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Call for Transparency on Asset Manager AGM Votes

26th May 2015 | Closer Alignment With Stewardship Code Needed says Share Action

In a sign that corporate transparency expectations are moving further up the investment chain Share Action UK has urged asset managers to take a more active stance on controversial AGM votes and improve disclosure of their annual meeting votes and rationales.

 

The high profile activist NGO analysed the 2014 AGM voting patterns of thirty three major UK based asset managers responsible for investing £13.8 trillion for asset owners including international pension and superannuation funds, charities, universities and retail investors.

 

Asset Managers –In Whose Interests examined voting results from annual meetings where more than 30% of shareholders voted against management, primarily on board appointments and excessive remuneration in pharmaceuticals, energy, fashion, tourism, defence, consumer goods, transport, and financial sectors.

The UK Stewardship Code administered by the Financial Reporting Council (FRC) to which some UK Authorised asset managers are signatories recommends that they should routinely disclose how they vote at annual meetings.

 

According to its website:  “The FRC sees the UK Stewardship Code as complementary to the UK Corporate Governance Code for listed companies and, like that Code, it should be applied on a 'comply or explain' basis.”

 

The Council also publishes a helpful list of all asset managers who have published a statement of commitment to the Code with links to their statements.

 

In practice, few asset managers actually attend the annual meetings of the companies they are supposed to monitor on behalf of their clients.

 

The Share Action report identifies both leaders and laggards amongst the thirty three managers surveyed.

 

Aviva Investors, F&C Investments, Newton Investment Management, Royal London Asset Management and Standard Life Investments were identified as the five most transparent companies of the 33 surveyed.

 

Aviva was also one of four managers who most consistently opposed management – alongside Goldman Sachs Asset Management, Threadneedle Asset Management and AllianceBernstein.

 

The report also urged a more consistent approach in disclosing the rationale behind a vote, noting that some asset managers actively disclosed why they voted with or against management, while some others only explain a vote against a company.

 

According to the report on shareholder resolutions about environmental and social issues, the following Asset Managers voted most often for such resolutions: Aviva Investors, Threadneedle Asset Management, and Royal London Asset Management.

 

The asset managers that voted most often against such resolutions included Aberdeen Asset Management, Investect Asset Management, JP Morgan Asset Management, and UBS Global Asset Management.

 

“This is ShareAction’s first survey to focus in detail on the asset management industry’s voting policies and practices.” Chief Executive Catherine Howarth said.

 

“All of the managers surveyed have signed up to the UK Stewardship Code, first published in 2010 in the wake of the financial crisis, which recommends that asset managers do publicly disclose their voting records,”

 

“24 of the 33 managers included in this study did not disclose any information on their voting rationales, and the level of disclosure of the remaining nine varied significantly. There is room for significant improvement in the disclosure of voting rationales by asset managers.”

 

“This is critical to achieving real accountability by an industry that invests other people’s money,” Ms Howarth added.

 

Report author Jo Mountford said “Asset managers’ voting decisions have a strong impact on companies’ activities, so it is important that investors understand how these decisions are made. Transparency of voting records and rationales for votes is crucial for ensuring that.”

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