Sir David Walker is set to call this week for the creation of a new body to act as a rallying point for institutional shareholders wanting to challenge the governance of company boards.

In February, the Treasury asked Sir David to review bank boards and pay policies amid public anger over the financial crisis and taxpayer bailouts of banks. The City grandee, previously international chairman of Morgan Stanley and a director of the Bank of England, is understood to be keen to find a way to make shareholders’ engagement with companies more effective.

Sir David will unveil his initial proposals for beefing up bank boards and improving corporate governance on Thursday, with a final report expected in the autumn. One proposal is for a powerful “standing secretariat”, which would put forward shareholders’ views to a company if there were a disagreement about strategy or people. This could give institutions more power to dilute or dislodge well-entrenched managers such as Sir Fred Goodwin, the former chief executive of Royal Bank of Scotland (RBS), whose dominance of the RBS boardroom was seen as a factor in the bank’s downfall.

The proposals will follow a separate strategy document today from UK Financial Investments (UKFI), the body that manages the Government’s stakes in banks. UKFI will say that it wants to maximise value from the billions of pounds it pumped primarily into Lloyds and RBS last year.

Lloyds is understood to be sounding out alternative chairmen to succeed the outgoing Sir Victor Blank after some investors indicated that they were unhappy with one proposed candidate — Sir Win Bischoff. Sir Win is seen by some institutional investors as lacking credibility after his chairmanship of Citigroup, the bank which has repeatedly tapped US taxpayers for bailout money. Some Lloyds shareholders have also questioned whether he has the appetite to oust Eric Daniels, the Lloyds chief executive, whom they blame for the purchase of HBOS.

With both Lloyds and RBS still struggling with huge losses and going through radical restructuring, UKFI believes that it will be several years before it can sell its 70 per cent stake in RBS and 43 per cent stake in Lloyds back to the private sector.

Legal & General (L&G), whose funds control almost 5 per cent of the FTSE 100 index, has complained that repeated attempts to engage with RBS over changing its chief executive last year fell on deaf ears. L&G’s frustrations are shared by other investors, who believe that companies ignore their concerns because, while each shareholder might be significant, it is not big enough to have critical mass.

Historically, shareholders have been nervous about acting together to lobby for change because of the Takeover Panel’s rules about concert parties, which restrict such behaviour. However, the Panel and the Financial Services Authority have made clear that shareholders can co-ordinate their approach in dealing with companies, as long as they do not try to impose drastic actions, such as forcing their own directors on to the board.

A standing secretariat dedicated to engaging with companies in difficult situations could fall under the auspices of the Institutional Shareholders’ Committee, made up of shareholder bodies such as the Association of British Insurers and the National Association of Pension Funds. However, critics said that it would be overly bureaucratic to create a formal new committee to co-ordinate action. “We would prefer just to phone each other up,” one institutional investor said.

Sir David is also likely to call for a dramatic increase in the power of risk committees. He is expected to say that bonuses should be subject to clawbacks, paid out over a number of years and more heavily geared to share awards rather than cash payments.

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