Hermes, the UK pension fund manager, is upping its engagement with US companies as it seeks to take advantage of the financial crisis to push its governance agenda.

Bess Joffe, who heads the Americas team for Hermes’ advisory arm, Hermes Equity Shareholder Services (HEOS), believes today’s political and financial conditions offer a great opportunity to bring about reform. 

‘It’s like a perfect storm, with the Democrats and Obama in power, with business news on the front pages, and the desire for more oversight and accountability,’ says Joffe. ‘It’s a prime opportunity to press for some major changes. We have been upping our engagement with US companies and looking at ways to influence policy makers.’

A Canadian qualified lawyer, Joffe joined HEOS in 2005 to work on corporate governance and responsible investment in America. She is based in London and visits the US around five times a year. Joffe feels some progress has been made in in the last four years, but not nearly enough.

‘Shareholder rights in the US are limited compared to the UK and to some extents Canada,’ she comments. ‘Significant problems include the lack of a true majority vote, the lack of an advisory vote on executive compensation, the lack of proxy access, the lack of board accountability, and the inability to call a special meeting. There is also too much disclosure but not enough transparency.’

Joffe also believes the focus on bonuses, in particular at AIG, is deflecting attention from more important governance issues. ‘We have a lot of concerns around pay for performance at companies around the world, not least in the US, but the media this entire week has been focused on $165 mn of bonuses out of a $200 bn investment into AIG,’ comments Joffe.

‘While it’s important to have the accountability to shareholders, at this point it’s much more important for the government to maintain its focus on the economy as a whole and instilling confidence in the minds of investors. I would like the administration and Congress to keep their eyes on the prize and really focus on effecting change at the macro level.’

HEOS offers investment and corporate governance advice to clients with assets worth around £50 bn ($70 bn), some of which is invested in roughly 2,800 US companies. The advisor’s policy is to keep all discussions with companies confidential.

Hermes, which operates HEOS, also manages the UK’s largest pension fund, the BT Pension Scheme.