date: 26 June 2009

embargo: 00.01hrs Monday 29 June

Vast majority of institutional investors backed bank remuneration reports in run up to crash

The vast majority of institutional investors 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 TUC reveals today (Monday) in its annual fund manager voting survey.

The TUC's 2008 fund manager voting survey analyses the voting records of 20 fund managers and pensions funds between July 2007 and July 2008, including votes on banks' remuneration reports and the RBS acquisition of ABN Amro.

The survey shows that investors did not signal any great concern about remuneration reports at bank AGMs. HSBC was the only bank to receive less than 60 per cent for its remuneration report from the survey respondents. The report received just under 82 per cent support at its 2008 AGM.

The survey also shows that out of the respondents only one investor - Co-operative Insurance Society - opposed the acquisition of ABN Amro by RBS in 2007, which is now widely regarded as one of the worst deals in UK corporate history, despite receiving overwhelming support from RBS shareholders as a whole.

The survey reveals big 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, suggesting that they have a clearly defined stance on these issues.

But with fewer fund managers responding to the survey than in previous years, it is likely that those who take social responsibility and engagement seriously are over-represented in the responses.

The response rate for the TUC's seventh annual fund manager voting survey was slightly lower than in recent years. This year 23 organisations provided full or part responses to the voting survey, while 29 failed to do so. The 40 per cent response rate was down on previous years; 42 per cent responded in 2007, 61 per cent in 2006 and 68 per cent in 2005.

Almost three quarters of respondents now make some voting data publicly available. However, the information provided is of varying quality. While some investors disclose their full voting records, others only provide details for the votes that they oppose or abstain.

The TUC believes the low quality of much of the publicly available voting data combined with the low response rate to the TUC survey proves that the voluntary approach to disclosure has failed and that mandatory disclosure of voting records is needed. The Government has so far resisted using its reserve power in the 2006 Companies Act to enforce mandatory disclosure.

But in the wake of the most serious financial crash for more than half a century, when many investors have acknowledged that they failed to properly engage in decisions that contributed to the financial crash, the need for investor accountability is greater than ever, says the TUC.

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.

'And yet the City seems set to go back to business as usual, talking up green shoots and opposing change while unemployment continues to rise as those with no responsibility for the crash continue to lose their jobs.'

NOTES TO EDITORS:

- The full fund managers survey is available at www.tuc.org.uk/extras/fundmanager2009.pdf

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk

Press release (800 words) issued 29 Jun 2009