Two examples will lead you to understand the reasons behind this firm’s involvement in Corporate Governance and why it has become so important for institutional investors.

Firstly, the agreement by large shareholders to significant remuneration increases for the directors of a newly privatised utility. Secondly, the agreement by the same large shareholders to vote for the re-election of a director whose multi-year service contract gave him a large "Golden Goodbye" when he was fired.

In both cases, many of these large shareholders, such as pension funds and insurance companies, did not actually vote for the above changes, but did not oppose such changes, either. The corporate resolutions were, effectively, carried by default. The ensuing public outcry has left these institutions embarrassed, but more importantly, the government has started to take an interest in this area, directly as a result of such public concern.

Trustees of Pension Funds and Directors of Investment Management Companies and Insurance Companies sometimes need help on deciding what is a good standard of conduct for major shareholders in the modern investment world. They sometimes feel that they have been "bulldozed" into agreeing to resolutions without sufficient analysis. In the past, the easy decision has been to do nothing, effectively letting the other shareholders decide. This can no longer be considered appropriate behaviour.

Such scandals have fuelled the Corporate Governance debate and focussed media attention on it. This damages the image of institutional investors and directs attention to the responsibilities of trustees and directors. For example, pension scheme members may ask trustees which way they voted on a particular matter. It would be embarrassing if the decision had been delegated to an external fund manager whose voting strategy was influenced by current and prospective fund management mandates from quoted companies.

The Government is aware that this is an important issue for its supporters and while it is only applying verbal pressure on institutional investors to exercise their voting rights at the moment, it has indicated a willingness to move to compulsion if it sees little response. The Department of Trade will be reporting on this matter in the summer of 2000. A simple compulsion to vote is unlikely, as the Corporate Governance Movement sees this having a diluting effect on their current voting strength. More likely is a requirement on funds to poll their members on voting policies, which would have obvious cost implications. Watch our "News Page" for details when they are announced.

More and more trustees are recognising the need to vote the shares under their control, fulfilling their fiduciary role through supporting the framework set out by the Cadbury, Greenbury and Hampel committees and demonstrating social responsibility by having a prepared position on environmental and humanitarian issues. Specialist research on companies is ably provided by the NAPF but many funds do not have the internal resources to formulate a corporate governance policy and implement it through the use of the NAPF service.

At this company, we have the expertise to provide cost-effective support for policy formulation and implementation. We work with you to package a workable policy document and provide advice to your secretarial staff that ensures the correct voting pattern takes place. Controversial issues are flagged to the trustees for their views but typically this involves less than 5% of the proxies voted. We also provide quarterly or six monthly voting record reports to the trustees.