TUC 2004 Fund Manager Survey
A survey of the voting records and voting processes of institutional investors
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Executive Summary 1
Background to the Survey
Process
Response
Reading the results
Future versions of the survey
Section 2 - Voting Records 9
List of resolutions
Manager voting records
Voting by issues
Section 3 - Voting Process 22
Section 4 - Conclusions 32
Appendix 35
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Executive summary
This is the TUC’s second fund manager voting survey. The survey is intended to give trustees information on how various fund managers exercise voting rights in relation to controversial issues at company AGMs, and an insight into voting processes. It will be repeated on an annual basis.
This year’s survey has seen a much improved response rate with a greater number of fund managers choosing to provide full responses to the TUC. Overall we expect more fund managers to begin disclosing at least some voting information publicly, and as such the response rate to the voting survey is expected to increase over time. The TUC will continue to lobby for it to be a requirement for institutional investors to disclose voting records.
The second section of the survey looks at voting processes. This year it features new questions on voting processes including the implementation on the Institutional Shareholders Committee statement of principles on the responsibilities of shareholders. The TUC believes that the ISC principles have had an impact but is concerned that they are not as yet part of the formal framework of pension fund investment.
Key facts about the 2004 survey:
- Significantly improved response rate - 17 investors provided full responses to the TUC compared with 9 in 2003
- Comprehensive voting data for 20 investors compared with 12 in 2003
- At least some voting data for 27 investors compared to 21 in 2003
- Most respondents say they are at least broadly compliant with the ISC statement of principles
- Very few managers have many contracts that require them to adhere to the ISC statement of principles
- The survey will be distributed to over 1,000 pension fund trustees
Section one : Introduction
Background to the 2004 survey
Shareholder activism moved centre stage in 2003. The introduction of an advisory vote on companies’ remuneration reports gave shareholders more influence over an important governance issue. And there were also high-profile shareholder challenges to director appointments. Meanwhile there has also been further research attempting to find a correlation between corporate governance and shareholder value.
In addition the trend away from defined benefit provision towards defined contribution schemes has continued apace. It looks increasingly likely that in the future a majority of employees will be in pension schemes where they have to shoulder the investment risk, and therefore also the risk of governance failings in investee companies.
With this background the TUC believes that more than ever trustees should be paying close attention to the way their appointed fund managers exercise ownership including the use of voting rights. This information should be available freely to both trustees and beneficiaries in order that they can form a view of how various fund managers use voting rights to address governance issues.
It is worth restating why the current position of the fund management industry on this issue - that voting decisions should only be disclosed to existing clients - causes a number of functional problems. First, this means that pension funds can only form a view of how intelligently fund managers use voting rights after an appointment has been made (since prior to awarding a mandate they are not clients).
Second, it also means that investment consultants will be unable to advise pension fund clients effectively on the commitment of various fund managers to the responsibilities of ownership, since they too are not clients and as such not privy to voting data. Consultants will have to take a view based solely on managers’ corporate governance policies which may give little indication of how managers act in practice.
Finally the lack of transparency can only benefit those fund managers which do not take the exercise of voting rights seriously. Even today there are some managers which do not vote regularly, or which always support management. However, as voting records are currently not in the public domain many potential clients will not be aware of this.
Put simply if voting records are made public then voting will rightly become one factor for trustees and consultants to consider when awarding fund management mandates. But if the information on voting policy remains difficult to obtain there will be no commercial incentive for fund managers to devote adequate resources to this area.
The TUC does understand the issues that make the fund management industry wary of greater disclosure. However in practical terms lack of transparency has the unintended consequence of creating dysfunction in the system.
Since last year’s survey the argument in favour of greater disclosure has continued gain ground. As we noted in the introduction to the 2003 survey the White Paper on Company Law reform originally set out the government’s view that it would be in the public interest for institutional investors to disclose their voting records. And in the USA the Securities and Exchange Commission ruled last year that mutual funds must publicly disclose voting records.
There have been even more developments since the 2003 survey was published. Political pressure continues to grow. In November last year Secretary of State for Trade and industry Patricia Hewitt MP stated:
"Whether through voluntary codes or regulation, [institutional investors] need to become accountable to the millions of people whose savings they handle, disclosing their investment criteria and how they vote their shares. It's not just about exercising ownership. It's about being transparent about how you are using your ownership as well."
There is some movement on the part of UK fund managers. The TUC is aware that some managers are currently actively considering greater transparency on voting. And in March 2004 Insight Investment became the latest fund manager to embrace public disclosure. It now provides a company by company list of action it has taken including the 'house' voting recommendation. Significantly Insight Investment reports on engagement activity undertaken both on governance and social responsibility issues. This means that it is possible to see meetings and discussions that have taken place in advance of votes that may have affected the outcome.
The Insight Investment approach is noteworthy as it addresses two of the central issues some managers have raised against public disclosure. First, because engagement activity is disclosed in addition to voting records it tells more of the story of the relationship between investor and company on governance issues. Second, by disclosing its voting recommendations as opposed to voting carried out the information is not client confidential. The TUC believes that Insight’s model could easily be adopted by other managers and we hope the trend towards greater disclosure continues.
It is also notable that to date all those institutions which do disclose voting records have a broader view of shareholder responsibilities that encompasses social, environmental and ethical issues. In short socially responsible investors have been the pacesetters.
To conclude there is a widespread expectation that there will be a gradual shift to public disclosure, and some suggestion that if the fund management industry does not move the government may intervene. The TUC concurs with the Myners review:
'Voting is one of the central means by which shareholders can influence the companies in which they have holdings, and the review believes that a culture in which informed voting was more universal is very much to be desired.'
As such in lieu of greater voluntary disclosure we intend the Fund Manager Voting Survey to help trustees make better informed assessments of investment managers, and serve the public interest by increasing transparency.
The survey
The survey consisted of two parts. The first asked for voting decisions on a range of items at AGMs from October 2002 to November 2003. The second section featured a series of questions about the actual voting process of institutional investors. A list of the resolutions in Part One of the survey can be found in section 2 of this document. The questions for Part Two of the survey are included in section 3.
Process
The voting survey and a covering letter were sent out to fund managers on 30 January 2004 with a deadline of 31 March for responses. Follow-up calls were made to ensure that the fund managers had received the questionnaire. At the same time the list of resolutions was sent to the Member Trustee Network to encourage trustees to ask their fund managers how they had voted.
Response
A total of 13 fund managers provided full responses to the survey including voting data. They were ABN Amro Asset Management, Britannic Asset Management, CCLA Investment Management, Henderson Global Investors, Investec Asset Management, Insight Investment, ISIS Asset Management, M&G Investments, Morley Fund Management, RCM UK, Royal London Asset Management, Schroder Investment Management and Standard Life Investments.
The TUC believes by disclosing voting decisions these managers have set a standard for others. We welcome the commitment of these managers to transparency and hope trustees recognise the commitment of these managers to openness and accountability.
The TUC has also received information from some of the larger pension funds and is therefore very grateful to the Universities Superannuation Scheme, Railpen, Co-operative Insurance and British Airways Pensions Investment Management for providing voting data.
Information gathering through our member trustee network allowed the TUC to obtain voting records for several other managers. These are: Hermes Pensions Management, Deutsche Asset Management, Legal & General, Barclays Global Investors, Fidelity Investments, Threadneedle Asset Management and UBS Global Asset Management.
Finally several pension funds have independently published details of their corporate governance activities, including voting decisions, and some fund managers have publicly stated their voting stance on some issues. Some limited information is therefore included on JP Morgan Fleming Investment Management, Baillie Gifford and AXA Investment Managers.
Once again this year several survey respondents only provided answers to Part 2 of the survey. Some stated that they were unable to disclose voting records because of client confidentiality. In light of the decision of an increasing number of institutional investors to publicly disclose their voting records and the fact that 13 managers were willing to provide voting data the TUC believes this is a questionable argument.
