ShareSoc Issues Response to Green Paper on Corporate Governance Reform

PRESS RELEASE 89 20/02/2017

How to fix the ills of the UK Corporate Governance scene? ShareSoc and UKSA have given their solutions in a response to the Government Green Paper on Corporate Governance Reform. We have emphasised that the following are the key issues:

1. Engagement between shareholders and companies is not working. Shareholders are not exercising effective stewardship and control, and boards are failing to fulfil their fiduciary obligations to members. As a result, public trust in business is low. This is bad for business and for long term investors. It needs to be addressed.

2. The ownership structure of public corporations is a problem. It means that beneficial owners’ interests and views are not represented adequately. The bulk of public company shares are controlled by institutions whose interests are often not aligned with those of the beneficial owners.

3. Shareholder Committees: We strongly support the concept of Shareholder Committees, provided that they represent the interests of all shareholders, including private investors and investors in employee share plans.

4. Problems in the voting chain: This is not highlighted in the Green Paper. The proliferation of shareholders who are not directly interested in the companies in which they own shares– for example, intermediaries, ETFs, tracker funds and other index-related funds – corrupts the governance and stewardship process and the associated governance checks and balances. This is exacerbated by stock-lending. This prejudices the concept of corporate governance based on shareholder oversight, and places too much influence over our companies in the hands of traders – the ultimate cause of short-termism.

5. Disenfranchisement of individual shareholders: The Green Paper recognises the problem that most private investors are now obliged to hold their shares in pooled nominee accounts wherein shares are legally owned by an intermediary. The ability and rights of informed individual investors to influence the affairs of companies in which they have invested is fundamental to good governance.

6. Complexity of boardroom pay: Systems of remuneration for directors have become excessively complex, as a result of the structural governance weaknesses identified in the Green Paper. The mechanisms for triggering bonus payments have become opaque, the quantum of the payouts is often impossible to predict, the true motivational impact has become questionable while the reporting to shareholders has become cumbersome and often obscure to the point of incomprehension.

7. Weaknesses of long-term incentives: Boards and their advisors have taken advantage of the lack of voting integrity to implement complex LTIPs as a major part of the overall remuneration package. It is widely accepted that the longer a reward is deferred the less motivational impact it has on the recipient. It is also accepted that for performance incentives to work, the achievement of outcomes must be within the control of the recipient. The current system of long-term incentives fails both these tests. It can encourage perverse behaviour which we do not want from those who run our companies.

Shareholder Committees are a core part of the solution to the problems of corporate governance. There are many other elements of governance and control that can be improved and we have commented in our response on those where we have specific knowledge. However, without Shareholder Committees, and concomitant reform to restore the rights of individual shareholders, other changes to corporate governance are unlikely to produce meaningful change.

More Information

Our responses to the specific questions set out in the Green Paper are given here:https://www.sharesoc.org/ShareSoc-UKSA-Green-Paper-Corporate-Governance-Response.pdf (the submission was a joint one from ShareSoc and UKSA).

For further information please contact:

Roger Lawson

Deputy Chairman, ShareSoc

Telephone: 020-8295-0378

Post Date: February 20, 2017

Group description:	Following the launch of the SIGnet Technical Traders groups, it was identified that there were a number of members who use fundamental and other information as their main source of choosing companies to invest in, who would find some understanding of technical analysis helpful to identify good entry and exit points for their investments. This new SIGnet Technical Analysis in Support of Investing group is therefore being launched and we welcome members of all levels of experience to join.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	There will be an initial Zoom meeting on Monday 29th April at 7pm to launch this group, please email info@sharesoc.org if you are interested in joining.

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	A new in person group coming soon! Keep and eye on our Events page to register for the launch meeting.
Meeting Type/Venue:	In person
Meeting Frequency/Timing:	TBC

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

Group description:	This group was set up as a forum to discuss companies in detail, each company is introduced by a member and discussion may last one or two hours. Membership is by invitation only and is for experienced investors.
Meeting Type/Venue:	The group meets at a venue in Waterloo, London.
Meeting Frequency/Timing:	Meetings are on Tuesday mornings at two month intervals.

Group description:	Our group members have wide ranging investment experience and work backgrounds. Discussion topics include reviewing our recent stock or collective investment buying and selling activity, plus what we are considering buying or selling and the reasons for our decisions. We also have a wider discussion on where we think opportunities might arise in the next few months and what we think needs to be avoided. Members occasionally lead discussions on specific topics such as recent events attended, articles or books of interest and sources of investment ideas and information.
Meeting Type/Venue:	During the pandemic our meetings were held on Zoom, but we have now resumed meeting in person at a location a few miles to the west of Colchester. Most meetings will now be in person, but it is possible that occasional meetings will be held on Zoom in special circumstances.
Meeting Frequency/Timing:	We meet midweek every two months. Zoom meetings run for about two hours from 10.30am and in person meetings from 11am until about 3pm, including a break for lunch.

Group description:	Our group is a broad church that contains investors of varying age and experience. We discuss stocks and investment trusts that we have bought, sold or are interested in and the reasons behind our decisions, and try to make sense of the ever changing investment environment. Our members backgrounds are diverse and include corporate banking, engineering, teaching and the leisure industry. Discussions are robust and challenging but tend to be to be informal, and do not generally involve agendas, presentations or detailed preparation. We are a friendly and approachable group who welcome investors of all levels – we just ask that you contribute, at whatever level you can.
Meeting Type/Venue:	Our meetings are held in a very nice pub near to South Ealing tube station (Piccadilly Line), not far from Ealing Broadway (District, Central and Elizabeth Line). Group numbers permitting (and assuming members are happy to purchase food and drink from the bar), we may also have access to a private room in the pub.
Meeting Frequency/Timing:	We meet every 2 months, usually on a Wednesday morning at 11am.

Group description:	An online group for those who are new to investing. Including topics such as how to buy and sell shares, unit trusts, investment trusts, exchange traded funds and diversification, tax and how to save it, pensions, portfolio management and research tools, other asset classes and basic technical analysis.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the 1st Monday of the month at 7:15pm.

Group description:	Group focused on active investing, primarily in small / medium cap UK equities.
Meeting Type/Venue:	Regular Zoom meetings interspersed with occasional face to face meetings and social activities in the North West.
Meeting Frequency/Timing:	Monthly on Saturdays at 10am.

ShareSoc Issues Response to Green Paper on Corporate Governance Reform

PRESS RELEASE 89 20/02/2017

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