Response to BEIS on the FRC Kingman proposals

In a detailed joint ShareSoc-UKSA 12-page Response to BEIS on the FRC Kingman proposals, we said we support the general thrust of the Kingman proposals. Kingman is proposing a new authority to replace the FRC.

We also made some more general points:

Sound financial reporting is a basic prerequisite for good stewardship. However, no matter how good the financial reporting is, if a significant proportion of investors are disenfranchised and unable to make their voice heard, many of the benefits of better financial reporting will be lost. This is exactly the situation that exists currently with regard to individual investors. According to ONS estimates, private investors own 12% of UK main market companies by value and 29% of AIM companies. They have an important contribution to make to governance, stewardship and shareholder oversight of listed companies. However, thanks to the way in which the system of nominee accounts currently works their views are currently not heard and they are disenfranchised.

It should not be difficult in this day and age of digital technology and electronic communications in which shares are held in electronic format to ensure that beneficial owners are identifiable to companies as the true shareholders and are able to exercise their shareholder rights. Reform of the way in which nominee accounts work is something which the new regulator should look at urgently in conjunction with BEIS. Allowing voting power to remain in the hands of conflicted parties explains the need for more regulation when in an ideal world we would call for less.

We have also commented to the FCA on this in our response to its consultation (CP 19/7 on Proposals to Improve Shareholder Engagement. Our comments to the FCA on this are shown in Appendix 2.

Two other areas in which change should be considered and which would strengthen corporate governance are:

  • There should be a requirement for FTSE100 companies to hold meetings: at least one meeting each year with individual shareholders. Some companies currently do this, for example, HSBC, BHP Billiton and Marks and Spencer. Institutional shareholders are usually able to gain an audience informally with the senior management of a company at any time. Currently there is no effective line of access to senior management for private investors.
  • The introduction of shareholders committees. These would include members who are aware of individual shareholders views and interests. This is the only mechanism that can give disenfranchised stakeholders influence while the fundamental causes of disenfranchisement remain un-addressed.


The full response is here: BEIS Consultations on Kingman proposals for the FRC Final

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