LONDON - Greater disclosure by U.K. corporations and an overhaul of the corporate governance machinery are needed, urged Anne Simpson, joint managing director of Pensions Investment Research Consultants Ltd.
Ms. Simpson said both companies and shareholders need to live up to their responsibilities.
In a speech at PIRC's annual corporate governance conference, Ms. Simpson called for creation of a charter for shareholder democracy. Among the charter's major points:
Greater corporate disclosure needs to be made in such areas as executive pay, dividend policy, directors' backgrounds and environmental reporting.
The U.K. corporate governance mechanisms need to be overhauled by the government.
In particular, nominee accounts prevent pension funds from receiving voting materials, breaking the line of accountability and making it difficult for shareholders to pursue campaigns. Also, companies should announce the results of proxy votes, and the process for submitting proxy resolutions should be reformed, she added.
The annual general meeting should be made a more important focus, and not be upstaged by release of preliminary results to analysts, she said. Results should be released at the annual meeting.
Companies should open a dialogue with their stakeholders, both in Britain and abroad. Companies have a duty to employees, the community, customers and the environment, as well as shareholders, Ms. Simpson said.
Institutional shareholders must live up to their responsibilities. They should maintain and disclose voting policies, she said.
Institutional investors should be under a legal obligation to consider the value of the votes, and take initiatives where necessary, she added. Lord Haskel, in consultation with PIRC, has pushed an amendment to the pensions bill that would require pension funds to exercise their vote.
Institutional funds also must record their votes and report back to members to ensure accountability.
Ms. Simpson also criticized the growing amount of work that accounting firms are performing for corporations.
She cited data showing the proportion of non-audit income among the Big Six accounting firms approaching 55% of revenue in some cases.
"We've been concerned about the growing role auditors have played working for the company itself," she said. "If the auditor is working for the shareholder on one part of its income, and for the company on another, is it possible for (the auditor) to be truly independent?"
Ms. Simpson said PIRC believes if non-audit work accounts for more than 25% of the annual fee charged per company, then that would be material and could affect the auditor's judgment. PIRC officials also would like greater disclosure on audit fees.
