TUC Fund Manager Voting Survey 2015

The TUC's annual voting survey - its 12th! - is out today. Two things I would flag up - the votes on the shareholder resolution at National Express (a rare case of a res explicitly on labour issues) and the votes on the bonus cap at the banks. Both indicate there is a long way to go.

Press blurb below, PDF of the survey itself here.

The TUC is today (Friday) publishing its latest report on fund manager voting. The survey looks at the voting records of fund managers, pension funds and proxy voting agencies in 2014. It is the 12th such survey conducted by the TUC, but the first one since the new rules have been in place to require binding votes on remuneration policy.

Companies are now required to hold AGM votes on:

1. Remuneration policy – in 2013 the UK government introduced a binding vote for shareholders on future remuneration policy.
2. Remuneration reports – in 2003 the UK government introduced an advisory vote focussed on directors’ remuneration over the preceding year.
3. Bank bonuses – in 2013 the EU agreed a new cap on bankers’ bonuses of 100% of fixed pay; but it can rise to 200% if approved by a vote of shareholders.

Since their introduction in 2003, remuneration reports have typically attracted the highest level of opposition on AGM agendas. However, this is now being surpassed by even higher opposition for the new binding votes on remuneration policy.

In the current survey, median support for retrospective remuneration reports was at 40%, whereas median support for future remuneration policy was just 27%.

The TUC suggests that this may be because fund managers believe they can have more influence through remuneration policy votes, as they are forward looking, and binding. By contrast, remuneration reports are on remuneration that has already been paid, and the shareholder vote is only advisory.

The TUC welcomes the message sent to boardrooms by the votes of the survey respondents. If other shareholders had voted similarly, most remuneration policies covered in the survey would have been rejected, forcing boardrooms to rethink their pay culture.

But despite survey respondents dissenting on remuneration policies, on the specific issue of bank bonuses they were more compliant. 22 of 29 respondents approved 200% bonuses for all the banks in which they hold stock – a median support rate of 100% (and a mean support rate of 85%).

Incentive structures in place in the banking sector contributed to excessive risk taking that precipitated the financial crisis, says the TUC. It is therefore disappointing that the vast majority of fund managers have not used the new opportunity provided to shareholders to vote against bonuses above 100% of fixed pay.

Overall, while there is evidence from the survey of a significant block of investors showing concerns over boardroom pay in their AGM voting, the TUC says there is not yet enough shareholder dissent to stop there being a ‘business as usual’ attitude to remuneration and bonuses in the boardroom. All the remuneration policies covered by the survey were passed at company AGMs because fund managers who responded to the survey were outweighed by votes from other investors.

TUC General Secretary Frances O’Grady said:

“The public’s unhappiness about excess boardroom pay is being represented at company AGMs by at least some of the people who manage their savings, investments and pension funds. We hope that their influence will extend to more shareholders. AGMs should not be rubber-stamping sessions and all shareholders should recognise the responsibility they have in holding boardrooms to account.

“The lack of shareholder dissent over bank bonuses, even from investors in our survey, is a particular concern given how pay incentives contributed to the risk taking by banks that led to the financial crisis.

“These new voting rules and reports are simply not enough to produce the major culture-change needed. It’s time for executive pay in the UK to be modernised by the addition of workers representatives to remuneration committees.”

NOTES TO EDITORS: 

- This is the TUC’s twelfth fund manager voting survey. It is intended to give trustees and others information on how fund managers exercise voting rights in relation to controversial issues as company AGMS. It presents the full voting data, and provides voting analysis by investor, and by company. A full copy can be found at XXX.

- The survey covered 61 resolutions on which voting and engagement data was sought and was sent to 46 investors, 30 of which (65%) responded. The full list of respondents is: Aberdeen Asset Management PLC, Aviva Investors, Axa Investment Managers, BA Pension Investment Management Ltd, Baillie Gifford, Baring Asset Management, BMO Global Asset Management, CCLA, Columbia Threadneedle Investments EMEA, EdenTree Investment Management, Environment Agency Pension Fund, Fidelity Worldwide Investment, Goldman Sachs Asset Management, Henderson Global Investors, Hermes,  HSBC Global Asset Management (UK), J.P. Morgan Asset Management, Jupiter Asset Management, Kames Capital, Legal & General Investment Management, Newton Investment Management, PIRC, Royal London Asset Management (RLAM), RPMI Railpen Investments, Sarasin & Partners LLP, Schroders, Standard Life Investments (SLI), State Street Global Advisors (SSGA), TUSO (Trade Union Share Owners), Universities Superannuation Scheme.