Hermes backs UK’s Higgs proposals

UK – Hermes Pension Management has called for companies and investors to embrace the Higgs proposals on corporate directors.

Hermes has around 37 billion pounds (53.8 billion euros) under management and manages the assets of four of the seven largest UK pension funds.

“Let us move forward together,” says Hermes’ chief executive Tony Watson. “We urge companies and their owners to accept the Higgs recommendations.”

In October last year Hermes, which is owned by the British Telecom Pension Scheme, set out its so-called “Hermes Principles” on corporate governance which called on institutional investors to act more like owners of a company and not speculators in shares.

The Higgs review, conducted by former investment banker Derek Higgs, called for greater transparency in the role of non-executive directors of UK companies. It has had mixed backing from the investment community.

“Hermes endorses its recommendations and on balance considers that the changes it proposes to the combined code provide an opportunity to advance corporate governance in the UK to the long-term benefit of shareholders and the companies in which they invest,” Watson writes in a letter to the Financial Times.

“It is our belief that good governance leads to good performance,” Watson adds.

The London Stock Exchange has also entered the Higgs debate. “We are for Higgs, but for Higgs to be translated into a Revised Code in a different way,” said exchange chairman Don Cruickshank today. The exchange is calling for the UK’s ‘principles-based’ approach to be preserved. He warned against a “box-ticking” mindset.

“There is a danger that long sets of rules create a mindset of ‘anything is allowed as long as it is not precluded’.”

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