A total of 20 managers failed to respond or declined to take part in the survey.
A list of the organizations surveyed and the nature of their responses can be found in the Appendix.
Reading the results
As we stressed in last year’s survey trustees should be aware that there is not a 'right' way to vote on the issues covered in the section covering voting records. Investors may well be able to give a reasonable justification for voting in favour of a controversial item where an abstention or vote against might have seemed more likely. For example many fund managers inform a company that they vote against an item before an AGM to encourage the senior executives to change their behaviour. If the company promises to improve, the investor may decide to revise their voting position.
Votes in favour of management proposals should not necessarily be seen as a failure to engage properly with investee companies and raise legitimate complaints with incumbent management. That said the TUC believes that over a range of issues differences between managers over the use of voting rights become apparent. The information in this survey suggests that there is indeed a range of stances taken by fund managers.
It is hoped that in future years more fund managers will provide voting records to enable trustees to assess managers’ commitment to engagement and activism.
Future versions of the survey
Since last year’s survey there has been much discussion about shareholder voting and engagement. Several fund managers commented to the TUC in response to this year’s survey that focusing on the exercise of voting rights provides only a partial picture of fund managers’ commitment to activism. Overall engagement with companies is a larger part of the relationship and more indicative of commitment to activism.
The TUC accepts that the use voting rights is a limited tool. For example voting rights can typically only be used once a year at the company AGM. And the TUC agrees that voting and engagement are often part of the same process and should be considered in that context.
It must be stated that voting rights are part of the asset of owning a share, and that the exercise of these rights is a fiduciary duty. We are concerned therefore that the importance of voting decisions has been underplayed in some commentary. In addition engagement is still a rather nebulous concept and as such it is currently hard to compile quantitative or qualitative data about it. Voting records may only describe part of the relationship between company and shareowner but it is an important part and one that is quantifiable and cannot be hidden behind vague statements of policy.
However the TUC has taken on board the comments it has received and will explore whether information on engagement activity could be captured in future versions of the survey in order to provide a fuller picture for trustees.
Finally the TUC will also consider whether the voting recommendations of voting advisory services could also be included in future.
Section two : Voting records
Introduction
Part One of the survey asked respondents how they voted on issues at AGMs in 2002 and 2003.
List of resolutions - AGMs October 2002 to November 2003
|
Company Name |
Meeting date | ||
|
1 |
GLAXOSMITHKLINE |
19/05/2003 |
Receive the remuneration report |
|
2 |
BAE SYSTEMS |
29/04/2003 |
Approve remuneration report |
|
3 |
SHIRE PHARMACEUTICALS GROUP |
12/06/2003 |
Receive the remuneration report |
|
4 |
BSkyB |
14/11/2003 |
Re-elect Lord St John of Fawsley |
|
5 |
BSkyB |
14/11/2003 |
Approve the remuneration report |
|
6 |
WPP GROUP |
30/06/2003 |
Approve the remuneration report |
|
7 |
ALPHA AIRPORTS GROUP |
29/05/2003 |
Approve the new ESOS |
|
8 |
REED ELSEVIER |
08/04/2003 |
Approve new Long Term Incentive Plan |
|
9 |
EASYNET GROUP |
23/04/2003 |
Receive the remuneration report |
|
10 |
MERANT |
05/12/2002 |
Elect Mr Michel Berty |
|
11 |
ROYAL & SUN ALLIANCE INSURANCE GROUP |
14/05/2003 |
Approve remuneration report |
|
12 |
REED ELSEVIER |
08/04/2003 |
Approve the remuneration report |
|
13 |
PETERHOUSE GROUP |
04/06/2003 |
Approve the granting of an option to Janette Anderson pursuant to The Peterhouse Group 2001 Executive Share Option Scheme |
|
14 |
REED ELSEVIER |
08/04/2003 |
Approve new Executive Share Option Scheme |
|
15 |
SURFCONTROL |
31/10/2002 |
Amend the Executive Share Option Scheme |
|
16 |
ROYALBLUE GROUP |
03/04/2003 |
To approve the remuneration report |
|
17 |
ROYALBLUE GROUP |
03/04/2003 |
To re-elect Mr Liebman |
|
18 |
SECURICOR |
13/03/2003 |
Approve Securicor 2003 Performance Share Plan |
|
19 |
WESTBURY |
20/06/2003 |
Approve the remuneration report |
|
20 |
HILTON GROUP |
16/05/2003 |
Approve the remuneration report |
|
21 |
INCEPTA GROUP |
04/07/2003 |
Approve remuneration committee report |
|
22 |
CARNIVAL |
23/06/2003 |
Approval of amended and restated Carnival Corporation 2002 Stock Plan |
|
23 |
HILTON GROUP |
16/05/2003 |
Re-elect Mr B G Wallace |
|
24 |
PETERHOUSE GROUP |
04/06/2003 |
Approve remuneration report |
|
25 |
PETERHOUSE GROUP |
04/06/2003 |
Approve the granting of an option to Simon Foster pursuant to The Peterhouse Group 2001 Executive Share Option Scheme |
|
26 |
SENIOR |
16/04/2003 |
Approve remuneration report |
|
27 |
SHELL |
23/04/2003 |
Receive the remuneration report |
|
28 |
SLOUGH ESTATES |
13/05/2003 |
Elect Mr P D Orchard-Lisle |
|
29 |
AEGIS GROUP |
28/05/2003 |
Re-elect Doug Flynn |
|
30 |
MYTRAVEL GROUP |
20/03/2003 |
Amend Articles |
|
31 |
REUTERS |
17/04/2003 |
Receive the remuneration report |
|
32 |
ROXBORO GROUP |
23/04/2003 |
Elect Harry Tee |
|
33 |
AMERSHAM |
07.05.2003 |
Approve the remuneration report |
|
34 |
EUROTUNNEL |
15/05/2003 |
Re-elect Mr Charles Petruccelli |
|
35 |
PROVIDENT FINANCIAL |
30/04/2003 |
Receive the remuneration report |
|
36 |
BODYCOTE INTERNATIONAL |
28/05/2003 |
Receive the remuneration report |
|
37 |
BARCLAYS |
24/04/2003 |
Receive the remuneration report |
|
38 |
EUROTUNNEL |
15/05/2003 |
Receive the report & accounts |
|
39 |
GLAXOSMITHKLINE |
19/05/2003 |
Elect Dr Jean-Pierre Garnier |
|
40 |
VOSPER THORNYCROFT HOLDINGS |
08/07/2003 |
Re-elect Mr D Barclay |
|
41 |
BSKYB |
14/11/2003 |
Re-elect James Murdoch |
|
42 |
BALFOUR BEATTY |
15/05/2003 |
Elect Mr P J L Zinkin |
|
43 |
EUROTUNNEL |
15/05/2003 |
Re-elect Mr Yves Dejou |
|
44 |
EUROTUNNEL |
15/05/2003 |
Appoint the auditors and fix their remuneration |
|
45 |
LONDON BRIDGE SOFTWARE HOLDINGS |
24/04/2003 |
Waiver of any requirement to make a general offer to shareholders resulting from market purchases of shares by the company |
|
46 |
WPP GROUP |
30/06/2003 |
Elect Mr Masao Inagaki |
|
47 |
WPP GROUP |
30/06/2003 |
Elect Mr Howard Paster |
|
48 |
LONDON BRIDGE SOFTWARE HOLDINGS |
24/04/2003 |
Waiver of any requirement to make a general offer to shareholders resulting from the exercise of options granted to Mr Crawford |
|
49 |
HSBC |
30/05/2003 |
Receive the remuneration report |
|
50 |
CORUS |
29/04/2003 |
Receive the remuneration report |
Manager voting record tables
The following section is split into two tables. The first lists voting records where either the respondent disclosed its full voting record or the TUC was able to obtain a full voting history.
