PLSA has said that whilst it is pleased to acknowledge companies have generally acted responsibly in the face of the extraordinary challenges posed by the coronavirus, the guidance follows news that some firms nationwide are laying off or furloughing members of staff in a bid to manage their outgoings during the crisis while high-paid directors and chief executives maintain full pay and bonuses.

Previously, the PLSA stated in its annual Stewardship Guide and Voting Guidelines – launched in February – that pension fund investors must be prepared to hold directors accountable on issues such as executive remuneration, which must “demonstrate some recognition of wider societal expectations, the general economic environment and the returns to long-term shareholders.”

However, given the current crisis, the PLSA has added that that investors must keep an eye on how those firms in which they invest manage the pandemic and consider voting against directors who they believe did not behave appropriately towards their workforces this AGM season.

The guidelines state that one of the most effective ways of investors using a vote to effect change is through holding relevant directors individually accountable.

Pension schemes have a fiduciary duty to their beneficiaries to act in their interests. This includes acting as a good steward of the assets entrusted to their care and part of that is being unafraid to exercise voting rights in a way that sends the clearest possible message to companies that repeatedly fail to respond to legitimate investor concerns.

Caroline Escott, policy lead investment & stewardship, PLSA, said: “This AGM season it is worth investors remembering that the post-crisis memories of the public and policymakers tend to be long.

“How companies behave now towards their workforces will likely have a material impact on their future revenue, operating costs and even the post-COVID-19 regulatory environment. This, in turn, has consequences for scheme investors’ risk-adjusted returns and ultimately for the value of beneficiaries’ savings.

“Coronavirus is putting companies’ employee models and practices to the test. It is one thing for a company to discuss its pioneering approach towards flexible working, health and safety or mental health in its Annual Report, but quite another to put this into practice under immense financial stress and uncertainty.”

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