the need for reputational risks, such as a company’s approach tax management, and emerging risks, such as those from cyber security and climate change, to be appropriately considered.
Remuneration. This has long been an area of shareholder interest and public discussion. This year we have updated our policy to set out more explicitly those issues we think investors should consider carefully when they vote on the remuneration policy, the remuneration report, and the chair of the remuneration committee.
Voting guidelines. This year the focus has moved from the corporate governance code generally to the specific resolutions being voted on at an AGM. We hope this will encourage shareholders to give more consideration to how they use their voting rights and subsequently to exercise their voting rights more coherently on all resolutions.
In addition, the NAPF no longer advocates the use of abstentions as a general approach and places stronger emphasis on holding the individuals within the board to account on issues relevant to their area of responsibility.
Will Pomroy, Corporate Governance Policy Lead at NAPF, commented: ‘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.’