On 19 January 2010 the National Association of Pension Funds (NAPF) published amendments to its UK Corporate Governance Policy which should apply during the 2010 Annual General Meeting (AGM) voting season.

The NAPF’s current Corporate Governance Policy was published in November 2007 and subsequently amended in April 2008 and February 2009.

The new amendments relate to:

  • Calling general meetings on short notice - the Shareholder Rights Directive provides that traded companies can hold meetings other than AGMs on 14 days’ notice provided a number of requirements are met. The NAPF comments that it would expect companies to give as much notice as possible such that a meeting should only be called on 14 days’ notice in limited circumstances where it would benefit shareholders as a whole. If the proposals at a meeting are not time-sensitive, the meeting should not be called on short notice. When tabling an enabling resolution, companies should outline the circumstances in which meetings might be called on short notice.
  • Director independence - where a director has been nominated by a dissenting significant shareholder, the director can still be classed as independent provided the independence criteria, as set out in the NAPF Corporate Governance Policy, are satisfied. However, particular attention should be paid to the assessment of ‘significant links’ between the nominee and the dissident shareholder.
  • Director suitability - when considering whether to put a director forward for re-election, the board should have particular regard to whether the director has had significant involvement in “material failures of governance, stewardship or fiduciary responsibilities”, whether as an executive or non-executive director, at another company.
  • Director re-election - where an issuer takes advantage of the Association of British Insurers’ policy concerning authority to allot where the company is undertaking a rights issue and therefore undertakes a rights issue of more than one-third of its issued share capital pursuant to a general authority, all directors should stand for re-election at the next AGM.
  • Termination payments - contractual payments should be limited to base pay and benefits and any payments in excess of this amount should be fully explained.
  • Institutional Shareholders’ Committee Code on responsibilities of institutional investors - the NAPF has incorporated this into its Corporate Governance Policy.

The NAPF intends to reissue its Corporate Governance Policy in due course to take into account more substantial changes which will result from the Financial Reporting Council’s Review of the Combined Code.

(NAPF, Corporate Governance Policy - 2009/2010 Updates, 19.01.10)