The Pensions and Lifetime Savings Association (“PLSA”), representing the occupational pensions industry, has published guidance on market best practice to assist its members when exercising their vote at AGMs in 2019. The revised version of its Corporate Governance Policy and Voting Guidelines (“Guidance”) reflects the introduction of the 2018 UK Corporate Governance Code which applies to financial years beginning on or after 1 January 2019 (“Code”). Interestingly, the Guidance does not follow the format and order of a typical AGM agenda but instead highlights those issues which the PLSA believes are significant to investors. In particular, this change has resulted in greater prominence for resolutions regarding approval of the remuneration policy and remuneration report, and the principle of sustainability.
UK Corporate Governance Principles
Whilst the PLSA’s corporate governance principles remain largely unchanged, the Guidance includes the following additions:
- Companies should take capital structure decisions which balance the financing needs of the firm with the interests of broader stakeholders: a new principle which encompasses striking the right balance between dividend payments to shareholders and paying deficit repair contributions to any defined benefit pension scheme as well as undertaking share buybacks only when doing so is the best way to achieve long-term value.
- Pension schemes should consider explicitly setting out their expectations for outsourced engagement and stewardship activities in their contracts or mandates: a new principle which identifies that stewardship responsibilities remain when asset owners outsource engagement to asset managers and contracts should be set up to allow their service providers to be accountable. This principle recommends the International Corporate Governance Network’s Model Mandate as a starting point for ensuring this.