FRC announces changes to shareholder responsibility
The Financial Reporting Council (FRC) has today issued a seven point plan which it hopes will increase shareholder responsibility and make investors more aware of their rights and their obligations in relation to their investments. Historically many shareholders have refused to challenge boardroom decisions and boardroom remuneration packages although over the last few months we have seen a significant rise in the number of challenges. The FRC is hoping to introduce a more formal communication line between shareholders and company directors and indeed is looking for shareholders to pass over mandates to their fund managers.
There's no doubt that many companies in the UK have enjoyed a relatively easy ride over the last few years in relation to financial decisions and remuneration packages. However, the credit crunch would appear to have created something of a sea change whereby institutional investors especially are now keen to challenge "generous" remuneration packages and corporate transactions which they have concerns about.
In many ways this is reflection of the very difficult trading environment in the UK because when the economy was flying high, and everybody was winning, there was little conflict between directors and shareholders but in the bad times there is a need to account for every pound paid out.
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