ICC Policy Publications

The audit tendering process - the expectations of UK institutional investors

This paper, prepared by the Institutional Investor Committee (IIC), sets out guidance for audit committees when companies tender their audits and on audit firms’ transparency when they no longer hold office.

One of the concerns investors have is that where audit firms hold office for long periods this can impact their independence and objectivity, both of which are vital in ensuring audit quality. There have been various recent initiatives that seek to address this and the UK market appears to be responding to these in that audits are now being tendered more frequently. This is welcomed.

The aim of this paper is to set out guidance for audit committees when companies tender their audits and covers, inter alia: (1) transparency when companies decide to tender; (2) identification of candidates to be invited to tender; (3) the tender process, including consultation with institutional investors on the objectives and selection criteria; and (4) audit firms’ transparency when they cease to hold office. Read More...

Investors’ Use of Proxy Advisory Research

There has in recent times been a growing interest in how institutional investors exercise their voting responsibilities. There has been increasing focus, from issuers, regulators and others, on how institutional investors, within the UK, EU and internationally, utilise proxy advisory services in exercising their voting decisions. This paper outlines how the members of the associations which together comprise the Institutional Investor Committee (IIC) - the institutional investor clients of the various proxy advisory firms - utilise these services and what is considered best practice.

There is a clear need from institutional investors for quality voting and research services to support informed and effective proxy voting. The use of proxy advisory services facilitates investors in carrying out their responsibilities to engage with and vote in an informed manner across highly diversified portfolios. The ultimate responsibility however, for the voting decision taken for each resolution at a company meeting is with the institutional investor.

It is important that companies wishing to understand the views of investors endeavour to engage directly with them. Institutional investors, in turn, should endeavour to be willing to meet companies and discuss the business, its strategy and governance practices such as how remuneration structures support the strategy. Read More...

Update on IIC Audit Position Paper

UK institutional investors continue to believe that ensuring a high quality of audits is vital in ensuring that markets value and trust the information reported. As set out in the December 2012 paper, investors support the objectives of the European Commission's proposals to safeguard auditor independence and objectivity and to improve the communications between auditors, audit committees and shareholders.

Investors are concerned that, where auditors hold office for long periods, this can affect their independence and objectivity, which are vital in ensuring audit quality. However, the IIC has not reached a consensus on the merits of mandatory auditor rotation.

The December 2012 IIC Position Paper remains reflective of UK institutional investor views on the remainder of the EU proposals.

IIC - reservations about proposal to amend directors’ duties in the Companies Act for directors of banks

While each of the IIC’s constituent members has responded individually to the discussion paper, Transparency & Trust: enhancing the transparency of UK company ownership and increasing trust in UK business, the IIC wrote to Corporate Governance Minister Jo Swinson MP to express directly its significant reservations with regards to the proposal to amend directors’ duties in the Companies Act for directors of banks.

The proposal to create a primary duty to promote financial stability over and above other interests, including shareholders is, we believe, mis-directed, sets a worrying precedent and could impact upon the investibility of UK banks. Directors’ duties should be consistent for all companies. Read More...

IIC revised Terms of Reference (updated May 2013)

The Terms of Reference of the IIC are as follows:

Rights Issue Fees Inquiry

The IIC’s “Best Practice Guidance for Issuers when raising equity capital,” published on Wednesday 18 May 2011, can be found here. The press release can be found here.

The Rights Issue Fees Inquiry report, published Tuesday 14 December 2010, can be found here.
The press release can be found here.