Pension schemes can ‘hold bosses to account’, says body
PENSION schemes should monitor how companies handle the coronavirus pandemic and be prepared to hold directors to account if they mistreat staff, an industry body has said.
The Pensions and Lifetime Savings Association (PLSA) raised concerns some firms are laying off or furloughing employees while highly-paid directors and chief executives maintain full pay and bonuses.
It insisted pension fund investors must be prepared to hold directors accountable on issues such as executive remuneration, which must “demonstrate some recognition of wider societal expectations, the general economic environment and the returns to long-term shareholders”.
It also said investors should keep an eye on how firms manage the Covid-19 pandemic and consider voting against directors who they believe did not behave appropriately towards their workforces.
Caroline Escott, policy lead for investment and stewardship at the PLSA, said how companies act now will have a lasting impact.
She said: “This AGM [annual general meeting] season it is worth investors remembering that the post-crisis memories of the public and policymakers tend to be long.
“How companies behave now towards their workforces will likely have a material impact on their future revenue, operating costs and even the post-covid-19 regulatory environment.
“This, in turn, has consequences for scheme investors’ risk-adjusted returns and ultimately for the value of beneficiaries’ savings.
“Coronavirus is putting companies’ employee models and practices to the test.
“It is one thing for a company to discuss its pioneering approach towards flexible working, health and safety or mental health in its annual report, but quite another to put this into practice under immense financial stress and uncertainty.”
Her comments follow warnings that business owners who exploit the UK Government’s furlough payout scheme could be taken to court.
HMRC’S chief executive Jim Harra said the policy, which covers 80 per cent of employees’ wages if they are put on furlough, had a “range of abuse risks”.
Speaking during a Treasury select committee on Wednesday, he urged employees who are put on furlough to report their companies if there are any attempts to make them work while they are supposed to be off, and warned the scheme could attract organised criminals.
He told MPS that while the “vast majority” of employers would “use the scheme responsibly and indeed need it for their support” there were a “range of broad and abuse risks that we need to manage and we will be doing our best to do that, but we would be relying to some extent on people giving us information”.
Asked what would happen to employers found to be abusing the policy, Mr Harra replied: “We would seek to recover the money from them and, depending on the nature of the behaviour, if it amounted to knowingly trying to defraud us then we could take criminal action against employers.”
Guidelines issued by the PLSA state that one of the most effective ways of investors using a vote to effect change is through holding relevant directors individually accountable.
The body said pension schemes have a “fiduciary duty to their beneficiaries to act in their interests”.
It said: “This includes acting as a good steward of the assets entrusted to their care and part of that is being unafraid to exercise voting rights in a way that sends the clearest possible message to companies that repeatedly fail to respond to legitimate investor concerns.”
The PLSA brings together the pensions industry and other parties to “raise standards, share best practice” and support members.
It represents more than 1,300 pension schemes with 20 million members and £1 trillion in assets, across master trusts, defined benefit and defined contribution schemes and local government funds.
Its members also include some
400 businesses which provide essential
Coronavirus is putting companies’ employee models and practices to the test
services and advice to UK pensions providers.
Earlier this week, the British Chambers of Commerce found more businesses than anticipated had applied for the furlough payout scheme, with between 7 million and 10m workers expected to be put on leave.
Analysis by the Resolution Foundation think-tank suggested Chancellor Rishi Sunak should be prepared to spend between £30bn and £40bn on furlough payments over the next three months.
Mr Sunak previously said that if people were using the job retention furlough scheme, it showed it was working and that it was “a success”.
He said: “When it comes to the job retention scheme, if there are people who are put on that scheme at whatever scale, to me that’s the scheme working.
“We did that so that people were not laid off, they were not unemployed, they had a good income to get them through this and they remain attached to their company and their employer.
“So, if it ends up being significantly used, I will view that as a success, if it means that we get through this and then can bounce back quickly and provide security for those people and their families during it.”