to download a Special Report of this meeting - The Europaeum

Anglo-American and European Models
frontational. This is not the case in Europe and
the UK. In the UK, we have tended however to
have influential pressure points.
The situation at GSK on remuneration was
one such: it was a watershed in the UK that told
companies that investors were prepared to be
assertive. It also had the encouraging dividend
of far better company awareness of the need to
keep shareholders informed of what they are
doing and to listen to shareholder views. In
Europe, as Antonio was saying, we have “friends
of the family” who can sometimes be the representative
shareholders or, in certain parts of
Europe, institutions: for example, Telecom Italia,
where the banks may be actually pulling the
strings or making sure they are associated with
what is going on.
Going global does bring challenges to institutional
investors when it comes to corporate governance.
Although our influence is diluted in the
UK, I can by and large gain access to boardrooms
when I want to. That is more challenging when I
go to Europe or the US.
Coordination becomes difficult when dealing
with institutional investors, although institutional
investors are increasingly bonding together in
different networks – Hermes was instrumental in
building up GIGN, the Global Investors’
Governance Network, and there is also the ICGN,
which Alastair chairs and which is coming up
with some very useful recommendations.
But cost is an issue for institutions. I was listening
to Alastair earlier this week in Edinburgh,
highlighting that institutions have to face up and
be prepared to pay for what they are doing on
corporate governance.
There is a cost (whether I am an overhead or
a profit centre is a question for debate) but it is
very much an issue which does require an investment
by institutions; there are issues of economic
scale that come into play. When going global,
you do have challenges in trying to blend together
the different views of US, European and UK
shareholders, who all come to the table with a
different agenda.
Comply or explain: In the UK this is now
becoming the generally accepted approach, but I
would suggest that this is still not proven in
terms of whether or not it will work. I acknowledge
its general acceptance, but I believe there
are still some rough edges to address as we go
forward. In Europe this is gaining some momentum,
although time will tell as to how well it will
work – it is more explaining than complying. In
the US, law and regulation are still the drivers.
Good communication down the DNA chain
does align the players. In the UK, I suggest these
communications are now channelled. Yesterday
I was speaking to a chairman of a company we
invest in, and the day before another company
chair came up to Edinburgh to see me. Each day
this is happening. Ten years ago, it did not. Ten
years ago, chairmen were asking (and I still have
a few letters on file), “by what right does Mr
Jubb ask these questions” I think this has now
changed in the UK.
In the US, we have regulation FD (Fair
Disclosure, which is fair but arguably neither
helpful nor constructive). FD is used on one
hand to try to keep a level playing field, while on
the other hand many institutions in the US use it
as an excuse not to actually talk about things like
corporate governance, which are not necessarily
price-sensitive. In Europe, we are starting to
break the ice. In my experience, there are
enlightened companies and there are unenlightened
ones -- middle ground is not so well understood.
Representative bodies: in terms of the key to
the codes in the US, we have the Council of
Institutional Investors, which is quite good at
political lobbying and is getting better at coordinating
its members to deal with individual corporate
situations, but by and large it is not as effective
as the ABI (Association of British Insurers)
and the NAPF (National Association of Pension
Funds) in dealing with situations in the UK. In
the UK, the ABI and the NAPF are rather like the
representative shareholders.
They can bring a degree of discipline to bear
when discipline is needed -- two or three
investors gathered together can actually have
their prayers answered more effectively. In
Europe, the lobbying focus is clearly on Brussels:
the industry bodies are of course there.
Interestingly, in Europe I find private investor
bodies, which are more prevalent in Sweden and
Germany for example, are being listened to in a
way that they are not in the UK.
In terms of engagement, it takes two to tango;
attitudes need to be in tune. I see that it is happening
in the UK and I think it is going to happen
in Europe, but policymakers should pay
more attention to communicating objectives on
corporate governance. It is they who can wrap
their legislation and regulations with encouragement
to engage and talk constructively. If they
are at the top, they can (in part) set the tone
coming down.
Governance, from my perspective, is focusing
on governance chains. I have to speak to companies,
I have to be accountable and speak to my
clients. The governance models themselves are,
if not a myth, then something that needs to be
disentangled.
Investors (and perhaps we mean shareholders
in some respects, coming back to the point David
was making, but I generally mean investors
38