Thursday, 9 April 2009

Voting disclosure

The disclosure of shareholder voting records by institutional investors has been a bit of a crusade of mine for a number of years now. Slowly but surely more fund managers have started putting more information in the public domain. If you're lucky, 6 months after an AGM has taken place, you might be able to find out how half of the company's large UK shareholders voted, or be able to have a guess (because some managers only report votes against or abstentions, so if you know they held the stock you can assume they voted in favour).

This voluntary disclosure regime is, I humbly submit, a crock of ****. I've recently been doing some research into how fund managers were voting at bank AGMs in recent years. If you believe - as many profess to - that shareholders are the owners of companies, and therefore have a responsibility to engage with them where they think there are problems, then surely now the question of how those ownership rights were exercised in respect on the banks is a matter of considerable public interest.

I am pretty confident that I am one of the few UK-based people who knows this area in any depth. I can't think of many people in the UK who have spent as much time looking as this as I have. I know where to look for the info (not always obvious, believe me) and what to look for in the data. But the reality is that there simply isn't much there. In the course of this research I have only been able to find data for a bit over a third of my target group of fund managers in respect of 2008 AGMs, less then a fifth for 2007 AGMs and about one in ten for 2006 AGMs. You basically can't put together a comprehensive picture of how institutions voted at the banks.

The voluntary regime allows this - there is no prescription on issues such as the level of disclosure (so some just disclose headline stats), the timeliness of disclosure (some disclosures are only updated months later), or the provision of archived info (even some of those who make full disclosures don't give you access to previous years' data). The result is a mess of information that frustrates proper analysis. If I was a trustee of a pension fund trying to compare my fund manager against others I would give up.

Imagine if the same thing occured with performance - fund managers only telling you the results they decided, in the format they decided, in a timeframe they decided. It wouldn't be acceptable, so why is it in respect of their ownership performance, for want of a better term?

The UK also contrasts with markets like the US and Canada where initiatives like and ProxyDemocracy provide the data for direct comparisons of fund managers (and some othe institutions). The AFSCME report I mentioned the other day gives you a practical example of how mandatory disclosure can provide a way for interested parties to hold institutional investors to account for own they exercise ownership. This just isn't possible in the UK because of the fudged voluntary disclosure regime the fund management industry managed to buy the Government off with.

But it does not need to be like this. The Treasury judiciously took a reserve power in the Companies Act that would enable them to mandate public disclosure. The voluntary system is not (New Labour-ism alert!) fit for purpose, and this is dramatically demonstrated by the lack of data on bank AGMs. Therefore let's tackle this issue once and for all and make it compulsory to disclose voting records, and in a standardised form.


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