PIC vows it will not let code for institutions die

The Public Investment Corporation (PIC) is to drive the process of establishing an institutional shareholder code. This follows the decision by the Institute of Directors (IoD) to abandon its plan to launch a shareholder code alongside the King 3 report on corporate governance next month.

An institutional shareholder code would be aimed at encouraging asset management firms to engage more actively with the companies in which they are invested.

Deon Botha, a corporate governance specialist at the PIC, said on Friday that he was surprised and disappointed to hear that the institute was abandoning the shareholder code. "It's an extremely important issue. If the IoD is not going to pursue it, we at the PIC definitely will."

He said he would approach other large institutional shareholders as well as the Financial Services Board and the JSE.

Botha referred to earlier informal discussions that had been held with the Government Employees Pension Fund, Element Investment Managers and a number of other institutional fund managers.

He said there was a growing recognition of the need for a shareholder code.


He also noted that the PIC was drawing up a document that would outline its approach to environmental, social and governance issues.

Element analyst David Couldridge said it was crucial that a shareholder code be developed and without it King 3 would be considerably weaker.

King 3's recommendations are based on an "apply or explain approach", which corporate governance experts across the globe say is pointless in an environment in which there is limited shareholder activism.

"Every opportunity should be taken to ensure institutional shareholders are aware of their responsibilities to engage with companies to improve corporate governance," Couldridge said.

Last month IoD chief executive Lindie Engelbrecht said a shareholder code would be launched alongside King 3.

However, on Friday Engelbrecht said the members of the King committee had decided that it was not the appropriate body to undertake the drawing up of a shareholder code.

She stressed that the institute was prepared to play a co-ordinating role in developing a code once the King 3 report had been launched next month.

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