Friday, 16 October 2009

NAPF's odd comments part 2

The outgoing NAPF chair has repeated what he wrote to The Guardian at their annual conf it seems.
He said: "I am fed up with government ministers and regulators pointing the finger of blame at pension funds and pension fund trustees for the banking crisis. There are others far more culpable and they must shoulder their responsibility and look to put their own houses in order first."
Hitchen added schemes take their responsibility as corporate owners seriously.
However, he added: "Our job is to pay pensions, not to run the banks. And our influence is limited - today, we own just 13% of the UK stock market. It is ironic that as more and more DB pension funds enter run-off, driven in no small part by government and regulator-driven policies, we are now expected to come to the rescue of capitalism."

I just don't get what the issue is here. I don't think anyone is particularly blaming pension funds, and by that I mean two things. First, it is very clear that the principal focus of Walker etc is on the boards of companies themselves. Second, though there is (rightly) also a focus on the role of shareholders as owners, it's mainly aimed at asset managers isn't it?

Also I don't get the false choice that is suggested between taking ownership seriously and paying pensions. Again, if you read the Walker Review the focus on shareholder engagement is entirely based on the idea that this is in shareholders' financial self-interest. And this is corp gov basics, separation of ownership and control and all that. According to this way of thinking, surely, the existence of well-run companies (ie the survival of an important aspect of capitalism) directly contributes to the payment of pensions. That's why pension funds should be interested.

Finally, it is true that pension funds' influence is limited, and they account for a declining share of equity ownership. But let's be honest - most pension funds have never really tried to exert the influence that they do have. Ask any asset manager how many questions they get from clients about corporate governance etc. The client pressure on them to act like owners barely exists, whereas a perceived focus on short-term return does (I say perceived because pension funds claim they don't put such pressure on). If you feel that keeping your job has more to do with short-term returns than long-term ownership, what are you going to prioritise?

Unfortunately the language used above, which I am sure will have many an NAPF member nodding in favour, only reinforces the idea that corporate governance and ownership activity have no overlap with financial self-interest. If you want an example of why we have this ownership problem, this is it.

1 comment:

John Gray said...

"Jellyfish NAPF"