Fund managers play an integral role in the corporate governance of the businesses they invest in – good governance is therefore a central theme of the asset-management industry. Of course, that was not always the case.
Corporate governance only began to feature with any regularity in discussions about public companies in the UK after a series of corporate collapses and scandals in the late 1980s . In turn, these scandals prompted numerous bodies, including the Financial Reporting Council, the UK Government and the London Stock Exchange, to commission a slew of reports that recommended changes to corporate-governance practices. The period that followed transformed corporate culture in the UK – and we played an important role in this shift too.
At Hermes, our goal is to help people invest better, retire better and create a better society for all. We have been doing this since 1983, when our first Chief Executive Ralph Quartano rebuked the Marks & Spencer Board for unfair practices.
Alastair Ross Goobey, in his capacity as Chief Executive of Hermes from 1993-2001, was instrumental in improving the culture of corporate governance in the City of London. Cognisant of our fiduciary duty – putting the interest of our clients and their ultimate beneficiaries front and centre of all that we do – and our significant holdings in a large number of British quoted companies, Ross Goobey pursued greater corporate accountability and transparency. In 1993, he pressed for shorter CEO contracts, writing to the chairmen of the 100 biggest UK companies and urging them to scrap long-term rolling contracts for directors. He also called for separating the roles of CEO and chairman.
Companies began to listen, and Ross Goobey’s ideas were later adopted and developed by the Cadbury, Greenbury, Hampell and Higgs reports – which were eventually incorporated into the UK Corporate Governance Code, formerly the Combined Code. And in 1996, we established an investment team focusing on the corporate governance of companies.