The second table provides partial voting information that the TUC was able to obtain either via trustees or from other public sources, and the voting records of the pension funds that responded.
Key:
X indicates the manager voted against
F indicates the manager voted in favour
= indicates the manager abstained
D indicates that the manager held shares but did not vote
N indicates the manager reported it held no shares
U indicates a resolution where unions called for a vote against
Where there is no symbol no information has been provided or obtained.
Table 1. Full records - fund managers
|
No |
Company |
Resolution |
RCM UK |
Britannic |
CCLA |
Fidelity |
Hendersons |
Hermes |
Insight |
Investec |
ISIS |
L&G |
M&G |
Morley |
Royal London |
Schroders |
Standard Life |
|
1 U |
GLAXOSMITHKLINE |
Receive the remuneration report |
= |
X |
X |
F |
X |
X |
F |
= |
X |
= |
X |
X |
X |
= |
X |
|
2 |
BAE SYSTEMS |
Approve remuneration report |
D |
N |
F |
F |
F |
F |
N |
= |
F |
F |
X |
F |
X |
F | |
|
3 |
SHIRE PHARMACEUTICALS GROUP |
Receive the remuneration report |
X |
D |
X |
F |
F |
X |
F |
X |
N |
X |
F |
X |
= |
N |
X |
|
4 U |
BSkyB |
Re-elect Lord St John of Fawsley |
X |
X |
X |
F |
X |
X |
= |
X |
X |
X |
= |
X |
X |
X |
X |
|
5 U |
BSkyB |
Approve the remuneration report |
X |
X |
X |
F |
F |
X |
X |
X |
X |
X |
F |
X |
X |
X |
X |
|
6 |
WPP GROUP |
Approve the remuneration report |
X |
D |
= |
F |
X |
X |
F |
= |
X |
X |
X |
X |
= |
= |
= |
|
7 |
ALPHA AIRPORTS GROUP |
Approve the new ESOS |
F |
N |
N |
F |
F |
F |
N |
N |
N |
F |
F |
X |
N |
X |
N |
|
8 |
REED ELSEVIER |
Approve new LTIP |
= |
D |
X |
F |
F |
F |
F |
N |
F |
X |
F |
X |
= |
X |
F |
|
9 |
EASYNET GROUP |
Receive the remuneration report |
N |
N |
N |
F |
F |
F |
N |
N |
N |
F |
F |
X |
N |
D |
N |
|
10 |
MERANT |
Elect Mr Michel Berty |
N |
N |
N |
F |
F |
X |
N |
N |
N |
N |
X |
N |
X |
N | |
|
11 |
ROYAL & SUN ALLIANCE INSURANCE GROUP |
Approve remuneration report |
= |
D |
N |
F |
F |
X |
F |
N |
= |
F |
F |
= |
N |
F |
F |
|
12 |
REED ELSEVIER |
Approve the remuneration report |
= |
D |
= |
F |
F |
F |
F |
N |
X |
X |
F |
X |
= |
X |
F |
|
13 |
PETERHOUSE GROUP |
Approve the granting of an option to Janette Anderson |
F |
D |
N |
F |
F |
F |
N |
N |
N |
F |
F |
X |
N |
F |
X |
|
14 |
REED ELSEVIER |
Approve new ESOS |
= |
D |
X |
F |
F |
F |
F |
N |
F |
X |
F |
X |
= |
= |
X |
|
15 |
SURFCONTROL |
Amend ESOS |
D |
N |
N |
F |
F |
F |
F |
N |
F |
F |
N |
N |
X | ||
|
16 |
ROYALBLUE GROUP |
To approve the remuneration report |
N |
N |
N |
F |
F |
= |
N |
N |
X |
F |
N |
X |
N |
X |
= |
|
17 |
ROYALBLUE GROUP |
To re-elect Mr Liebman |
N |
N |
N |
F |
F |
X |
N |
N |
X |
F |
N |
X |
N |
X |
F |
|
18 |
SECURICOR |
Approve 2003 Performance Share Plan |
D |
N |
N |
F |
F |
X |
F |
N |
F |
X |
F |
X |
F |
X |
F |
|
No |
Company |
Resolution |
RCM UK |
Britannic |
CCLA |
Fidelity |
Hendersons |
Hermes |
Insight |
Investec |
ISIS |
L&G |
M&G |
Morley |
Royal London |
Schroders |
Standard Life |
|
19 |
WESTBURY |
Approve the remuneration report |
N |
N |
N |
F |
F |
F |
F |
N |
= |
X |
F |
X |
N |
X |
F |
|
20 |
HILTON GROUP |
Approve the remuneration report |
F |
X |
N |
F |
X |
F |
F |
= |
X |
F |
= |
X |
= |
= |
F |
|
21 |
INCEPTA GROUP |
Approve remuneration committee report |
N |
N |
N |
F |
F |
X |
F |
N |
X |
F |
F |
= |
N |
N |
N |
|
22 |
CARNIVAL |
Approval of amended and restated Stock Plan |
F |
F |
= |
F |
X |
X |
F |
N |
X |
F |
F |
X |
N |
X |
F |
|
23 |
HILTON GROUP |
Re-elect Mr B G Wallace |
F |
X |
N |
F |
F |
F |
F |
= |
= |
F |
F |
X |
F |
F |
F |
|
24 |
PETERHOUSE GROUP |
Approve remuneration report |
N |
D |
N |
F |
F |
F |
N |
N |
F |
F |
F |
X |
N |
= |
X |
|
25 |
PETERHOUSE GROUP |
Approve the granting of an option to Simon Foster |
N |
D |
N |
F |
F |
F |
N |
N |
= |
F |
F |
X |
N |
F |
X |
|
26 |
SENIOR |
Approve remuneration report |
N |
N |
N |
F |
F |
F |
F |
N |
N |
F |
F |
X |
N |
X |
N |
|
27 U |
SHELL |
Receive the remuneration report |
X |
D |
X |
F |
F |
X |
F |
X |
F |
F |
F |
X |
= |
X |
= |
|
28 |
SLOUGH ESTATES |
Elect Mr P D Orchard-Lisle |
= |
N |
= |
F |
F |
X |
F |
N |
X |
F |
F |
X |
F |
F |
F |
|
29 |
AEGIS GROUP |
Re-elect Doug Flynn |
N |
N |
N |
F |
X |
F |
F |
= |
F |
F |
F |
X |
F |
= |
F |
|
30 |
MYTRAVEL GROUP |
Amend Articles |
N |
N |
N |
F |
F |
F |
F |
N |
N |
F |
N |
F |
N |
X |
N |
|
31 U |
REUTERS |
Receive the remuneration report |
N |
D |
N |
F |
F |
X |
F |
N |
= |
X |
F |
X |
N |
= |
X |
|
32 |
ROXBORO GROUP |
Elect Harry Tee |
N |
N |
N |
F |
F |
= |
N |
N |
X |
F |
F |
X |
N |
N |
N |
|
33 |
AMERSHAM |
Approve the remuneration report |
F |
D |
= |
F |
F |
F |
F |
N |
F |
F |
F |
X |
F |
= |
F |
|
34 |
EUROTUNNEL |
Re-elect Mr Charles Petruccelli |
N |
N |
N |
F |
F |
F |
F |
N |
F |
F |
N |
F |
N |
N |
N |
|
35 |
PROVIDENT FINANCIAL |
Receive the remuneration report |
X |
D |
N |
F |
F |
X |
F |
X |
F |
F |
F |
X |
F |
F |
= |
|
36 |
BODYCOTE INTERNATIONAL |
Receive the remuneration report |
N |
N |
F |
F |
F |
F |
F |
N |
X |
F |
F |
X |
F |
F |
F |
|
37 |
BARCLAYS |
Receive the remuneration report |
= |
D |
X |
F |
F |
= |
F |
= |
X |
F |
F |
X |
F |
X |
F |
|
No |
Company |
Resolution |
RCM UK |
Britannic |
CCLA |
Fidelity |
Hendersons |
Hermes |
Insight |
Investec |
ISIS |
L&G |
M&G |
Morley |
Royal London |
Schroders |
Standard Life |
|
38 |
EUROTUNNEL |
Receive the report & accounts |
N |
N |
N |
F |
F |
F |
F |
N |
F |
F |
N |
F |
N |
N |
N |
|
39 |
GLAXOSMITHKLINE |
Elect Dr Jean-Pierre Garnier |
= |
X |
X |
F |
F |
F |
F |
= |
F |
F |
F |
X |
F |
= |
F |
|
40 |
VOSPER THORNYCROFT HOLDINGS |
Re-elect Mr D Barclay |
N |
N |
N |
F |
F |
F |
N |
N |
F |
F |
F |
X |
F |
= |
N |
|
41 U |
BSKYB |
Re-elect James Murdoch |
F |
X |
= |
F |
F |
F |
F |
F |
X |
X |
X |
X |
X |
F |
= |
|
42 |
BALFOUR BEATTY |
Elect Mr P J L Zinkin |
N |
F |
N |
F |
F |
F |
F |
N |
F |
F |
X |
F |
= |
F | |
|
43 |
EUROTUNNEL |
Re-elect Mr Yves Dejou |
N |
N |
N |
F |
