The Ownership Commission Report: Plurality, Stewardship and Engagement
Fieldfisher welcomes the report of the Ownership Commission
The Ownership Commission was established in January 2010 when a range of top academics and high profile business people were appointed as commissioners with a brief to look at employee owned and co-operative forms of ownership that might be applied to the public sector. The brief was then extended to include an analysis of ownership in Britain generally. In particular the study focused on assessing the governance and ownership of public limited companies (PLCs) as well as considering the contribution of non-PLC forms including family ownership, mutuals, co-operatives and employee ownership.
The Ownership Commission published the findings of this study on 14 March 2012. The key recommendation coming out of the study is that plurality, stewardship and engagement need to be strengthened within British business and the British economy in order to drive better ownership and corporate behaviours.
By plurality, the Commission means the need to have a variety of different types of ownership within the British economy. This will promote more resilience to shocks within particular sectors, will allow investors and savers more avenues in which to save and invest and will give customers more choice. Such plurality would involve a mixture of co-operatives, mutuals, employee owned businesses and family enterprises as well as PLCs. To encourage such plurality the Commission has recommended that the Government needs to develop tax concessions for various non-PLC business models. The Commission also recommends that public sector mutuals should be protected from de-mutualisation by a clear asset-lock.
The Commission make the recommendation that fiduciary obligations of directors, investment management companies, trustees and shareholders should be widened and that better stewardship should be achieve through maximum transparency for all aspects of ownership. Specific recommendations include a requirement for businesses to make a statement of their business purpose in their annual report, requiring directors to declare what they believe is in the best long-term interests of the business and encouraging pension funds and other long-term end asset owners to take more long term control over their beneficiaries' money.
Here the Commission emphasises that the engagement and involvement of employees, shareholders and other business stakeholders with management is a proven way to increase the performance and accountability of businesses. The Commission recommends that this should be promoted by encouraging employee share ownership schemes and consideration should be given to the creation of share-voting pools or "aggregation platforms" to whom individual or institutional shareholders can cede their voting rights. Another recommendation of the Commission is that Annual General Meetings of PLCs should include greater involvement of shareholders.
We expect these recommendations to be considered carefully by the Government and to have an important influence on future thinking on ownership structures.
For further information on Fieldfisher's involvement in the mutualisation sector follow this link.