UK - Pension schemes will have a far stronger voice on boardroom policy following the Higgs Review on corporate governance, industry experts believe.
The report sets out a series of measures which will increase the amount of contact non-executive directors will have with institutional investors – although it stops short of calling for legislation.
Derek Higgs said his review was not a blueprint for box-tickers but a “counsel of best practice that can be applied intelligently”.
The review says that:
• The roles of chairman and chief executive should be separate.
• The performance of directors and the board should be evaluated at least annually.
• Non-executives should serve no more than two three-year terms.
• At least half the board should be independent non-executive directors.
The NAPF and the Pension Investment Research Consultants welcomed the review.
NAPF spokesman Andy Fleming said: “We have every reason to expect engagement between shareholders and boards will produce positive results without recourse to legislation.”
PIRC research director Stuart Bell said the proposed changes to board structure, which would end the dominance of executive influence and the monitoring of non-execs, would benefit pension funds.
He explained: “For the first time, pension funds will have a good idea of what non-execs have actually done and whether they deserve further support.”
However, Higgs rejected calls for non-execs to meet shareholders without executives to discuss concerns and answer questions.
Instead, he suggested non-execs should attend meetings that executive directors – and chairmen – have with key shareholders.
Hermes Pensions Management director of corporate governance Colin Melvin said: “Higgs provides practical and pragmatic guidance on how boards might enhance effectiveness and performance.”
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