F |
F |
F |
N |
F |
F |
N |
F |
N |
N |
N |
|
44 |
EUROTUNNEL |
Appoint the auditors and fix remuneration |
N |
N |
N |
F |
F |
F |
F |
N |
F |
F |
N |
F |
N |
N |
N |
|
45 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from purchases of shares by the company |
N |
N |
N |
F |
F |
F |
X |
N |
X |
F |
N |
X |
N |
N |
F |
|
46 |
WPP GROUP |
Elect Mr Masao Inagaki |
F |
F |
F |
F |
F |
X |
F |
F |
X |
F |
F |
X |
F |
F |
= |
|
47 |
WPP GROUP |
Elect Mr Howard Paster |
X |
F |
F |
F |
F |
F |
F |
F |
F |
F |
F |
X |
F |
F |
F |
|
48 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from the exercise of options granted to Mr Crawford |
N |
N |
N |
F |
F |
F |
X |
N |
X |
F |
N |
X |
N |
N |
F |
|
49 U |
HSBC |
Receive the remuneration report |
F |
D |
X |
F |
F |
X |
F |
F |
F |
F |
F |
X |
F |
X |
= |
|
50 U |
CORUS |
Receive the remuneration report |
N |
D |
N |
F |
F |
F |
F |
N |
F |
F |
F |
X |
N |
N |
F |
Table 2. Partial fund manager records and pension fund records
|
No |
Company |
Resolution |
ABN Amro |
AXA |
Baillie Gifford |
BGI |
Deutsche |
JP Morgan |
Threadneedle |
UBS |
BA Pensions |
Co-opretaive |
Railpen |
USS |
|
1 U |
GLAXOSMITHKLINE |
Receive the remuneration report |
X |
X |
X |
X |
F |
X |
X |
X |
X |
X | ||
|
2 |
BAE SYSTEMS |
Approve remuneration report |
X |
F |
F |
F |
= | |||||||
|
3 |
SHIRE PHARMACEUTICALS GROUP |
Receive the remuneration report |
X |
X |
X |
N |
N |
X |
X |
X | ||||
|
4 U |
BSkyB |
Re-elect Lord St John of Fawsley |
X |
X |
X |
X |
X |
X | ||||||
|
5 U |
BSkyB |
Approve the remuneration report |
X |
X |
X |
X |
X |
X | ||||||
|
6 |
WPP GROUP |
Approve the remuneration report |
X |
= |
= |
X |
X |
X |
X | |||||
|
7 |
ALPHA AIRPORTS GROUP |
Approve the new ESOS |
X |
N |
N |
X |
N |
= | ||||||
|
8 |
REED ELSEVIER |
Approve new LTIP |
X |
= |
X |
X |
X |
= | ||||||
|
9 |
EASYNET GROUP |
Receive the remuneration report |
X |
N |
N |
X |
N |
= | ||||||
|
10 |
MERANT |
Elect Mr Michel Berty |
X |
N |
N |
X |
N |
= | ||||||
|
11 |
ROYAL & SUN ALLIANCE INSURANCE GROUP |
Approve remuneration report |
N |
N |
X |
F |
X | |||||||
|
12 |
REED ELSEVIER |
Approve the remuneration report |
X |
F |
= |
= |
X |
= | ||||||
|
13 |
PETERHOUSE GROUP |
Approve the granting of an option to Janette Anderson |
N |
N |
X |
N |
= | |||||||
|
14 |
REED ELSEVIER |
Approve new ESOS |
X |
= |
X |
X |
= | |||||||
|
15 |
SURFCONTROL |
Amend ESOS |
N |
F |
X |
X |
X | |||||||
|
16 |
ROYALBLUE GROUP |
To approve remuneration report |
F |
N |
X |
X |
= | |||||||
|
17 |
ROYALBLUE GROUP |
To re-elect Mr Liebman |
F |
N |
X |
X |
= | |||||||
|
18 |
SECURICOR |
Approve Performance Share Plan |
X |
N |
X |
F |
= | |||||||
|
19 |
WESTBURY |
Approve the remuneration report |
N |
N |
F |
F |
= | |||||||
|
No |
Company |
Resolution |
ABN Amro |
Baillie Gifford |
BGI |
Deutsche |
JP Morgan |
Threadneedle |
UBS |
BA Pensions |
Co-opretaive |
Railpen |
USS | |
|
20 |
HILTON GROUP |
Approve the remuneration report |
X |
X |
X |
F |
X | |||||||
|
21 |
INCEPTA GROUP |
Approve remuneration report |
N |
N |
X |
N |
= | |||||||
|
22 |
CARNIVAL |
Approval of amended and restated Stock Plan |
X |
= |
F |
F |
X |
F |
X | |||||
|
23 |
HILTON GROUP |
Re-elect Mr B G Wallace |
F |
X |
X |
F |
= | |||||||
|
24 |
PETERHOUSE GROUP |
Approve remuneration report |
N |
N |
X |
N |
= | |||||||
|
25 |
PETERHOUSE GROUP |
Approve the granting of an option to Simon Foster |
N |
N |
X |
N |
= | |||||||
|
26 |
SENIOR |
Approve remuneration report |
N |
F |
= |
N |
F | |||||||
|
27 U |
SHELL |
Receive the remuneration report |
= |
X |
F |
F |
F |
X |
X |
X | ||||
|
28 |
SLOUGH ESTATES |
Elect Mr P D Orchard-Lisle |
F |
F |
X |
F |
X |
= | ||||||
|
29 |
AEGIS GROUP |
Re-elect Doug Flynn |
F |
X |
X |
X |
= | |||||||
|
30 |
MYTRAVEL GROUP |
Amend Articles |
N |
N |
= |
N |
= | |||||||
|
31 U |
REUTERS |
Receive the remuneration report |
X |
X |
X |
X |
X | |||||||
|
32 |
ROXBORO GROUP |
Elect Harry Tee |
N |
N |
= |
N |
= | |||||||
|
33 |
AMERSHAM |
Approve the remuneration report |
X |
F |
F |
= |
X |
F | ||||||
|
34 |
EUROTUNNEL |
Re-elect Mr Charles Petruccelli |
N |
N |
X |
N |
F | |||||||
|
35 |
PROVIDENT FINANCIAL |
Receive the remuneration report |
X |
N |
= |
X |
= | |||||||
|
36 |
BODYCOTE INTERNATIONAL |
Receive the remuneration report |
N |
N |
F |
N |
= | |||||||
|
37 |
BARCLAYS |
Receive the remuneration report |
= |
= |
F |
= |
F |
X |
X | |||||
|
38 |
EUROTUNNEL |
Receive the report & accounts |
N |
N |
F |
N |
F | |||||||
|
39 |
GLAXOSMITHKLINE |
Elect Dr J-P Garnier |
F |
F |
X |
X |
X |
= | ||||||
|
40 |
VOSPER THORNYCROFT HOLDINGS |
Re-elect Mr D Barclay |
F |
F |
N |
= | ||||||||
|
No |
Company |
Resolution |
ABN Amro |
Baillie Gifford |
BGI |
Deutsche |
JP Morgan |
Threadneedle |
UBS |
BA Pensions |
Co-opretaive |
Railpen |
USS | |
|
41 U |
BSKYB |
Re-elect James Murdoch |
= |
F |
X |
N |
F |
X | ||||||
|
42 |
BALFOUR BEATTY |
Elect Mr P J L Zinkin |
N |
N |
= |
F |
= | |||||||
|
43 |
EUROTUNNEL |
Re-elect Mr Yves Dejou |
N |
N |
F |
N |
F | |||||||
|
44 |
EUROTUNNEL |
Appoint the auditors and fix their remuneration |
N |
N |
F |
N |
F | |||||||
|
45 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from market purchases of shares by the company |
= |
N |
X |
X |
F | |||||||
|
46 |
WPP GROUP |
Elect Masao Inagaki |
F |
F |
F |
= |
F |
= | ||||||
|
47 |
WPP GROUP |
Elect Mr Howard Paster |
= |
F |
F |
F |
F |
= | ||||||
|
48 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from the exercise of options granted to Mr Crawford |
F |
N |
X |
F |
F | |||||||
|
49 U |
HSBC |
Receive the remuneration report |
F |
F |
F |
X |
F |
= | ||||||
|
50 U |
CORUS |
Receive the remuneration report |
F |
X |
= |
X |
X |
X |
X |
Voting by issues
Remuneration
Clearly the introduction of an advisory vote on remuneration has made this area of corporate governance a key investor issue. In total 22 of the 50 resolutions on which voting records were sought related to remuneration reports and policy.
