Patricia Hewitt is today expected to tell big investors she is considering new legislation to boost shareholder activism.
The trade and industry secretary will tell City fund managers the country needs "more active, engaged investors" and make it clear that she will ensure "future legislation looks at shareholder engagement". Any new legislation could be incorporated into the reform of the Companies Act, which is still completing its passage through parliament.
While she will rule out making voting by shareholders at annual meetings compulsory, Ms Hewitt is expected to highlight practices in the US, where the onus is on firms to solicit proxy votes from shareholders ahead of annual meetings.
She will also make it clear there should be greater transparency about how City fund managers vote at annual meetings on behalf of big pension funds and other investors, welcoming the move by some institutions to put their voting records on websites.
Ms Hewitt's comments to an event organised by fund management group Hermes come at a time when investors are increasingly aware of government pressure to become more "activist".
The National Association of Pension Funds last week urged its members to attend the annual meeting of BSkyB this month, in part because of the government's desire to foster a more active role between shareholders and the firms they invest in.
Ms Hewitt, who has already given investors the right to vote on pay policies at annual meetings, will say that while the government should not force an increase in activism, it can create the "right framework for such activism to occur".
She will cite recent events at Carlton and Granada, where investors ousted Carlton chairman Michael Green, as a "good example" of activism. "I don't offer any judgment on the rights or wrongs of this, that's a matter for the board and their investors. But I will stand up for the rights of shareholders as the ultimate owners of a company to take this sort of action."
