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Pensions and Lifetime Savings Association updates Corporate Governance Guidelines

The Pensions and Lifetime Savings Association (the Association), better known as the National Association of Pension Funds of old,  has updated its Corporate Governance Policy and Voting Guidelines. The Corporate Governance Policy and Voting Guidelines aim to  promote the long-term success of the companies in which the Association’s members invest; and, ensure that the board and management of these companies are held accountable to shareholders, such as pension funds.

There are three areas that the Association is seeking improvement on by companies and which forms the basis on which they will be considered by institutional investors. These are improving risk reporting; ensuring that directors are giving enough time to their roles and giving timely notice of the issuance of new shares without the application of pre-emption rights.

The Association believes that there should corporate reporting on the human capital of a company for investors which would include more transparency on the composition of the workforce and the sustainability of the employment model. The reporting should also include the board’s view of the associated strategic and operating risks, the Association said. The Guidelines also suggest that corporate reporting on  emerging risks, such as cyber-security and climate change, also needed improvement and companies should disclose how these risks are managed and what changes have occurred in relation to these risks in the past year.

The non-executive role is an increasingly demanding one, particularly when chairing a key committee, and is essential to the effective governance of the company, the Association said. This year’s policy and guidelines include a note that shareholders should be mindful of concurrent directorships and their respective call upon an individuals’ time.  For complex companies it may be appropriate to vote against the (re)-election of a non-executive director who holds more than four directorships.  Where a director chairs a number of key committees a stricter view may be adopted, especially where an individual is a director of two or more companies in heavily regulated industries.

Companies are allowed to issue shares for cash without the application of pre-emption rights, under Section 570 Authorities, subject to limits on the amount of shares that can be issues. The Association believes that companies should clearly signal at the earliest opportunity their intention to undertake a non-pre-emptive issue and to engage in a meaningful dialogue with their shareholders about this.  Companies should keep shareholders informed of issues related to an application to dis-apply their pre-emption rights.  In return, shareholders should review each case made by a company on its own merits and decide on each case individually, using their investment criteria, the Association said.

As in previous years, the PLSA voting guidelines will be incorporated to Manifest’s research reports and voting guidelines for all UK listed companies reporting after 31-Dec-15

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