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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
Anglo-American and European Models here), not companies, should control the chains. However, to do that, investors have to be properly resourced, they have to understand what they are doing, and they have to do it in a way that is consistent with their clients’ interests. The spotlight is undoubtedly moving on the chain and investors are feeling the heat more than they have in the past. Policymakers must be the communication catalysts, particularly in Europe and the US, to help unlock some of the benefits of the chain. 39
Page 1 and 2: Restructuring Corporate Governance:
Page 3 and 4: Contents Contents Introduction.....
Page 5 and 6: Introduction this point most clearl
Page 7 and 8: Introduction The Said Business Scho
Page 9 and 10: Welcome context of the Europaeum, w
Page 11 and 12: Institutional Activism talking to o
Page 13 and 14: Institutional Activism associated w
Page 15 and 16: Institutional Activism information
Page 17 and 18: Institutional Activism Ihave been d
Page 19 and 20: Institutional Activism provided sub
Page 21 and 22: Strategies and Balance SESSION II S
Page 23 and 24: Strategies and Balance kets, but we
Page 25 and 26: Strategies and Balance in our exper
Page 27 and 28: Strategies and Balance the non-exec
Page 29 and 30: Strategies and Balance Discussion T
Page 31 and 32: Strategies and Balance Bebchuck sho
Page 33 and 34: Anglo-American and European Models
Page 39: Anglo-American and European Models
Page 47 and 48: Round Table Discussions Round Table
Page 49 and 50: Concluding Remarks Perhaps we shoul
Page 51 and 52: Appendix B APPENDIX B Biographies o
Page 53 and 54: Appendix C APPENDIX C Participating
Page 55 and 56: Appendix D APPENDIX D Profiles of C
Page 59 and 60: The Europaeum Vision As the pace of

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