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28 September 2012

FT: FRC curbs advisory groups' voting role


The FRC, which oversees corporate governance, has announced changes to the UK Stewardship Code that will make investors explain more clearly how they use these groups, which some say are in effect proxy voting agencies.

The new requirements follow worries that the use of advisory groups, such as the US-owned ISS, is preventing shareholders from engaging with companies themselves.

Martin Sorrell, chief executive of global advertising group WPP, was one of the biggest critics of these bodies after ISS recommended that shareholders vote against his 60 per cent pay rise at the company’s annual meeting in June. Other company heads have expressed concerns that ISS – which advises an estimated 25 per cent of shareholders in FTSE-listed groups – and similar bodies such as Pirc and Manifest are unregulated and unaccountable.

The FRC said investors must explain more clearly how they manage conflicts of interest, the circumstances in which they will take part in collective engagement and the use they make of proxy voting agencies. FRC head Stephen Haddrill said: “Investors may choose to outsource some of the activities associated with stewardship, but they cannot delegate their responsibility.”

Full article (FT subscription required)



© Financial Times


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