Investment Association Letter to FTSE 350 companies

Of interest to those working in listed companies

On 7 April, Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association (IA), wrote to the chairs of FTSE 350 companies to outline IA members views on a number of issues arising from their discussions with companies in the light of the COVID-19 pandemic “in order to express our support to the companies in which we invest during these challenging times”.

Mr Ninian was at pains to emphasise that IA “members seek to deliver long-term outcomes for these clients and are committed to supporting UK Plc as long-term stewards of British companies” and that “as custodians of long-term capital, [they] favour companies that can demonstrate they are well run and take a long-term view of how they treat their employees, communities, suppliers, pension savers and customers.”

These areas include:

  • Engagement and communication, where IA member will “support firms who place their primary focus on maintaining a business that is ultimately sustainable over the long-term rather than prioritising short-term financial returns” but “ask that companies maintain as open a dialogue as possible with their shareholders and other stakeholders over the coming months.”
  • Financial Reporting, where IA members will support companies who take the additional two months flexibility permitted by the Financial Conduct Authority to prepare audited accounts.
  • AGMs, where the IA welcomed our guidance and ask companies “to consider how to effectively engage with their retail and institutional shareholders in lieu of the normal AGM meeting”
  • Dividends, where the IA supports the FRC guidance stating that firms should consider the position of the company at the time a dividend is paid, not just when it is declared, but notes that “whilst IA members expect companies to take a prudent approach to current and future dividend payments, carefully assessing their ability to withstand financial stress, shareholders would be concerned if companies unnecessarily reduced or rebased the dividend level.”
  • Executive pay, where IA members will support Boards and Remuneration Committees that demonstrate how the cancellation of dividend payments or changes to workforce pay is reflected in their approach to executive pay.
  • Long term capital raising, where IA members believe that the revised Pre-Emption Group guidelines (see the Technical Briefing on 9 April) should be respected.

The complete text of the letter can be found at: https://www.theia.org/sites/default/files/2020-04/Letter%20to%20FTSE%20Chairs%20-%20April%202020_0.pdf

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