by
N. Peter Kramer
In the absence of reliable information, investors are inclined to think the worst of the situation in the Eurozone, but added value of the Euro remains, is another result.
Eighty-nine percent of global institutional investors believe that companies need to be more vocal about the potential impact of policy changes on their business to investors, yet only 8% believe that companies currently do this very well, according to the latest research from FTI Consulting, the global business advisory firm dedicated to helping organisations protect and enhance their enterprise value.
The research highlights that investors are expecting some form of engagement from CEOs on the public policy debate. Nearly a third (28%) expect significant contribution, and almost two-thirds (63%) expect a moderate contribution to relevant policy discussions. A further 40% of investors believe that CEO involvement in a policy debate will have a positive impact on the wider business environment, and only 10% believe it could be negative.
On the global economic outlook, investors in the European Union (EU) and North America are more negative about the consequences of political decisions that will be taken in the coming five years than their Asian and Latin American counterparts. In the absence of reliable information, investors are inclined to think the worst of the situation in the eurozone.
On corporate governance, executive compensation is and will remain high on the investor agenda — an annual say-on-pay vote on executive compensation is increasingly important for investors. Consistent with a requirement for increased transparency, disclosure and accountability, 58% of investors responding to the FTI Consulting survey indicate that companies should undertake corporate governance road shows every year. The research finds that on the issue of remuneration, investors are starting to use their voting power to make their wishes known to boards. Seventy-two percent of investors think a threshold of below 30% is enough to warrant a corporate response.
Julia Harrison, Senior Managing Director in the Strategic Communications practice of FTI Consulting in Brussels, commented:
“Our research shows that investors expect CEOs to be more proactive and engage directly in the policy debates that are likely to impact their businesses. Nearly two-thirds of investors in the EU expect that policy decisions in the EU will negatively affect their decisions to invest in Europe. This makes it all the more important that the European business community participates actively in shaping European policy at the most senior level.”
Investors: better for countries to stay members of the Eurozone
The FTI Consulting research shows that nearly half (47%) of investors think a country leaving the Eurozone will be worse off. However, 77% of investors in Western Europe are prepared to take advantage of investment opportunities with various Euro and other EU country scenarios.
Hans Hack, Senior Vice President of FTI Consulting in Brussels, said:
“At a time when the fundamentals of the euro are being discussed, it is interesting to see that many investors see the benefit of having and keeping the euro.”
Investors should step up to the plate to improve corporate governance strategies
The FTI Consulting research indicates that 92% of investors in Western Europe believe that institutional investors should play a stewardship role in investee companies, 87% feel investors should help achieve long-term sustainable value and 80% feel they should help curb excessive risk taking. Board directors no longer can rely just on written communications with shareholders. Ninety-two percent of the investors surveyed in the region say that companies need to engage in corporate governance road shows with major shareholders, with over half (58%) expecting such activity once a year. Moreover, shareholders want to hear more from the chairman: fifteen percent expect the chair to be constantly accessible, and, overall, 92% expect to hear from a chairman at least once a year.
“Investors expect themselves to assert influence in the policies of companies. As you can see in practice, they act increasingly according to these beliefs. Corporate governance and executive remuneration in particular, is a subject that requires greater transparency, disclosure and dialogue. There certainly are instances where company performance and executive remuneration are misaligned, and we believe that the long-term interests of companies and their owners are best served through constructive and continuing discussion. Voting against a say-on-pay resolution may be warranted, but it can be a blunt tool for shareholders to engage in dialogue with the companies they own,” Hack added.
*
About the Research
The Strategy Consulting and Research team at
FTI Consulting surveyed more than 170 institutional investors based in Europe, North America, Asia and Latin America between 16 April and 4 May 2012 on issues that include corporate governance, shareholder stewardship, and investment trends and expectations for 2012.
Sixty percent of respondents were portfolio managers at institutional investment firms. A further 25% of respondents were hedge funds, and the remaining respondents were private wealth managers and other investors. The average assets under management of respondents were USD $30 billion, and more than 60% of respondents managed funds in excess of USD $1 billion. Almost 90% of respondents were based in Europe and North America, with other respondents being based in Latin America and Asia.
*
About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,800 employees located in 24 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.56 billion in revenues during fiscal year 2011. More information can be found at www.fticonsulting.co.uk
By: N. Peter Kramer
