Shareholder activism can be part of a more responsible capitalism, but giving shareholders new powers will not be enough to achieve this, Jon Cruddas MP argued in parliament this afternoon. Pensions Minister Steve Webb met the MP for Dagenham’s speech with approval.

Cruddas is calling for big shareholders to be more accountable to the people whose retirement savings they look after. He would like to see changes in the law which would force shareholders to disclose their voting practices at company AGMs, and he called for reform of shareholders’ duties to pension savers, to make clear that they can and should act responsibly.

The MP for Dagenham said: “Making companies more accountable to shareholders will not be enough to tackle 'crony capitalism': shareholders themselves must also become more accountable to the ordinary savers whose capital they invest.

“This means much greater transparency about what is being done with our money. It also means clarification of investors’ duties: we cannot have responsible capitalism if the capitalists think the law prohibits them from acting responsibly.”

The minister responded by saying that fiduciary duty does not simply mean someone must maximise short-term returns at all costs and that the extent of trustees’ fiduciary duties is frequently misunderstood.

Webb said he has “a great deal of sympathy for the issues. The coalition government supports the highest standard of corporate governance and ethical behaviour”.

He added that he will raise the transparency issue with The Pensions Regulator and that he is working with TPR on things that can be done to improve transparency to members.

Commenting on the speech, Christine Berry, policy officer at FairPensions, said: “Government moves to give shareholders greater powers are to be applauded. But to paint this as a solution in and of itself, when we know shareholders often do not use the powers they already have, is either naïve or disingenuous.

“This does not mean shareholder power is a ‘dead duck’. The big investors who manage our savings can and should be more responsible and accountable when it comes to their exercise of voting rights. The focus now needs to move on to how we make this a reality.”

Share Story: