The UK’s trade union federation, the TUC has published its 2008 fund manager voting survey and found investors wanting.
For the seventh year the TUC’s investment team has analysed the voting records of 20 fund managers and pensions funds for the period July 2007 and July 2008, which included votes on banks’ remuneration reports and the RBS acquisition of ABN Amro.
According to the data, most of the respondents did not challenge the remuneration reports of leading banks or the takeover of ABN Amro by the Royal Bank of Scotland (RBS) in the run up to the 2008 financial crash. The survey also reveals significant differences between institutional investors in their general approach to boardroom pay. At one end of the scale six respondents supported every remuneration report covered in the survey while six of the respondents supported fewer than half. A similar gap emerged in investor stances on incentive schemes. Eight respondents supported all incentive schemes in the survey and a further eight opposed the majority of schemes. Most of the respondents took the same position on both remuneration and incentive schemes.
The response rate for this year’s survey was noticeably lower than prior years at 42% compared with 68% in 2005. On that basis it is likely that those funds which devote more resource to ESG are over-represented in the responses. This year 23 organisations provided full or part responses to the voting survey, while 29 declined to participate. Although voting disclosure is on the increase with almost three quarters of respondents now make some voting data publicly available, the TUC notes that the format of the reporting is “of varying quality”; some investors disclose their full voting records, others only provide details for the votes that they oppose or abstain.
The TUC lays the blame for the perceived low quality and disclosure rate at the UK’s voluntary disclosure regime and that mandatory disclosure is called for, suggesting that The Government should use its reserve power in the 2006 Companies Act to enforce mandatory disclosure.
“The need for investor accountability is greater than ever”, says the TUC. Commenting on the survey, TUC General Secretary Brendan Barber said: ‘The theory is that in modern capitalism company boards are accountable to their owners, the shareholders. But this is far from what actually happens. Instead share owners – mostly ordinary people saving through their pension funds – have no say.
‘The fund managers who are meant to exercise ownership rights and responsibilities often fail to do so. What is worse is that many will not even tell the unions that represent thousands of pension fund savers whether or how those ownership responsibilities were exercised.
‘The tragedy is that this system has been tested, with the result being the near destruction of the global financial system. In practice, big banks were accountable to no-one, their boards free to chase big bonuses without any regard to safeguarding the long term interests of their share-holders.