Corporate Governance

Lord McFall of Alcluith Excerpts

Wednesday 7th December 2011 Lords Chamber

[Baroness Wilcox]

On boards and pay, I shall refer back to my notes because we have three reviews going on at the moment. There are no noes on anything. At the moment we are keen to listen to everybody’s views and to look at progress anywhere else in the world. The UK has a strong corporate governance framework and we are committed to strengthening it further, as we should do. As it happens, this country has a good reputation in the world for running boards, although of course we will have to wait to see what Professor Kay says in his review.

[Lord McFall of Alcluith]

My Lords, does the noble Baroness accept that there will be no long-term future for companies if there is not adequate shareholder engagement? To date, the level of that engagement has been shameful, allowing ownerless corporations to dictate and a managerial class to prevail. Does the Minister not agree that the Government should do something to ensure that we get both short-term and long-term engagement with shareholders, which is crucial for the long-term health of a company?

[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.