UK pension funds have launched a campaign to counter the “misperception” that the UK’s governance structures and shareholder rights are a block on economic growth.

Eleven fund managers, with assets of around £150 billion, have joined the Governance for Growth Investor Campaign (GGIC) to promote the role of investment managers in the development of regulatory policy.

Caroline Escott, head of investment stewardship at Railpen pension fund, welcomes the government’s policy focus on growth and capital markets.

“Damaging to this drive,” she says, “is the misperception that the UK’s historic world-leading corporate governance and shareholder rights mechanisms unnecessarily hinder growth, rather than providing the UK with a key differentiator and supporting long-term value creation in the interests of everyday UK savers.

“Last year’s listing changes watered down many longstanding shareholder rights—changes which, to date, do not appear to have had a positive effect on the UK IPO environment.”

‘Race to the bottom’

Escott has been a consistent critic of measures that softened the rules on dual-class shares, including an end to the need for sunset clauses.

Reforms also saw the lifting of requirements for companies to organise shareholder votes on related-party or significant transactions.

At the time, Railpen indicated the reforms were a “race to the bottom” on governance.

GGIC’s main call is for a seat at the table for pension funds during discussion of reform to capital markets and corporate governance.

Wyn Francis, chief investment officer at BT Pension Scheme Management, says: “Strong governance shouldn’t be viewed as a barrier to growth but a catalyst for it.

“Well run companies that are transparent and accountable are more likely to succeed over the long term. That’s how we deliver sustainable returns for members and support a thriving UK economy.”

GGIC’s launch comes just a week after the chancellor Rachel Reeves gave her Mansion House speech which focused on regulation, describing it as a “boot on the neck of businesses”.

Healthy growth environment

The GGIC campaign is conciliatory in tone towards government aims, but sets the scene for a significant section of the investor community pushing back on deregulation for its own sake, and for a debate about what makes a healthy regulatory environment for economic growth. Escott calls it a “vital moment for the UK’s capital markets and economy”.

GGIC has three other priorities in addition to formal inclusion in governance reform talks: avoiding artificial divides between private and public markets; promoting growth through companies’ recognition of the importance of shareholder rights; and “working collaboratively with government to promote the UK’s governance standards internationally, including on international trade missions”.

GGIC also highlights that one of its first policy “engagement” areas will be on the so-far unpublished audit reform and governance bill, legislation announced in the King’s Speech last year.

Among the issues the bill could introduce are a new regulator—the Audit, Reporting and Governance Authority (ARGA)—with new enforcement powers; increased accountability for directors; and managed shared audit.

Debates in the House of Lords indicate the government may push ahead with new powers, while going cold on managed shared audit.

John Ball, chief executive of the Church of England Pensions Board, says: “Whilst ensuring an efficient market is vital to the government’s growth agenda, it is also important that we do not throw away the lessons learnt of good corporate governance and of past corporate failures and financial crises. This campaign places good corporate governance at the heart of an agenda to support long-term sustainable growth in the UK.”