Corporate Governance

Baroness O'Cathain Excerpts

Wednesday 7th December 2011 Lords Chamber

[Baroness Wilcox]

There is no doubt that shareholder engagement should—and, I hope, will—be improved. After all, it is shareholders who can, as is only right and proper, hold the company’s feet to the fire on the day they are asked to put up the salary of the chairman and the chief executive. They are not doing their job well, particularly the very big shareholders—the big pension funds and so on. I myself have sat on boards and have experienced these big shareholders not turning up at the shareholders’ meeting, instead having another meeting at another time. Usually, small shareholders turn up and make very good suggestions, but then in come the proxy votes—and there are millions of them. We are doing everything we can to see whether we can get shareholders to take the responsibility and the power that they have to put this right.

[Baroness O'Cathain]

My Lords, can the Minister go a little further on shareholders and their involvement with boards? As we all know, the major shareholdings are held by big institutional investors—namely, pension funds—and the problem with that is that they never have taken their responsibility seriously enough. Instead of hammering on about worker representation and women’s representation, they ought to get right down to the bottom of the issue and find out what the responsibilities of these pension funds are.

[Baroness Wilcox]

My noble friend has expressed it extremely well. We would like to think that this will happen voluntarily, but in the mean time the Kay review is examining proposals for tackling potentially damaging short-term economic behaviour in the markets. We will also be looking at the actions of the shareholders and seeing what recommendations are made there.