Investors still have concerns about business accountability to shareholders

A new study by The Share Centre shows that although investors are generally supportive of the UK Corporate Governance and Stewardship codes, there is still widespread concern that there is insufficient oversight into whether institutions really comply

The Share Centre invited key industry experts to debate the “Accountability in Business” report, which provides an inside-look at corporate governance amongst specialists and fund managers.

Among its many findings, the research revealed that all investors were supportive of both the UK Corporate Governance Code and Stewardship Code. Half of those (50%) said the “comply-or-explain” regime was the UK Corporate Governance Code’s key attraction, while 14% welcomed the increased focus on board effectiveness.

However, when questioned over their concerns about the code, 35% of investors had reservations, with 18% believing there is insufficient oversight of whether institutions really complied. Pressure from shareholders and voting at the AGM are typically seen as sufficient penalties for failing to follow the UK Corporate Governance Code.

More than 70% of investors believe there is value in executives appearing before Parliament. The typical reasons for this include the need for MPs to understand company failures and the benefits of powerful executives being held accountable.

Over half (53%) believe investors should vote on major changes to a company, such as a new business model. Those in favour also note the significant practical difficulties of deciding when a vote is necessary.

Almost two thirds (60%) of respondents think there is enough oversight already and struggle to see what else would be worthwhile.

“The subject of corporate governance has never been so relevant and prominent, especially around the most vexing of issues, remuneration,” said Andy Parsons, head of investment research at The Share Centre.

Private investors continually hear about vast boardroom remuneration packages; trying to comprehend the vast discrepancies between the numbers mentioned and their own personal financial circumstances.

“In addition, it’s always alarming to hear of bonus packages, when a business may have clearly failed to deliver shareholder returns. Is it right that individuals can be rewarded for failure?”

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