Shareholders call for greater transparency on dividends

Saturday 25 May 2019

The Investment Association (IA) is today calling for companies to improve the transparency of their approach to paying dividends. The IA wants companies to publish a ‘distribution policy’ setting out their approach to paying dividends to shareholders. This new approach must set out the company’s approach to dividends policy alongside other ways of returning capital to shareholders, in order to promote a more transparent, long-term approach.

The call forms part of a report into dividend payments carried out by the IA, conducted on behalf of the Department of Business, Energy and Industrial Strategy. The work was designed to shine a spotlight on companies given the concern that more were moving to paying interim dividends which are not subject to a shareholder vote.

The research found that more than one in five (22%) of FTSE listed companies that pay dividends are not holding annual votes on the payment of the final dividend or are paying only interim dividends.

However, it also revealed that there are often legitimate reasons for that decision, such as meeting a demand from investors to receive a regular income stream in the form of quarterly payments, and therefore the report recommends a distribution policy that gives shareholders transparency on how dividends will be paid. The report also found that among the top 20 FTSE companies, 12 had paid dividends without holding a shareholder vote.

Chris Cummings, Chief Executive of The Investment Association, said:

“Dividends are a core part of how a company returns capital to its shareholders. But if companies are not seeking a shareholder vote on any dividend payments they risk depriving shareholders of the opportunity to have a say on a matter that is pivotal to the organisation’s long term attractiveness to investors.

“A distribution policy will provide shareholders with an opportunity to engage on companies' approaches to paying dividends and structure of returns to shareholders, including how the dividend payments fit within with the wider capital allocation decisions the company takes. We want to ensure that they are being decided in a way that delivers long-term, sustainable returns. It will also allow companies to explain their logic behind not holding annual votes where they have a legitimate business reason.”

Business Minister Kelly Tolhurst said:

“I thank the Investment Association for this report which shines a light on companies who are not giving their shareholders a say on dividends.

“The Government welcomes the further work being undertaken to encourage companies, as a minimum, to set out a distribution policy for shareholders. This type of policy makes sure shareholders have a clear basis for engaging with companies on their approach to dividends, investment and other uses of cash.

“We are committed to ensuring the UK’s largest companies become even more transparent and accountable, which is why we have implemented reforms to upgrade our corporate governance and continue to seek further ways to ensure the UK remains the best place in the world to work, invest and do business.”

-Ends-

Notes to Editors

• The full report, which is embargoed until 0001 25th May 2019, is available here.

For further information, please contact:

Ben Rathe, Senior Communications Manager: [email protected]

T +44 (0)20 7831 0898

Helen Ayres, Communications Manager: [email protected]

T: +44 (0)20 7269 4620

IA press office: [email protected]

About the Investment Association (IA):

• The IA champions UK asset management, supporting British savers, investors and businesses. Our 250 members manage £7.7 trillion of assets and the asset management industry supports 100,000 jobs across the UK.
• Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for the economy, so everyone prospers.
• Our purpose is to ensure investment managers are in the best possible position to: o Build people’s resilience to financial adversity
• o Help people achieve their financial aspirations
• o Enable people to maintain a decent standard of living as they grow older
• o Contribute to economic growth through the efficient allocation of capital.
• The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
• The UK is the second largest investment management centre in the world, after the US and manages 35% of all assets managed in Europe.