Hermes to unveil new governance charter
UK - BT pension fund-owned Hermes Equity Ownership Services (EOS) is about to launch its rewritten corporate governance charter - ‘The Hermes Principles' - later this month, IPE has learnt.
Chief executive Colin Melvin said an interview Hermes has rewritten the principles which outline what the governance platform expects from companies, as the firm has seen interest in its service significantly increase since the start of the credit crunch.
Hermes EOS sees itself as a formal collaboration of pension funds, currently representing 11 schemes as owners of shares while engaging with companies world wide.
Melvin told IPE: "The current climate has been very helpful for us," adding pension funds now better understand he link between their ownership of the companies and their influence.
The Hermes Principles, first drawn up in 2002, were among the first explicit statements of investor engagement in companies by an asset manager.
Melvin said he agrees with the comment recently made by city minister Paul Myners on pension funds' "absent ownership": "It is not providing a challenge [to companies]."
He claimed pension funds, as long-term owners, have focused too much so far on the short-term.
"Fund managers buys shares, and the only conversation had is about the next quarter earnings," he said, adding he believes part of the problem is the City is inherently structured this way.
"We have been engaging with banks for two years in the run up to the credit crisis, these engagements weren't the most successful," said Melvin.
Hermes thinks the ownership position of the pension fund is being neglected, and the poor oversight and lack of challenge from institutional investors needs to be tackled.
"In order to come out of this crisis we need a stable basis, also from those who are major investors in it," concluded Melvin.
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