Executive pay at GlaxoSmithKline was a key issue is 2003. Of the 25 investors where we have voting data, 3 voted for the remuneration policy, 4 abstained and 18 voted against.
BAE Systems came within a whisker of losing the vote on its remuneration report. But strikingly in the survey sample most voted in favour. Of the 17 investors where we know the voting decision 11 voted for, 2 abstained and 4 voted against. The large vote against the BAE Systems report is therefore probably explained by the fact that one of the leading US proxy voting agencies recommended a vote against and many US investors may have followed this recommendation.
Shire Pharmaceuticals also attracted large opposition. Of the 18 investors where we have voting data only 4 voted for, 1 abstained and 13 voted against.
BSkyB’s pay policy, along with some other notable issues, attracted significant investor opposition. Of those 21 surveyed only three voted for the remuneration report and 18 opposed it.
Looking towards the lower results in our sample 12 investors voted for HSBC’s remuneration report, 1 abstained and 6 voted against. And at Corus 9 voted in favour of the report, 1 abstained and 5 voted against. Notably all 4 pension funds in the sample voted against.
Company Name | |||||
|
1 |
GLAXOSMITHKLINE |
Receive the remuneration report |
3 |
18 |
4 |
|
2 |
BAE SYSTEMS |
Approve remuneration report |
11 |
4 |
2 |
|
3 |
SHIRE PHARMACEUTICALS GROUP |
Receive the remuneration report |
4 |
13 |
1 |
|
5 |
BSkyB |
Approve the remuneration report |
3 |
18 |
0 |
|
6 |
WPP GROUP |
Approve the remuneration report |
2 |
11 |
7 |
|
9 |
EASYNET GROUP |
Receive the remuneration report |
5 |
3 |
1 |
|
11 |
ROYAL & SUN ALLIANCE INSURANCE GROUP |
Approve remuneration report |
8 |
3 |
2 |
|
12 |
REED ELSEVIER |
Approve the remuneration report |
7 |
6 |
5 |
|
16 |
ROYALBLUE GROUP |
To approve the remuneration report |
4 |
4 |
3 |
|
19 |
WESTBURY |
Approve the remuneration report |
8 |
3 |
2 |
|
20 |
HILTON GROUP |
Approve the remuneration report |
6 |
8 |
4 |
|
21 |
INCEPTA GROUP |
Approve remuneration committee report |
5 |
3 |
2 |
|
24 |
PETERHOUSE GROUP |
Approve remuneration report |
6 |
3 |
2 |
|
26 |
SENIOR |
Approve remuneration report |
8 |
2 |
1 |
|
27 |
SHELL |
Receive the remuneration report |
9 |
9 |
3 |
|
31 |
REUTERS |
Receive the remuneration report |
4 |
8 |
2 |
|
33 |
AMERSHAM |
Approve the remuneration report |
12 |
3 |
3 |
|
35 |
PROVIDENT FINANCIAL |
Receive the remuneration report |
8 |
5 |
3 |
|
36 |
BODYCOTE INTERNATIONAL |
Receive the remuneration report |
11 |
2 |
1 |
|
37 |
BARCLAYS |
Receive the remuneration report |
9 |
6 |
5 |
|
49 |
HSBC |
Receive the remuneration report |
12 |
6 |
1 |
|
50 |
CORUS |
Receive the remuneration report |
9 |
5 |
1 |
Election of directors
Perhaps not surprisingly BSkyB tops the list of votes on directors’ appointments. As was widely reported at the time most investor anger was targeted at Lord St John of Fawsley who was responsible for the recruitment of the company’s chief executive James Murdoch, son of the company chairman. In our sample only a single investor voted in favour of Lord St John and there were 2 abstentions, but 18 voted against. Looking at the actual appointee, James Murdoch, the vote was far more split, 9 voted in favour, 3 abstained and 8 voted against.
GlaxoSmithKline saw some opposition to the election of Jean-Pierre Garnier in addition to his remuneration package. Although 11 investors in the sample backed Garnier 6 voted against his election and 4 abstained. Notably the pension funds in the survey accounted for 3 votes against and 1 abstention.
The UK investors featured in our sample were clearly not those pushing for major board changes at Eurotunnel that subsequently came about. Charles Petruccelli picked up one vote against and Yves Dejou was backed by all investors in the sample. It seems that small investors were the prime movers for change.
|
Company Name | |||||
|
4 |
BSkyB |
Re-elect Lord St John of Fawsley |
1 |
18 |
2 |
|
10 |
MERANT |
Elect Mr Michel Berty |
2 |
5 |
1 |
|
17 |
ROYALBLUE GROUP |
To re-elect Mr Liebman |
5 |
6 |
1 |
|
23 |
HILTON GROUP |
Re-elect Mr B G Wallace |
12 |
4 |
3 |
|
28 |
SLOUGH ESTATES |
Elect Mr P D Orchard-Lisle |
11 |
6 |
3 |
|
29 |
AEGIS GROUP |
Re-elect Doug Flynn |
9 |
6 |
3 |
|
32 |
ROXBORO GROUP |
Elect Harry Tee |
4 |
3 |
3 |
|
34 |
EUROTUNNEL |
Re-elect Mr Charles Petruccelli |
8 |
1 |
0 |
|
39 |
GLAXOSMITHKLINE |
Elect Dr Jean-Pierre Garnier |
11 |
6 |
4 |
|
40 |
VOSPER THORNYCROFT HOLDINGS |
Re-elect Mr D Barclay |
9 |
1 |
2 |
|
41 |
BSKYB |
Re-elect James Murdoch |
9 |
8 |
3 |
|
42 |
BALFOUR BEATTY |
Elect Mr P J L Zinkin |
11 |
3 |
2 |
|
43 |
EUROTUNNEL |
Re-elect Mr Yves Dejou |
9 |
0 |
0 |
|
46 |
WPP GROUP |
Elect Mr Masao Inagaki |
15 |
3 |
3 |
|
47 |
WPP GROUP |
Elect Mr Howard Paster |
17 |
2 |
2 |
Share schemes, incentive plans and other issues
Share option and incentive schemes are another area where shareholders have grown increasingly willing to challenge companies. Alpha Airports saw the biggest opposition in the past season although only a minority of those surveyed held stock at the time. Of those 6 supported the scheme 4 opposed it and 1 abstained.
