UPDATE 2-UK investors join forces to fight for boardroom change

Fri Apr 11, 2014 10:35am EDT

Related Topics

* ABI's investment arm, IMA to merge into new body

* To give investors a stronger voice in company meetings

* Follows politician plans to counter market short-termism

* Asset managers under pressure to justify fees, returns (Recasts, adds detail, quote, background)

By Simon Jessop and Chris Vellacott

LONDON, April 11 (Reuters) - British company bosses could face a rougher ride at investor meetings in future after two trade bodies representing trillions of pounds joined forces to fight for change in the boardrooms of the largest firms.

That could mean 2012's "shareholder spring" - when investors gave a high-profile thumbs down to the bumper pay and perks proposed by several companies - becoming a more regular event.

The tie-up will see Britain's Investment Management Association merge with the Association of British Insurers' (ABI) investment affairs unit, which advises members how to vote at company meetings.

The decision comes days after EU financial services chief Michel Barnier proposed new rules on shareholder rights to make companies more answerable to their owners.

It also follows frustration among investors over bonuses at bank such as Barclays which raised its payouts for staff by 10 percent last year, despite a one-third drop in profits.

The aim of the merger is to more effectively lobby on issues affecting asset managers and owners.

"It is better and more powerful if you do it as a single and more unified voice," Robert Hingley, director of the ABI investment unit that will move across to join the new trade body, said in an interview with Reuters.

The ABI, whose 300 members hold investments around the world worth nearly $3 trillion, currently uses a colour-coded alert system to advise its members, issuing "red top" alerts to indicate serious concerns about how a company is being run.

And it is the asset owners that politicians want to see get a better deal, both from the companies themselves and also the asset management industry, under pressure to justify fees and returns in a low interest rate, post-financial crisis world.

WANING INFLUENCE

Both bodies to be merged represent insurers and asset managers that hold a large number of the shares issued by companies in Britain's FTSE 100 and other indexes.

However, as representatives of British investors, they have seen their influence wane in recent years as the shareholder base of UK companies has become more internationally diverse.

"We have situations where conventional engagement by individual investors, or the existing mechanism for collective engagement, have not been able to have the desired impact," said Daniel Godfrey, chief executive at the IMA, whose members manage assets worth more than 4.5 trillion pounds.

"And that's particularly where there are very big companies with a very diversified shareholder base," added Godfrey, who is to head the new, as yet unnamed, body.

The new organisation would be able to offer better and deeper assistance to asset managers, he said, and would complement the work of the Investor Forum, which represents the voice of overseas investors.

It would work with companies to foster a culture of longer-term strategic thinking, in line with a government report that criticised short-termism in financial markets.

That report, produced by economist John Kay in 2012, suggested investors could deliver long-term benefits if they engaged collectively with company boards, rather than individually. (Editing by Pravin Char)

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