Shareholders’ duties must be clarified to enable enlightened capitalism

30 March 2012

FairPensions has called for legislative changes around fiduciary duties in its report, The Enlightened Shareholder: Clarifying investors' fiduciary duties, funded by the Nuffield Foundation

The report suggests that fiduciaries should be empowered to consider the broader impacts of their investment activities on beneficiaries' future spending power or quality of life, as long as this does not compromise investment performance. "Pension investments do not exist in a vacuum, but are a means to securing a decent retirement," it argues.

The report sets out detailed proposals for legislative clarification, modelled on directors' duties under the Companies Act 2006. It suggests that the Act's attempt to embed ‘enlightened shareholder value' into UK company law missed a vital piece of the puzzle by not tackling the perception that fiduciary shareholders are legally obliged to be unenlightened.

Its recommendations were backed by investors in a letter to the Times, which argues: 

Legal clarification is needed to confirm that fiduciary investors may act as responsible and enlightened market participants in the pursuit of sustainable value creation – thus enabling them to better serve their beneficiaries’ true best interests.

Download The Enlightened Shareholder: Clarifying investors' fiduciary duties (PDF)