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NAPF responds to EC’s shareholder rights directive

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Will Pomroy (pictured), Policy Lead for Corporate Governance at the National Association of Pension Funds (NAPF), responds to the publication of the European Commission’s Shareholder Rights Directive…

We empathise with the Shareholder Rights Directive’s objective to encourage and facilitate long-term shareholder engagement with investee companies. More consistent shareholder rights across Europe, along with greater disclosures from asset managers to their clients, are welcome and should strengthen investor stewardship in the interests of both savers and companies.

NAPF pension fund members have a clear interest in promoting the long-term success of the companies in which they invest; as such it is crucial they are equipped with sufficient information to assess how their investment managers have undertaken activities on their behalf. This greater transparency to clients should foster a stronger market among asset managers and enable pension funds increasingly to hold their managers to account for their stewardship activities.

The NAPF’s Principles for Stewardship Best practice – designed to help pensions funds understand and fulfil their responsibilities as investors – cover many of the issues identified within the new Directive.

It is right that pension funds should devise an investment policy that includes stewardship objectives, and one that empowers their agents to engage actively with investee companies to enhance and protect value on pension funds’ behalf.

Whilst the objectives of the Directive are positive, and greater transparency around activities is beneficial, new disclosure requirements must be practical. Care needs to be taken to avoid unintentionally tying the hands of investors or creating a tick-box exercise at the expense of encouraging the right behaviours.

With our members invested in companies across Europe, the extension of a shareholder binding vote on executive remuneration across the single market is very welcome.

We believe that executive pay should be proportionate and aligned with shareholder interests and long-term sustainable value creation. It is also important that remuneration committees should be able to justify credibly pay differentials within the company. 

The NAPF looks forward to working with all parties to assess and develop the practicality of these new proposals.

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