Proposed revisions to the UK’s corporate governance code focus too narrowly on workforce engagement, according to a major body representing investors.
The Investment Association, which represents investors with £6.9trn in assets under management, has told the UK’s governance watchdog that revisions that would see boards pay more attention to the views of workers departs too far from director’s duties as set out in UK law.
In a submission to the Financial Reporting Council on a revamped code, the Investment Association said that it was “concerned that the revised code focuses too narrowly on workforce engagement, and moves away from the established duties of directors as set out in law, to make decisions for the benefit of all members while taking account of the long term and other stakeholders.”
The association wants the code to more clearly reflect the duties set out for directors in section 172 of the Companies Act.
According to the association, the revised code should recognise that stakeholders are broader than the workforce, and added that engagement should focus on “material stakeholders”.
It also calls on the code to “recognise that there is a distinction between board engagement and board understanding of the views of stakeholders”.
The Investment Association said that provision in the new code relating to the independence of board chairs required further examination. Provisions in the new code switches the assessment of a chairperson’s independence from the moment of appointment to being on an “ongoing basis”.
When it comes to improvements to the UK’s stewardship code, the association believes it should focus on stewardship activities. It requests that asset managers be required to report on how they carried out their stewardship activities.
The association also seeks ways to develop more “discerning” asset owners to push for better stewardship practice.