Lord Myners, the
Financial Services Secretary, delivered the
keynote speech at yesterday's
NAPF seminar on pension funds and responsible investing. Here are some extracts:
To me, one of the iconic failures of governance has been executive remuneration. There is a large body of data that shows a continual upwards spiral of senior executive pay ... Why has this happened? An economist might ask the following questions to find an explanation: Is the rise in salaries a reflection of contraction in the supply of talent or an increase in the demand for talent? Or have the demands, pressures and stresses of work risen over the past five decades, requiring this to be reflected in compensation? I am not persuaded that I can find a satisfactory answer to any of these questions.
... I believe that Institutional investors, on behalf of their clients, need to be more challenging in the future than they have been in the past. And you, as Trustees, have a duty to satisfy yourselves that your agents, the fund managers, are taking necessary action to protect and enhance the value of the investments they make on your behalf and on behalf of those for whom you act in trust.
... I am also keen to further the debate on establishing an independent industry body with a mandate to represent the institutional investor community and raise the profile of governance and engagement as an investment strategy. There would be very real benefit in establishing an industry-wide institute that speaks with one voice on behalf of all institutional investors.
... The Government can and will help in enabling good corporate governance, but, if the market and trustees are to meet their fiduciary duties, you need to develop and promote solutions to the problems that still impede effective engagement and governance. This should include a thorough evaluation by pension fund trustees of the appropriateness of goals they set for their fund managers and the development of effective economic incentives to good value-adding governance – those who are willing to put the effort and resource into successful stewardship deserve to be handsomely rewarded".
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