Labour criticised over corporate governance

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The National Association of Pension Funds, whose members control pounds 350bn worth of investments, yesterday launched a broadside against Labour proposals for reforming the way companies are run.

In a wide-ranging policy statement on corporate governance published ahead of a fringe meeting it will hold at the Labour party conference next week, the NAPF rejected Labour plans for a standing commission on corporate governance and said suggestions for compulsory voting by institutions at company meetings would create more problems than they solved.

The NAPF also dismissed the concept of stakeholding, which holds that directors are accountable to wider interests such as employees, customers and suppliers. It said that although companies must be "sensitive" to these groups, shareholders' interests should be paramount.

But the funds' statement of corporate governance policy proposed a tightening of some guidelines for company directors, including golden handshakes. The document proposes that compensation should be phased so that it is paid over a period and stopped when the recipients find new jobs.

The NAPF also demanded more realistic targets for executive bonus and incentive schemes, following complaints about the excessive generosity of long-term bonus plans.

Asked whether Labour policy on corporate governance was a danger to business, Ann Robinson, NAPF director, described it as "at best irrelevant".

She believed the overriding need for companies was macroeconomic stability. The NAPF hoped Alistair Darling, the Labour Treasury spokesman who is to address the conference fringe meeting, would reiterate that. "It is almost impossible to get good corporate governance if you have stop go [policies]," Mrs Robinson said.

She said Labour's proposal for a standing commission on corporate governance would produce yet another unnecessary bureaucratic machine, and there was no need for it, since a corporate governance review committee begins to take evidence next month.

The NAPF said good corporate governance should be aimed at improving the performance of UK companies over the long term and should not be a "box ticking exercise," that checks companies' conformity with rulebooks.

The document attacked theview that pension funds have a damagingly short-termist investment outlook and that they demand excessive dividends that damage investment. It said funds' average period for holding shares was eight years, and rejected claims that members' fees for underwriting new capital issues were excessive.