Taking it one step at a time
The success or failure of Prof John Kay’s proposed investor forum hinges, unsurprisingly, on its ability to attract a critical mass of asset managers and owners to the table.
However, due to the simple matter that non-domestic investors today hold large stakes in UK companies, attracting these overseas investors is imperative to the forum’s success, something of which the chair of the Collective Engagement Working Group, James Anderson, is all too aware.
Anderson notes that the forum has “quite a lot of support” from Canadian investors, naming the CAD130bn (€89.5bn) Ontario Teachers Pension Plan as one of the North Americans keen to associate itself with the venture. Additionally, the involvement of Dutch fiduciary manager APG was secured from the outset, with its head of governance and sustainability, Claudia Kruse, joining the working group early last year.
“We felt it would be useful to contribute to it,” says Kruse, “because we believe in the power of collective engagement, and this forum might well pave the way for similar forums or initiatives in other markets and help shape the thinking about engagement.”
She fully endorses the notion that the forum will act quietly, engaging with companies behind the scenes. “I certainly agree publicity should not be sought for the sake of it,” she says.
Anderson also believes proving the forum can handle matters “tactfully, quietly” will be key to attracting a number of overseas asset owners and managers, ones that may not want to see their activities publicised, but nonetheless want to be engaged investors.
He adds that attracting some of the world’s sovereign wealth funds will be a “longer and more delicate task” than winning over US asset managers, which, he argues, are mainly cautious about getting involved in a jurisdiction where they may not fully understand potential legal pitfalls.
“The single greatest opportunity has to be the Norwegians, who are becoming, as you know, more conscious of the need to be involved in corporate governance in the long term,” he continues, noting that Kay’s recent appointment to the Government Pension Fund Global’s new corporate governance board raises his hopes that they could get involved.
Anderson, a partner at the asset manager Baillie Gifford, also says it will be “absolutely critical” to ensure involvement of investors from outside the Western world.
“I think, with the Middle East and Asian [sovereign wealth funds], we’ve got to take it one by one and be prepared for them to have different levels of publicity about their involvement but try to gradually get them over the course of years,” he says.
He sees potential for the forum to learn from the experiences of other investors, citing the Swedish approach to board appointments as “particularly interesting” and noting the important governance role at German and Swedish companies played by the wealthy Quandt and Wallenberg families.
Kruse also sees the Netherlands as a source of best practice, thanks to the work of Eumedion – a governance forum that counts both domestic and UK pension funds among its members.
However, she says, while the UK forum could entice asset owners currently not actively engaging with their shareholdings to do so, it will not become involved in regular matters of pay.
“I strongly support the view that day-to-day, routine remuneration consultations are best handled individually by investors, or however they collectively want to work on this,” she says.
“The forum really should only concern itself with more strategic issues and, as the report says, pay may feature in that.”