CG chiefs turn up heat on institutions

Three of the most influential figures in British corporate governance used a well-attended seminar to join forces in attacking institutional investors for their failure to represent adequately the interest of shareholders in the companies in which they invest.

Derek Higgs, author of the influential government-commissioned Higgs report, George Cox, director-general of the Institute of Directors and John Sunderland, chairman of the global food and drinks group Cadbury Schweppes all turned on institutions for not taking governance seriously.

Their criticisms, coming only a month after the consumer giant Unilever had criticised its own investors for not turning up at meetings to vote, show that in Britain at least the focus in governance is turning away from company managements to investors.

At the conference, staged by the London Business School whose dean, Laura Tyson, has emerged as a significant influence in corporate governance, it was difficult to identify which speaker was the most critical.

The IOD's George Cox described institutional shareholders as "the least loyal of anyone connected with the company". "They are simply not involved with quoted companies", he said, "Institutions try to buy and sell at the right time. That is their business".

Mr Sunderland said there was a "mismatch" between investment companies and business, while Mr Higgs described how institutions had taken a great interest in a private company in which he had once been involved only to lose active interest once it had been listed on the stockmarket.

Higgs said the "great challenge" for the fund management industry was to organize itself in such a way that steps up its involvement in business, ending the 'disconnect' between institutions and company boards.