Achievements and priorities
Achievements to date
Phase 1: Marshalling the evidence
We began by compiling the worldwide evidence around the impact of companies pursuing long-term, value creating strategies. The results were published in an Interim Report in May 2016, which is still widely regarded as the pathfinder document in the field. The Task Force refined this research into a series of recommendations that helped us to strengthen and deepen our proposals, which resulted in the Policy Report published in February 2017.
Phase 2: Making policy change happen
We devoted our resources to using the marshalled evidence to influence regulatory reforms. While we do not want to over-claim, it is notable that our work has been extensively referenced and that we have been able to use the strong relationships we have built with regulators to ensure our voice was heard. Below are some examples:
Executive pay
- Our pay design recommendations were widely referenced in the BEIS Committee’s work and the Corporate Governance Green Paper, and many were reflected in the UK Corporate Governance Code published by the FRC in July 2018.
- Our latest Study on Deferred Shares Progress was published in September 2020.
- Our research has been influential in the development of institutional investor guidelines in favour of alternatives to long-term incentive plans. Our market-wide review of practice in 2019 was referenced in the Investment Association’s letter to Remuneration Committees in November 2019.
- Our research and thinking have influenced practical examples of pay reform, such as in NatWest (RBS) and the Weir Group.
Corporate governance
- The UK Corporate Governance Code reflected our recommendations for a principles-based code with strong stakeholder orientation and purpose at its heart. According to EY research in 2020, 86 per cent of FTSE 350 companies now report on their purpose, more than twice when we began in 2015.
- Our recommendation for stronger board accountability for pay fairness throughout the organisation developed with Remuneration Committee chairs and HR professionals, is also reflected in the revised principles and guidance.
Corporate reporting
- The Strategic Report Guidance reflects a strong focus on the importance of understanding strategic assets, in particular, intangible assets, and reporting on those as recommended in our submission. The Guidance also introduces a core ‘logic’ for reporting starting with purpose which in turn informs strategy, operating model and KPIs thereby placing purpose at the heart of Strategic Report.
- We have consistently called for a proportionate but coherent approach to be developed for large private companies, given their importance to the economy. We were pleased to see the steps taken in this direction through the development of the Wates Principles and Section 172 reporting requirements.
Stewardship
- The initial framing of the Stewardship Code consultation reflected many of the principles in our pre-consultation submission and the final version of the Code reflected our desire for a principles-based approach with provisions reflecting the importance of stewardship being based on activity not just reporting.
- Actions across the regulatory spectrum have reflected our call for an integrated approach to stewardship across the investment chain.
- We convened an influential group of asset owners and asset managers to inform our submissions and to discuss the actions they could take to be more purposeful and to influence the companies they are invested in, in this regard.
Corporate insolvency
- We input our evidence to the BEIS consultation on corporate insolvencies and corporate governance that demonstrates how alternative corporate forms and structural changes to the investment management chain could contribute where costs and risks are excessively externalised.
Utility regulation
- There are emerging examples of utility regulators as part of the 2018/19 price control and licence renewal process constitutionally requiring operators to place the customer at the heart of what they do. There is interest in our concept of a ‘public benefit company’ as a way to achieve this.
Priorities for 2021/2022
Stewardship: How should companies and investors interact around purpose
- Work with asset owners to help them to amplify their influence and use informed evidence to empower them to be better stewards, via, for example, a say on purpose.
- Encourage a more sophisticated understanding by stakeholders of the role of dividends.
- Review first round Stewardship Code reporting to identify what authentic and purposeful adoption of the Stewardship Code looks like.
Corporate governance: What purposefulness looks like post Covid-19 for companies
- Continue to support the agenda of pay reform, such as our recent report on deferred shares, informing the debate through research and practice.
- Identify what being purposeful means in practice and the subsequent trade-offs to help guide Boards.
- Review lessons learned from first-round reporting on purpose and s172, and continuing to deepen the impact of the UK Corporate Governance Code.
- Identify which previous Purposeful Company studies could be updated.
Policy: Leverage Government and regulator agendas
- Work closely and pragmatically with tier one regulators, including the FRC, FCA, and BEIS to align our work where relevant to the areas that they are focused on as they emerge and change over the crisis.
- Understand what regulatory changes need to happen, particularly in relation to industries at the interface of public and private goods such as utilities and public infrastructure providers, to allow companies to become more purposeful.