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UK roundup: Governance for Owners, Tullett Prebon, Pan Governance, LCP

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  • UK roundup: Governance for Owners, Tullett Prebon, Pan Governance, LCP

UK - Regulation does not help the advance the case of corporate governance, according to Terry Smith, chief executive of financial intermediary Tullett Prebon and founding chief executive of fund management firm Fundsmith.

Speaking at the Governance for Owners dinner in London under the title 'Investors, asset managers and companies: where did it all go wrong and where do we go from here,' he told attendees: "Corporate governance and its subtopics are a matter for owners, not for governments and regulators.

"Government engagement will not solve things but will probably make it worse."
 
He used a quota for women on company boards as an example where mandated change led to worse rather than improved company performance.

Smith was also critical of the use of proxy agencies - and too many intermediaries in the investment chain - the short-term measurement of company performance, the focus of the term sustainability on climate change at the expense of other issues, balance sheet efficiency and the sole focus on board remuneration when asset owners should also think of remuneration at below board level.

He said: "There is too much short-termism. One year is too short to judge a company. You can only measure it over a full economic circle."

At a separate meeting in London, speakers argued that the integration of auto-enrolment in the IT system of companies would be the biggest issue when soft compulsion launches in October.

Another concern was the 'unsexy' image of pensions and auto-enrolment.

Speaking at the AllianceBernstein roundtable, Steve Delo, chief executive at PAN Governance, said: "No one is talking about auto-enrolment with great passion. There is no great excitement around the subject among employers, which is not helpful. It is more about compliance."

He also believed that over the long term auto-enrolment will not solve the pensions problem.

He said: "It has created the groundwork for people to save a bit more but the pensions time-bomb will still go off."

However, Dean Wetton, founder of the eponymous advisory, saw auto-enrolment as the beginning of a new era.

He said: "It will become the norm for people to save for their pensions. And the required contribution rate of 8% by 2018 will grow to 15-20% with time."

The panel consisting of Delo, Wetton, Stephen Nichols of The Pensions Trust and Andy Chesildene of LCP warned against being overly cautious with default funds. Instead they needed to be dynamic with a lifestyle or target date approach.

Nichols said: "The default fund should not be the cheapest and blandest solution as in contract-based DC."

The panel also favoured master trust structures over group personal pensions (GPPs) although Nichols cautioned about the few barriers to entry for new master trust structures. This, he said, left scope for people to abuse the system by entering the market to make some money before making a quick exit.
 

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