Friday, 28 March 2008

Unexpected benefits

I was at Unison's national seminar on the LGPS this Tuesday. John Gray has blogged baout it here and here so I won't cover this in detail. Two things worth mentioning are that Fidelity's donations to the Tories were raised, and that the TaxPayers Alliance report on council pensions is thought of as "academically shoddy" by senior civil servants. (The TPA might think this is simply self-interest. Personally I think the obvious conclusion is simply that it was a poor report).

However the thing that really struck me about the afternoon sessions is how Unison's drive to get proper member representation on the LGPS has a) already had an impact and b) opened up other interesting avenues. In terms of the former, although the DCLG's response to date has been limited, the requirement for funds to disclose a governance policy is at least putting some pressure on, and officials there think there is movement. But on the second it's clear that by trying to get to the bottom of the apparent resistance to member representation, Colin M and his crew have found out quite a lot more.

For example, before Unison got stuck in how many of us knew that local government funds lend to authorities at below market rates? How acceptable would you find that in a private sector scheme? Had anyone outside the civil service looked at how the Government was interpreting EU directives on pensions, and how this might affect the LGPS? These are not small issues, yet they wouldn't have emerged without the drive to get member representation (which is itself a stepping stone for the Unison capital stewardship programme).

A similar thing happened when the TUC started its voting survey. This was intended as way of giving trustees information about how fund managers exercise ownership, with the aim of making this a factor in mandate decisions. However the refusal of most of the fund management industry to play ball meant that we were handed a great campaigning issue - voting disclosure. I can honestly say that if fund managers had simply co-operated with the survey in the first place it is unlikely that we would have pushed for a mandatory disclosure regime - we wouldn't have needed to. Although we still haven't got there, the Government now has a reserve power that could mandate disclosure the ISC has published disclosure guidance, and a number (not a large number!) of fund managers now publish their full voting records.

I also learnt a lot more about how the City operates. Early on when we first launched the survey I went to visit one fund management house that wasn't going to participate. One of their people explained that they couldn't give us the information because it was client confidential, what's more they had checked it with their compliance people and found it was actually illegal to disclose the information to us. About a year later the same fund manager started publicly disclosing its full voting record. I guess it must have become legal somehow...

Similarly in the first survey we found that one fund manager only voted its shares where it held 5% or more of a company. This was a midsize fund manager so that meant it wasn't voting much at all. And if you think it through it probably means that they were less likely to vote at larger companies - big public companies usually have a wider shareholder base, and it simply costs more to acquire a bigger stake. This had a further consequence - a trade union pension fund that employed this manager complained, and the fund manager subsequently said that it would revise it spolicy and from then on vote all it shares.

All this grew from a much much simpler objective - getting people to respond to a survey. Just like the wealth of information Unison is amassing on the LGPS is driven by the much more basic objective of getting trustees om pension funds. Sometimes doggedly sticking to a campaign objective can deliver significant unexpected benefits.

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