Corporate governance

Strong corporate governance underpins responsible corporate behaviour. This benefits long-term corporate performance and ultimately enhances the value of the fund’s investment. For these reasons, direct engagement with companies and work with policy makers on corporate governance issues is a key part of our responsible investment strategy.

Working with policymakers worldwide to improve corporate governance standards


UK: UK Corporate Governance

USS responded to the UK Department for Business, Energy and Industrial Strategy Green paper on Corporate Governance in February 2017. USS’s response covered listed and private companies. It encouraged the Government to ensure the UK’s corporate governance framework continues to promote international best practice and accountability to stakeholders.

In June 2014, USS responded to the Financial Reporting Council’s bi-annual consultation on revisions to the UK Corporate Governance Code. We welcomed some of the proposals but raised concerns regarding amendments to the Going Concern Statement, as reported in a joint investor letter to the Financial Times on 4 July 2014.


Japan: Corporate Governance developments in Japan

We welcomed the introduction of the Corporate Governance and Stewardship Codes in Japan in 2015, seven years after we worked with the Asian Corporate Governance Association (ACGA) to publish a White Paper on Governance in Japan.

Over a number of years, we have worked with peer investors, regulators and shareholder bodies in Japan to encourage improvement in independent representation, board quality and transparency of cross shareholdings on company boards. We continue to adopt an active engagement approach with companies and regulators in the market and USS Investment Management is a founder participant of the Japan Engagement Consortium.

In 2014, we attended international investor delegations and responded to consultations undertaken by the Financial Services Agency and Tokyo Stock Exchange on governance and stewardship matters. Further information can be found here.


Germany: Input to Kodex review

USS fed into the German Corporate Governance Code ‘Kodex’ review in December 2016 with other investors. The joint submission expressed support for the enhanced focus on supervisory board engagement with shareholders and strengthening of disclosures regarding directors’ competencies.

USS’s co-authored response additionally encouraged an independent Audit Committee and strengthened shareholder rights, including votes on individual directors (as opposed to one vote on the whole board) and shareholder votes on executive remuneration. Further information can be found here.

Executive pay: a key issue for alignment

We have been actively involved in the UK, Europe and the US to encourage increased oversight of executive compensation to ensure remuneration is aligned to long-term performance. In 2013, working with our industry peers*, we published ‘Remuneration principles for building and reinforcing long-term business success’. The report sets out five principles which provide a sound framework for use by remuneration committees when developing and implementing remuneration policies.


1. Management should make a material long-term investment in shares of the businesses they manage

For example, shares granted to executive directors should ideally be owned for at least ten years, whether or not the executive is still in post. This would encourage succession planning and reduce the need for ‘golden hellos’ for new directors.


2. Pay should be aligned to long-term success and the desired corporate culture throughout the organisation

Pay awards and pensions arrangements should be consistent throughout the organisation. Where this is not the case there should be a thorough explanation.


3. Pay schemes should be simple, understandable for both investors and executives, and ensure that rewards reflect long-term returns to shareholders

For example, large awards should not be paid where returns to shareholders are below the cost of capital.


4. Remuneration committees should justify how their decisions will help deliver long-term business success

They should consider scaling back or eliminating awards where targets have been met by, for example, aggressive accounting or high leverage, or if the company has suffered reputational damage.


5. Companies and investors should have regular discussions on strategy and long-term performance

USS welcomes an open and two-way dialogue with companies. We expect companies to consult with us when there are material changes and issues which impact long-term shareholders, such as strategy, capital structure, sustainability, and governance, as well as discussions on remuneration.

*The principles were jointly produced by Hermes EOS, the National Associate of Pension Funds, BT Pension Scheme, RPMI Railpen Investments and Universities Superannuation Scheme.

Last updated: about 3 years ago