The most unpopular share option scheme amongst those where we have voting data was that proposed by Reed Elsevier. Out of 17 investors only 6 voted in favour, whilst 7 voted against and 5 abstained. Carnival also saw some opposition with 7 investors voting against its stock plan and 1 abstaining, but a further 9 voted in favour.
A final point of interest was that My Travel picked up some opposition on the vote to amend its articles. One investor voted against and 2 abstained.
|
Company Name | |||||
|
7 |
ALPHA AIRPORTS GROUP |
Approve the new ESOS |
6 |
4 |
1 |
|
13 |
PETERHOUSE GROUP |
Approve the granting of an option to Janette Anderson |
7 |
3 |
1 |
|
14 |
REED ELSEVIER |
Approve new ESOS |
6 |
7 |
5 |
|
15 |
SURFCONTROL |
Amend the ESOS |
7 |
4 |
0 |
|
18 |
SECURICOR |
Approve Securicor 2003 Performance Share Plan |
8 |
6 |
1 |
|
22 |
CARNIVAL |
Approval of amended and restated Stock Plan |
9 |
7 |
2 |
|
25 |
PETERHOUSE GROUP |
Approve the granting of an option to Simon Foster |
6 |
3 |
2 |
|
45 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from market purchases of shares by the company |
6 |
5 |
1 |
|
48 |
LONDON BRIDGE SOFTWARE HOLDINGS |
Waiver of any requirement to make a general offer to shareholders resulting from the exercise of options granted to Mr Crawford |
8 |
4 |
0 |
|
30 |
MYTRAVEL GROUP |
Amend Articles |
6 |
1 |
2 |
Section three : Voting Process
Introduction
Part Two of the survey was intended to find out more about the policies and processes that lie behind institutional investors’ voting decisions. New to this year’s survey were questions relating to the Institutional Shareholders Committee statement of principles.
Discretion
1. Have you considered whether you comply with ‘The Responsibilities of Institutional Shareholders and Agents - Statement of Principles’ (Institutional Shareholders’ Committee, October 2002)?
There was a range of responses to this question. A small number of managers simply affirmed that they had considered whether they complied with the principles without giving further details.
A total of 12 managers could be said to have given a strong statement on compliance with the principles indicating that they believed they were compliant with them. One manager said it felt it went further than the principles required before they were even produced. Another reported that it was compliant with both the spirit and the wording of the principles.
A further 5 managers gave slightly weaker responses indicating that their policy had been developed with the ISC principles in mind, that their policy was 'broadly' or 'substantially' in line with the principles, or that their practice was consistent with the principles.
One manager reported that it was not yet compliant with the principles but intended to be so by July 2004, and one manager said it had not specifically considered compliance with the principles.
2. If these matters have been considered how is voting dealt with in the engagement policy?
There was a common theme to most of the responses, which was that voting was an integral part of the engagement process and vice versa. A number of managers also stressed that voting and engagement were also part of the investment process. Some managers made the point that they assessed how the company was dealing with their investment when deciding how to vote. And several said their approach was outlined in a policy document.
One manager reported that it only voted on 'material' issues, and another that the costs and logistics of voting were taken into account when deciding whether to exercise rights (this was specifically in relation to overseas investments).
A number of managers specified that they used input from voting advisory services such as RREV and the ABI and one manager reported that it outsourced voting and engagement to a third-party, although it set the policy within which this activity took place. Finally one manager reported having a particular focus on executive remuneration.
3. Where your own formal written policy is used please state whether this policy is in the public domain or is available to clients. Please give a web address for the policy where relevant and the date at which the policy was last updated.
In total 9 managers reported that their policy was available to clients, but did not report that it was available publicly. One of these managers stated that its policy was only available to clients and consultants, and one reported it was only available to clients. Another reported that it would make its policy publicly available via the website shortly.
The remainder of respondents said that the policy document was available publicly, on the website or on request.
The ISC principles state clearly that a document relating to the discharge of ownership responsibilities should be produced and that this should be a public document. As such the TUC is not confident that managers which only provide this document to clients are compliant with the ISC principles. We note that some managers which apparently do not make their policy document public indicated full compliance with the principles in question 1.
Most managers had updated their policy within the past six months, and of those where the last update was further than six months past one reported that it would be updating it again in 2004.
4. How was your in-house policy arrived at? To what degree were clients consulted (if any)?
The majority of managers replied to this question indicating that their policy was based on existing sets of principles. In most cases the Combined Code was cited but other guidelines referred to include those produced by the ABI, NAPF, OECD and ICGN.
In terms of development there was a variety of responses. Some managers said that corporate governance staff were responsible for developing the policy with senior investment staff feeding into that process. A smaller number said that their policy was predominantly developed by investment staff including the chief investment officer. One manager reported that their policy was devised with the help of an adviser.
Overall 9 managers said there was some client involvement in the development of their policy. The level of involvement varied with two reporting that the initial development of their policy was client directed, but most saying that they incorporated or invited client comments. One manager said that it consulted with its most active clients.
5. Do you have a formal policy for communicating voting intentions to investee companies? In the case where you intend to vote against management, is there a formal engagement process prior to the vote being lodged?
There are some variations in practice when it comes to engaging with companies and communicating voting intentions. Only a small number of managers referred to having a specific policy on communicating voting stances, but most clearly do so as a matter of course. Where there is a policy sometimes to structure communication based on size of holding (ie for holding over 0.9% in one case).
Typically managers said that they informed companies where they intended to either vote against or abstain on a management proposal, although a small number said that they only communicated intended votes against.
The nature of communication with companies is typically either by phone or by letter. And one manager reported that it also always wrote to the company after the vote to confirm its final voting decision. Typically it seems that such communication is with company secretaries although in one case a manager said it contacted the lead non-executive director and in another the manager said it might contact the company’s advisors.
Many managers stressed the value of engaging with companies prior to voting decisions being taken as this enables the company to give an indication of whether any movement was likely on the issue under consideration. A number of managers said that they had revised their voting decisions as a result of such engagement. Interestingly one manager said that in the case of advisory votes if it had not engaged with the company prior to the vote it would consider abstaining in the first year in order to talk more with the company.
6. Approximately what proportion of contracts with clients refer to ‘The Responsibilities of Institutional Shareholders and Agents - Statement of Principles’?
Of those managers responding only 15 gave an approximate figure in response to this question. The highest reported proportion of contracts referencing the principles was 10%. Another two managers reported the proportion being around the 5% mark. However these three figures are very much the outliers. One manager answered that about 1% of contracts referred to the principles, two others reported the proportion was less than 1% and another said only a single client contract referred to the principles.
A total of 7 of the 15 managers providing a figure said that none of their contracts referred to the principles.
However a number of managers reported that while the number of existing contracts referencing the principles was small the proportion was increasing. And several managers said that in future all new contracts would include a reference to them.
The TUC is not certain that ascertaining the proportion of contracts including some reference to the principles is the most helpful way to assess their impact. Just because only one client contract requires a manager to adhere to the principles does not mean that for all other clients the manager takes a different line. And the TUC believes that some managers which reported no contracts referring to the principles are amongst the most activist. As such these responses should be interpreted with caution.
