Shareholder turns heat on DFS, HIT and AB Foods

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Investor activism is set to return this week after the National Association of Pension Funds singled out three companies for their poor corporate governance records.

The NAPF is advising its members to abstain from voting on the re-election of directors at sofa retailer DFS Furniture and HIT Entertainment, home to children's favourite Bob the Builder, and the remuneration report of Ryvita-owner Associated British Foods. All three companies have annual meetings scheduled for this week.

The NAPF, which represents firms with more than £600bn of investments, is targeting non-executive director Malcolm Walker at DFS. He sits on the remuneration and audit committees and the NAPF is concerned that he can no longer be deemed independent as he has been on the board for a decade.

Mr Walker is the founder and former chairman of frozen food company Iceland, now renamed Big Food Group, but left under a cloud when he sold £13.5m worth of shares shortly before the group's first profit warning.

At HIT, the NAPF is targeting non-executive director Mike Luckwell, again over concerns about his independence. Mr Luckwell has been on the board for over 10 years and is also a significant shareholder with a 7 per cent stake.

In addition, the NAPF is recommending an abstention on the remuneration report at HIT. It is concerned that Steve Ruffini, the US-based fi-nance director, would receive 12 months' salary plus a bonus should his position be terminated. In the event of a change of control, the period would be extended to 18 months.

At AB Foods, which also owns the Ovaltine malt drink and Kingsmill bread, the NAPF's main concerns are the historic use of option awards without performance conditions, and a lack of disclosure.