Fund managers fail to use the power of their investments to influence corporate behaviour, says TUC
Remuneration reports drew the greatest opposition from institutional investors yet bank remuneration reports were widely supported, according to the latest TUC fund manager voting survey published today.
The ninth annual survey, published to coincide with the TUC’s Pension Trustee Conference taking place in Central London today, analyses the voting records of more than 20 fund managers, pension funds and voting agencies across 69 company resolutions between January and December 2010.
The survey has again found a sharp divide in voting stances, with four respondents supporting more than 70% of resolutions, while five respondents supported less than a third.
Remuneration was the most common topic of engagement and the issue over which respondents were most likely to oppose company management. Half of the survey respondents supported less than half the remuneration reports on which votes were sought, and many supported less than a third.
The remuneration reports of all five major UK-listed banks were included in this year’s survey. Surprisingly, bank remuneration reports comprised three of the five reports with the highest level of support in the survey. Barclay’s remuneration reports was backed by 75% of all respondents – the highest in the survey.
These findings are surprising given the bank’s recent stock market performance and divided return, says the TUC.
This year’s survey showed further progress in the disclosure of voting records, with 13 respondents disclosing a full voting record, compared to just nine last year. However, the quality of information varied, with several fund managers only disclosing votes against and abstentions, and others only providing headline statistics.
This improvement in voting disclosure is good news for pension trustees and pension scheme members as it helps them see how fund managers are using their shareholder mandate to influence companies, says the TUC.
Several respondents identified changes made as a result of the introduction of the Stewardship Code a year ago, such as improved engagement record keeping. However, the Code has had very little effect on the voting stance taken by the institutional investors and needs to be toughened up, says the TUC.
General secretary Brendan Barber said: “Shareholders are supposed to be the ultimate check on our corporate system, but too many fund managers are still failing to use the power of their investments to influence corporate behaviour.
“The fact that UK bank remuneration reports received so much backing in the face of diminishing dividends and poor stock market performance is a clear sign that institutional investors are not doing their job properly.
“Reform of our corporate culture is long overdue and ministers need to take the lead in forcing through change, particularly on executive pay, where remuneration committees are frequently failing to act in a transparent and responsible manners.”
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