That said the fact that the principles are so rare in contracts does mean that many fund managers are not contractually obliged to adhere to them. In addition we are aware from trustee feedback that they are not typically being included in pension scheme Statement of Investment Principles, and that there appears to have been a very limited flow of information between consultants and trustees regarding the principles.
Taken together this suggests that the principles are often absent from the formal framework of pension fund investment and given that they are now over 18 months old we believe this should be a matter of some concern.
No discretion
7. What proportion of clients retain voting rights themselves?
There was a wide range of responses to this question. Overall 7 managers said no clients retained voting rights themselves and a further 4 managers said the proportion was 1% or less. A further 3 managers said that the proportion retaining voting rights was in the region of 5% or less.
Looking at slightly higher levels 2 managers said 10% of clients kept voting rights, and one each said 9%, 12%, 15% and 20%.
The two highest levels reported were 37% and almost 100%. In the latter case the manager has many Netherlands-based clients where voting rights are not typically part of the mandate contract.
8. Where discretion is not given please state any circumstances in which the manager retains the power to override the voting instructions of the client? How are voting instructions arrived at where the normal voting policy is over-ruled?
This is clearly not a common practice. A total of 12 managers said that this never occurred. Several others said that they would need client approval to over-ride a voting instruction. Typically those managers which said they might over-ride a voting instruction said that this would only happen where there was a compelling material reason for doing so. Examples given include mergers and acquisitions and a management buy-out.
9. Where an override is applied please give some indication of how frequently this occurs. Was the override applied in the case of any of the 50 resolutions listed on the attached document? Please indicate which.
In addition to those managers which reported that they never over-ride client instructions, it was clear that those managers which retain the option to do so utilise it very rarely. One manager said it had done so twice over the preceding few years, another said it had done so once in the past ten years. One manager said it happened once or twice each year.
None of the managers over-rode voting instructions on any of the 50 resolutions covered in the voting records section of the survey.
10. How do you deal with clients in pooled funds that wish to override your voting policy and issue their own voting instructions?
The TUC asked this question as we are aware of some instances in the past proxy season where pooled fund clients have asked to over-ride the manager’s voting policy on specific issues at AGMs and were unable to do so.
Many managers said that they had never encountered such a request so it was not an issue for them. Of these several said that they would be very willing to help clients achieve their desired voting outcome. One manager said that to do so would involve changing custodial arrangements and as such would incur substantial costs.
A number of managers also reported that pooled fund clients would be unable to over-ride the manager’s voting policy and that the fund would vote the same way for all investors.
A small number of managers said that they had arrangements in place for the requirement for clients to vote differently from the fund’s policy. In these instances typically a proportion of the fund’s shares in the company in question that are equivalent to the client’s investment are voted in the way that the client has requested.
The TUC believes that as more pension funds take an active role in voting it is likely that more pooled fund clients may wish to issue voting instructions. Many smaller pension schemes invest through pooled funds, and the big passive fund managers invest most of their assets through pooled funds. As such it may be wise for fund managers to put processes in place to enable clients to direct votes if asked.
Reporting and vote execution
11. Describe the process by which you report on voting to clients. Does the content of your report include the results of the meeting; all resolutions or just negative outcomes; details of the proposal; the argument supporting the voting outcome? Is this reporting part of your standard client contractual arrangement? How frequently are such reports made and by what medium are they delivered? Do you report to your clients on how your discharged your responsibilities? Does this include a judgement of the efficacy of the voting process? Is the format for this communication agreed between you and your clients?
Looking first at the process of reporting most managers said that they issued quarterly reports to clients, although some said they would provide monthly reports in some cases, and others would produce annual reports if the client asked for them. One manager said some of its clients received semi-annual reports. Most managers produce hard copy reports and many also make the information available electronically. Several managers said that reporting was part of their contractual agreement with clients.
Considering what is actually reported to clients there are differences in approach. Some managers only report votes that have been cast against management, but most report on oppose votes and abstentions. And a small number of managers said they would also report on votes in favour where it was a contentions issue.
In terms of the nature of this reporting there are again differences. Some managers provide a simple list of votes against and abstentions, but many also provide commentary to explain why votes were cast in a particular way. Two managers reported that they also listed voting agency advice on the issues concerned and compared their own votes against those recommended by the agency. In one case the ABI IVIS service was used, in the other NAPF advice.
It was very noticeable that only a small number of fund managers said that they included information on engagement activity within reports to clients. Given that one of the arguments that is used against greater transparency around the use of voting rights is that this will not capture engagement activity which is equally, if not more, important than votes this is surprising. In addition the TUC notes that some of the managers that have been most forceful in making this particular argument do not as yet report on engagement.
12. Do you use a third party voting execution or voting advice service?
A large majority of managers reported that they used a voting advisory service and/or a voting execution service. Only one manager suggested that they did not use either. A number of managers simply replied that they did use an advisory and/or execution service without giving further details.
On the execution side those managers which did give details predominantly seem to use the Votex service. Looking to the advisory services as one might expect there was a wide range of suppliers. Manifest, PIRC, RREV and the ABI’s IVIS service were all reported to be used by several of the managers. The services most used appear to IVIS and RREV. Two managers also use research from IRRC and one of these managers also named Glass Lewis as a provider.
13. Does your organisation ever seek confirmation that a vote has been delivered and counted? Do you report to clients on vote confirmation?
Around a quarter of those managers responding said that they did not seek confirmation that votes had been delivered and counted. Of those that do seek confirmation predominantly this is done on an ad hoc basis, many managers saying they only did so occasionally as a spot check. Three managers said they sought confirmation in specific instances, for example on particularly contentious voting issues. One of these manages said that it sought confirmation when it voted against or abstained.
Very few managers said that they reported back to clients on confirmation with one making the point that such reporting had never been requested. Where managers did report back to clients this was usually where voting had failed.
14. Are you already in a position to lodge proxy votes electronically? If not by when?
Just short of half of those manager responding said that they were currently able to lodge votes electronically, although some said that this was in part dependent on whether further links in the chain were able to accept electronic votes. A couple of managers said that they carried out electronic voting for only some clients.
Several more managers said that they would be in a position to lodge votes electronically from April 2004 (many responses were received prior to April) and this appears to be due to one service provider offering a link through to the CREST system. A further two managers said that they expected to be able to lodge votes electronically by the end of 2004.
15. Is proxy voting dealt with as part of your corporate actions division or do you have a dedicated person/team?
Around a quarter of those responding said that voting was dealt with by the corporate actions team. The remainder of the sample said that they employed specialist staff or teams to deal with voting issues. The number of staff assigned to voting issues varies from one person to a team of ten. Several managers reported having three or four staff involved although it is not clear if this includes administrative staff.
It is also clear that in some houses the staff working on voting are part of broader teams that deal with responsible investment. This suggests that anecdotal evidence that corporate governance and social responsibility is beginning to merge is certainly underway in some fund management houses.
16. What measures do you take to avoid over-voting of pooled nominee positions?
Some managers reported that they did not used pooled nominee positions, several saying that they used segregated accounts. A handful of managers said that they did not take any measures, or that they relied on their custodian to ensure that this did not occur.
However many managers said that they sought to confirm their holdings prior to voting. Typically this involves confirming holdings with the custodian, although in some cases it may also involve a voting agency. Some managers reported that they regularly update their holdings in order to ensure there were no problems and in one case the manager reported auditing its custodian.
Section four : Conclusions
Increasing openness
The first important message to draw from this year’s survey is the increased number of investors willing to provide information. It is unfortunate that many managers are still reluctant to be transparent about how they exercise their voting rights. However the increased awareness amongst fund managers that they should be able explain how they exercise ownership particularly by the use of voting rights must be welcomed, and we are grateful to those managers that have responded to all or part of the survey. Overall we hope for an increasing response rate to the survey each year.
