UK: NAPF Corporate Governance Policy and Voting Guidelines for Investment Companies

The National Association of Pension Funds has published an updated edition of its Corporate Governance Policy and Voting Guidelines for Investment Companies: see here (pdf).

UK: NAPF: Company articles and arbitration clauses

The UK's National Association of Pension Funds (NAPF) has updated Section D of its Corporate Governance Policy and Voting Guidelines 2007. Section D now includes a new section - D.1.6 - dealing with arbitration clauses and which reads as follows:
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D.1.6: Dispute Resolution
The introduction or maintenance of a provision in the Company's Articles of Association which prescribes arbitration as the sole mode for settlement of all or a significant class of disputes between shareholders (whether acting in their own right or in the name of the Company, as applicable) and any one or more of the Company, its directors, executive management, or its professional advisors, should be viewed in the first instance as a material reduction in shareholder rights.
Voting
Investors will normally wish to oppose any such provision in the absence of a clear demonstration by the Board that the inherent detriment of a reduction in shareholders rights represented by such provision is outweighed by the benefit the provision brings in the light of specific and extenuating circumstances to which the Company is subject.
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It is worth pointing out that even where such clauses are present in a company's articles of association, the right to petition under Section 994 of the Companies Act (2006) cannot be removed through contract. This point was made in Exeter City AFC Ltd v Football Conference Ltd [2004] EWHC 831 (Ch), [2004] 1 W.L.R. 2910, with regard to Section 459 of the Companies Act (1985) (the predecessor of Section 994). Such petitions are, however, unusual in public companies.

UK: executive pay - NAPF principles

The chief executive (Joanne Segars) and head of corporate governance (David Paterson) of the National Association of Pension Funds have written to FTSE350 chairmen setting out several principles for the alignment of executive pay with shareholders' interests. The letter, published today, also states the NAPF's view that "a review of accepted best practice, which serves neither shareholders nor management well, is warranted and we have made these views clear to Government and in the FRC consultation on the Combined Code".

UK: Directors' contracts and severance pay: ABI and NAPF revised guidance

The ABI and NAPF joint guidance on directors' contracts and severance pay has been revised. The revised guidance contains eight principles and it is interesting to note here what is said with regard to notice periods:

"The Combined Code states that under normal circumstances directors should be retained on contracts of one year or less. However we believe that a one year notice period should not be seen as a floor, and we strongly encourage boards to consider contracts with shorter notice periods. Compensation for risks run by executive directors is already implicit in the absolute level of remuneration, which mitigates the need for substantial contractual protection"..

The guidance is available here.

UK: NAPF responds to the Walker Review

The National Association of Pension Funds has published its response to Sir David Walker's review of the governance of banks and other financial institutions. NAPF comments on each of Sir David's proposals and makes this general point:

... all of the changes and innovations proposed should be designed with the object of changing the behaviour of companies and investors so that they focus more on the creation of value over the longer term. This is a complex issue and there will be many views on definition as well as the route to achieving that goal, but pension funds and their members have not been well served by the concentration in the financial sector on short term gains which have been made at the obvious expense of the longer term and at significant cost to shareholders".

Note: see here for further NAPF corporate governance publications.

UK: pension fund engagement with companies - NAPF survey

The UK based National Association of Pension Funds has published its 2008 survey of pension fund engagement with companies. The NAPF surveyed pension funds managing more than £1 billion and received responses from 53 funds (with combined asset holdings of over £300 billion). The NAPF reports that pension funds are increasing their influence over companies and highlights the following findings:

Board Membership: 74% of pension funds had seen changes to board membership as a result of their engagement activities - up from 67% in 2007.

Company strategy: 69% saw changes to company strategy - up from 57% in 2007.

Remuneration Policy: 79% of respondents saw changes to remuneration policy - up from 74% in 2007.

Social/Environmental policy: 68% of funds reported making an impact on social/environmental policy - up from 51% in 2007.

A press release is available here.