Collective Engagement – A New “City Club” for Institutions?

PRESS RELEASE 52 (20/12/2013)

ShareSoc welcomed many of the proposals contained in the Kay Review, including the third key recommendation that “An investors’ forum should be established to facilitate collective engagement by investors in UK companies“. Subsequently a Collective Engagement Working Group was formed to take this proposal forward and it has recently produced a report (see Note below).

Unfortunately this report contains a number of major defects in our view and we will be making representations to the Government opposing the structure and modus operandi of the proposed Forum. Our concerns are as follows:

1. It is not at all clear how the members of the Forum are to be selected, but it looks like it will be a few of the larger institutional investors and mainly assets managers rather than asset owners. Although the shareholders in UK public companies are now very diverse (there are very few FTSE-100 companies where any one investor now holds more than 3% of the shares, and the majority are held by overseas investors), there is no apparent proposal for a democratic basis of selection. In addition there will be no representation from private shareholders even though in total they usually outweigh the top few institutional holders in total number of shares held.

2. An “Annual Strategy Meeting” is proposed, but only institutional investors will be invited it seems – no analysts or brokers and there is no commitment to public disclosure of what is said in such meetings. So it would seem that there will be no level playing field as there should be on information availability. 

3. The Report has not tackled the issue that members of the proposed “Engagement Action Groups” will become insiders. The pretence is that they won’t become insiders when they will surely have access to information that only members of those Groups and the Company know about. They will therefore be able to trade on information not available to others (such as private investors and smaller institutions not members of this “magic circle”).

4. As the LAPFF have already pointed out, it also appears that asset managers might have more influence than asset owners when the latter have a more direct interest in reforming corporate governance and the problems of “incompetent directors, excessive and unjustified pay, neglected shareholder rights and short-term decisions” to quote from their press release.

ShareSoc suggests that it is theoretically good to build trust to improve engagement, and avoid excessive confrontation, but the secretive nature of the proposed Forum will surely just turn it into a cosy club of insiders.

As ShareSoc Chairman Roger Lawson has said, “This just looks like a new ‘City Club” for a few major City institutions rather than a Forum for collective and open engagementIt’s surely a distortion of what was proposed in the Kay Review.

ShareSoc would like to see a better structure such as “Shareholder Committees” as used in Sweden as we have advocated in the past to improve engagement between companies and their shareholders.


1. The report of the Collective Engagement Working Group is available from the Investment Management Association’s (IMA) web site or from ShareSoc. 

For further information, please contact:

Roger W. Lawson,
Chairman, ShareSoc
Telephone: 020-8467-2686 

Or; Stan Grierson, ShareSoc
Telephone 01628-522514

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