Differences in managers
Last year’s survey found clear differences between fund managers in terms of how they approach voting practice and policy. That message is reinforced this year. A couple of noticeable trends on the policy side are the increased number of managers reporting that they have dedicated in-house staff dealing with governance issues, and the fact that in some houses these are now part of teams looking at wider investor responsibility.
In terms of the actual voting records again there seem to be some clear differences with some managers far more likely to oppose or abstain on issues than others. In addition some investors are more likely to use abstentions as an option rather than outright opposition. We also note that it appears that the pension funds in the sample seem to be typically more likely to oppose management when voting than many of the fund managers. Finally there are still some fund managers which do not vote all the time.
Given that there are such distinct differences between managers it is surely right that clients, particularly pension fund trustees, have access to information about them before appointments are made. If we take seriously the proposition that well-governed companies are more likely to outperform in the long run then it is surely right that clients should take commitment to exercising ownership into account when selecting managers.
The TUC will continue to produce the voting survey on an annual basis in order to provide trustees with information on various managers and a general sense of developments in voting and engagement. However we believe that there is a growing need for more information to be made available.
If voting and engagement is as important as most commentators now say it is then there should be greater resources to help potential clients attempt to assess the strengths of various managers.
Public disclosure
The TUC believes that at present being transparent about how ownership is exercised is a choice. Those that have sought to be open, such as CIS, ISIS Asset Management and Insight Investment, have found ways to disclose publicly because they have chosen to do so. Equally those managers which currently do not disclose have a choice, it is not a matter that they are unable to be open as those managers that have embraced public reporting have demonstrated. As such we have concluded that many of the arguments that have been put forward against public disclosure are disingenuous.
The TUC hopes that more fund managers will voluntarily move towards greater transparency in order that clients can become more involved and that we create a climate of more informed voting. At the same time we will continue to lobby that institutional investors should be compelled to disclose voting and engagement activity publicly.
Where are the ISC principles?
The TUC believes that there should be some concern at the fact that the ISC principles on the responsibilities of shareholders are not being built into the formal framework of pension fund investment. This year’s survey shows that the principles are rarely referred to in contracts, and, based on its own trustee research, the TUC also believes that they are also hardly ever part of a scheme’s statement of investment principles.
Of course we must allow for time-lag. If the principles are only part of new contracts it will take time before they are part of a significant proportion of contracts. In addition as was suggested earlier in the survey simply looking at the proportion of contracts mentioning the principles may not be a useful measure of implementation. And clearly the fact that the managers act in the spirit of the principles is ultimately more important than whether various bits of paper refer to them.
That said we do believe that if the principles are to be regarded as a genuine movement to encourage informed and active ownership, rather than simply an attempt to prevent regulation, then they need to be more visible. This would help create further confidence that fund managers are serious about their responsibilities as owners.
Looking ahead
The TUC does believe that there are genuine shared goals in area of active ownership. We want fund managers to take ownership seriously because employees’ retirement savings depend upon decent returns. We fundamentally believe that good corporate governance has an important role to play in delivering those returns.
By producing this survey we hope to help trustees better understand how managers exercise ownership, and ask searching questions. Our intention is that this will help develop a more informed approach by both managers and trustees, and contribute to the development of an investment culture where the responsibilities of ownership are taken seriously. We will continue to discuss voting and engagement issues with the fund management industry to ensure that this survey evolves in a way that meets these aims.
Appendix: Circulation and Response List
Full responses received directly from:
- ABN Amro Asset Management
- Britannic Asset Management
- British Airways Pensions Investment
- CCLA Investment Management
- Co-operative Insurance
- Henderson Global Investors
- Insight Investment
- Investec Asset Management
- ISIS Asset Management
- M&G Investments
- Morley Fund Management
- Railpen
- Royal London
- RCM UK
- Schroder Investment Management
- Standard Life Investments
- Universities Superannuation Scheme
- Information supplied by trustees for:
- Barclays Global Investors
- Deutsche Asset Management
- Fidelity Investments
- Hermes Pensions Management
- Legal & General Investment Management
- Threadneedle Asset Management
- UBS Global Asset Management
- Information retrieved from public sources for:
- AXA Investment Managers
- Baillie Gifford
- JP Morgan Fleming Asset Management
The following managers only responded to Part 2 of the survey on voting policies, or provided some related information:
- Aberdeen Asset Management
- Aerion Fund Management
- AXA Investment Managers
- Baillie Gifford*
- Barclays Global Investors*
- Capital International Ltd
- Deutsche Asset Management
- Fidelity Pensions Management
- Hermes Pensions Management*
- HSBC Asset Management (Europe)
- Lazard Asset management
- Merrill Lynch Investment Managers
- Newton Investment Management
- Scottish Widows Investment Partnership
- Societe General Asset Management
- * These managers also assisted the TUC in obtaining voting data.
The remaining managers failed to respond or declined to take part:
- Abbey National Asset Managers
- Baring Asset Management
- Cazenove Fund Management
- Chiswell Associates
- Credit Suisse Asset Management
- Edinburgh Fund Managers
- F & C Management
- Framlington Unit Management Limited
- Gartmore Investment Management
- Glasgow Investment Managers
- Goldman Sachs Asset Management
- Invesco Asset Management
- JP Morgan Fleming Asset Management
- Legal & General Investment Management
- Martin Currie Investment Management
- Morgan Stanley Investment Management
- Old Mutual Asset Managers (UK)
- State Street Global Advisors United Kingdom
- Threadneedle Asset Management
- UBS Global Asset Management
Contact information:
ABN Amro Asset Management
- 82 Bishopsgate, London EC2N 4BN
- Telephone: 020 7678 4500
Britannic Asset Management
- Fiona Ross, Head of Institutional Division, Tel: 0141-222-8221
- Scott MacMillan, Client Manager, Tel: 0141-222-8614
CCLA Investment Management
- Neville White, SRI/corporate governance, Tel: 020 7489 6047
- David Kightley, Business Development/Client Relationship, Tel: 020 7489 6021
Henderson Global Investors
- Arno Kitts - Director of Institutional Business: arno.kitts@henderson.com
- Rob Lake - Head of SRI Engagement and Corporate Governance: Rob.Lake@henderson.com
Insight Investment
- Rory Sullivan - Director, Investor Responsibility: 020 7321 1875
- Stephen Millar, Business Development Director: 020 7321 1323
Investec Asset Management
- 2 Gresham Street, London, EC2V 7QP
- Tel: 020 7597 1897
- Fax: 020 7597 1801
- E-mail: ukinstitutional@investecmail.com
ISIS Asset Management
- Karina Litvack, Head of Governance and Socially Responsible Investment, Tel: 020 7506 1219
- Michel Bernard, Director, Institutional Business, Tel: 020 7506 1506
M&G Investments
- M&G Customer Services
- FREEPOST NAT 3855, PO Box 6108, Basildon SS15 5ZZ
Morley Fund Management
- Anita Skipper, Head of Corporate Governance, Tel: 020 7809 8205
- Ia in Richards, Head of Governance and Public Policy, Tel: 020 7809 8213
RCM UK
- 155 Bishopsgate, London, EC2M 3AD
- Tel: 020 7859 9000
- SRI contact: Bozena Jankowska
Royal London
- 55 Gracechurch St, London EC3V 0UF
- Ian Kernohan, Corporate Governance: Ian.Kernohan@rlam.co.uk
Schroder Investment Management
- Miles O'Connor, Head of UK Institutional Sales & Client Service, Tel: 020 7658 4555
- Paul Emerton, Manager, Corporate Governance, Tel: 020 7658 3991
Standard Life Investments
- 1 George Street, Edinburgh, EH2 2LL.
- Tel: 0131 225 2345
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Congress House
Great Russell Street
London WC1B 3LS
telephone 020 7636 4030
fax 020 7636 0632
contact:
Tom Powdrill
020 7467 1201
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