On 22 April 2010 the National Association of Pension Funds (NAPF) published a new version of its Corporate Governance Policy and Voting Guidelines for Investment Companies. These Guidelines replace the equivalent Guidelines published in March 2007.

The Guidelines are based on the NAPF Corporate Governance Policy (published in November 2007 and subsequently amended in April 2008, February 2009 and January 2010), the underlying provisions of the Association of Investment Companies Code of Corporate Governance published in 2009 (the AIC Code) and the Financial Reporting Council's Combined Code on Corporate Governance.

The Guidelines set out the NAPF’s policy on the following issues:

  • An effective chairman - the board chairman can sit on all board committees if he/she is considered independent
  • Board balance - the NAPF has updated its policy such that if the majority of the board is not independent of the manager and no explanation or an insufficient explanation is provided in the annual report, the board chairman’s re-election may be targeted on the basis that he/she is deemed to be responsible for the board’s overall corporate governance policies.
  • Policy on tenure on board
  • Audit committee and auditors
  • Management engagement committee and manager evaluation - this is a new section in the NAPF Guidelines. The NAPF supports the AIC principles dealing with the relationship between a board and the manager. Where these principles are not complied with the NAPF will normally advise its members to vote against the re-election of any non-independent non-executive director who is a member of the management engagement committee.
  • Remuneration committee and directors’ remuneration
  • Appointments to the board
  • Issuance of shares from treasury - the NAPF will continue to recommend that members vote against share issues otherwise than in accordance with pre-emption rights that exceed 5 per cent of issued share capital and if the shares may be issued at a discount to net asset value
  • Share repurchases - the NAPF will continue to expect to see holdings of treasury shares restricted to 10 per cent of issued share capital
  • Disclosure of corporate governance information - the NAPF has added to its policy to make it clear that continuous poor corporate governance practices may cause it to recommend that its members vote against the re-election of the board chairman.

(NAPF, Corporate Governance Policy and Voting Guidelines for Investment Companies - April 2010, 22.04.10)