The TUC today called on UK fund managers to reveal how they vote on controversial issues in companies they hold shares in. The TUC says it is already surveying their voting records during 2002, and will use the results to “help” union pension fund trustees hire and fire fund managers. The aim is to encourage fund managers to meet the standards of corporate governance that trade unions regard as important.
The TUC is sending a questionnaire to the UK’s leading institutional investors to ask them how they voted on 50 key company issues in the 2002 proxy season. The results will be published in the summer and circulated to all 800-plus members of the TUC Member Trustees Network for use as a quick reference guide to the voting records of leading institutional investors.
The TUC’s initiative is being driven both by recent shifts in official opinion, and the views of trustees. The UK Government stated in the recent Company Law white paper: ‘In principle it would be in the public interest for institutional investors to be required to disclose publicly how they have voted in respect of their shareholdings in British quoted companies.’ Separately last week the Securities and Exchange Commission in the US decided that mutual funds should be obliged to publicly reveal how they vote.
More importantly, says the TUC, pension fund trustees are increasingly convinced that good governance pays rewards. The recent TUC/Just Pensions survey of trustee attitudes found that almost 40% believe that good corporate governance will have a substantial financial impact on investments in the next year, while 80% overall said it would have at least some impact in the same period.
Brendan Barber TUC General Secretary Elect, said: ‘Most trustees are in the dark about how their fund managers vote, even on the most controversial questions. Trustees would not appoint a fund manager without looking at the firm’s performance figures. Therefore, in future we expect trustees will take a similar attitude to managers’ voting records, especially when hiring fund managers.’
The TUC believes that if trustees feel that good governance has a financial benefit they should be aware of how different investors address such issues in investee companies through the exercise of shareholder voting rights. Most large institutional investors have a public corporate governance policy, but few trustees know how these work in practice. The voting survey is intended to give trustees a guide to how various investors responded to some of the most controversial governance issues in the 2002 season. The TUC also expects that the information will be used when trustees are reviewing or appointing fund managers.
The TUC is holding a conference on Britain’s investment culture entitled ‘Far Shares’ on Monday 24 February (9am – 1pm) at TUC Congress House, London WC1. Speakers include Ruth Kelly MP, Financial secretary to the Treasury; Brendan Barber, TUC General Secretary Elect; and Christine Farnish, Director General NAPF.