UK - Company reporting requirements should be extended to reflect the ethical concerns of pension fund trustees, corporate governance experts claim.
They point out that while the department for trade and industry’s Operating and Financial Review – which is currently out for industry consultation – provides “welcome clarification” on reporting expectations, it should go further.
The review will be an annual report to shareholders covering the key drivers of performance and will be required from all UK listed companies.
Henderson Global Investors head of corporate engagement Rob Lake said the OFR was seen as a “positive step” by the investment community but there were limitations to the current proposals.
He called for the requirements to be extended to non-UK companies which are listed in London, and to large private companies. Lake also wants the wording of the requirement to be extended to include ethical strategies of companies to reflect a “steady interest” among trustees.
He said: “The biggest corporate scandals in recent years – such as Enron – have been on ethical issues. It is crystal clear a company’s ethical performance is closely linked to shareholder value.”
Insight Investment investor responsibility director Rory Sullivan said the wording of the OFR should be brought into line with amendments to the Pensions Act 2000.
This states that trustees of occupational schemes must disclose the extent to which social, environmental and ethical considerations are taken into account in their investment strategies in their statement of investment principles.
Sullivan said that including the concept of corporate responsibility in the OFR would help align company reporting requirements with the corresponding information needed from trustees.
He said: “This would provide a useful signal to companies that these issues are squarely on investors’ radar screens.”
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