AFSCME report on mutual fund voting

This is worth a read. The US union AFSCME, with the help of the excellent Fund Votes, has produced a report on which US mutual funds are facilitating executive rent extraction. Here's the blurb:

A new report reveals that the largest mutual funds – including Vanguard, BlackRock, ING and Lord Abbett – are the least likely to use proxy votes to align executive pay with performance. On the other hand, the report finds that many smaller funds tend to vote “against’’ management-initiated compensation proposals, and ‘for’ shareholder Say on Pay proposals. Unfortunately, the pay-enabling influence of the larger mutual fund families greatly outweighs the impact of smaller funds. The report specifically finds that the largest mutual fund family, Vanguard, did the least to constrain executive pay in 2010.

Did I mention that we can't do something similar in the UK because we don't have a mandatory voting disclosure regime?

AFSCME etc report on mutual fund voting

Worth a read, here (PDF).

Unions & exec pay

There are a couple of interesting bits in the FT today about executive pay and both of them involve unions. First up, the TUC is suggesting that employees should have involvement in remuneration policy.

"What would be so radical about seeing workforce representation involved in remuneration committees of major companies to try to inject at least some sense of perspective with how the rewards at the top relate to the pay structures across the organisation?"

So says my old boss Brendan Barber.

I can already imagine the irritation this will without question have caused a couple of fund management people I had to deal with in the past who weren't exactly union-friendly, and for that alone I think this is a worthwhile proposal.... ;-) But more broadly, if any institutions do think this is a fundamentally bad idea they must be able to demonstrate a) why it would be worse than the current system where shareholder oversight has not proved effective and b) that their own track record on pay is a good one.

And point b) brings me on to the other story, which is actually based on this research. No surprise really, but US mutual funds are actually pretty weedy when it comes to voting against exec comp, or for resolutions seeking to rein it in.

And here I go on my soapbok again - I think we'd find a similar story in the UK (in fact I'm sure of it based on the data I've been able to find) but we aren't even able to produce a comparable report because fund managers aren't compelled to disclose their voting records, and as such many don't make any data public. This is a simple reform that Labour can enact, as it took a reserve power in the Companies Act that could be used to mandate disclosure. Surely the public interest argument in favour is much stronger now, so why not go ahead?

US unions attack on Countrywide chief

I posted the CTW release about this yesterday. Below is today's report in the Torygraph. I see that AFSCME are involved too.

Unions try to oust Countrywide boss

A group of American trade unions is trying to oust the boss of troubled US mortgage lender Countrywide Financial.

Change to Win (CtW), which represents union pension funds holding an estimated 3.5m Countrywide shares, has written to the company's board asking it to secure the resignation of Angelo Mozilo, the lender's chairman and chief executive.

The letter to Countrywide's senior director, Harley Snyder, refers to the recent investigation by the Securities and Exchange Commission into Mr Mozilo's sales of share options, as well as the company's sub-prime mortgage woes.

CtW goes on to allege that Mr Mozilo's has tolerated a "culture of non-compliance" at Countrywide, and refers to a recent report that borrowers were pushed into unsuitable high-cost loans.

The letter claims that such actions artificially inflated the company's share price during the mortgage boom, and have since sent them in to "freefall" as the sub-prime crisis has hit home.

CtW also argues that Mr Mozilo's remuneration is "far out-of-line" with his peers. In 2006, Mr Mozilo received a total of $48m (£24m) in pay, bonuses and other rewards, while Chuck Prince, the chairman and chief executive of Citigroup, received $26m.

Mr Snyder has also received a letter from the American Federation of State, County and Municipal Employees, demanding that Countrywide splits Mr Mozilo's dual role and names an independent director as chairman.

Countrywide had not commented at the time of writing.