A UK shareholder campaign that unions can support

Finally! The responsible investment campaign group Fair Pensions has an excellent initiative on the go - working with investors to encourage employers to consider instituting the Living Wage. More details here, the launch blurb below...

Investors bring remuneration debate ‘to the shop floor’

Investors worth over £13bn are issuing a call to FTSE 100 companies to adopt Living Wage standards across their UK operations. The broad investor coalition, headed by religious groups and philanthropists in the UK and USA, is backing Fairpensions’ JustPay! Campaign. The FairPensions campaign for Living Wages is mobilising both institutional investors and tens of thousands of FTSE 100 customers.

On 2nd May, the coalition of investors co-ordinated by FairPensions is writing jointly signed letters to the CEO’s of each FTSE 100 company asking for Living Wage standards to be applied.

With over 3.5 million workers in The United Kingdom earning under £7 an hour and 53% of poor children living in households with at least one working adult, the attention of shareholder activists is turning to the plight of those at the bottom of the salary scale.

Bill Seddon, Chief Executive of the Methodist Central Board of Finance:

“It is entirely appropriate that the Central Finance Board signs these letters to FTSE 100 companies. We look at the relationships companies have with their employees, suppliers, and service providers. That leads us to consider not only executive pay levels, but also the lowest paid in a company.”

Sister Nora Nash of The Sisters of St Francis Philadelphia, who recently filed a shareholder resolution challenging high pay at Goldman Sachs, said:

“While executive compensation spirals out of control, so does the number of people who suffer from food insecurity throughout the world. Companies have a moral obligation to be accountable, to protect the dignity of the human person and to consider equity and justice for the worker. Living Wages mean that persons who work full-time are able to support their families without charity or government intervention.”

As well as investors, thousands of individuals are set to mobilise their money for Living Wages. Through a unique tool at www.activateyourmoney.org (which goes live on Friday 29th April) people will call on companies who manage their money (banks, insurers and others) to become Living Wage employers.

Catherine Howarth, Chief Executive of FairPensions said:

‘This mobilisation of ordinary people’s money is a first-of-its-kind event in this country. People are sickened by the ever-growing wage inequality in Britain’s biggest firms but we haven’t had an effective way to make our voices heard until now. The combination of major investors and members of the public working together to bring the remuneration debate down to the shop floor should be irresistible.’

FairPensions and their campaign partners are also set to bring the issue of low pay to AGMs this summer.

Ms Howarth said:

“CEOs and Chairmen of Britain’s biggest companies can expect to be challenged at their AGMs this year. We’re very much looking forward to helping shareholders bring the issue of low pay straight to the top of FTSE 100s.”

Fiduciary duty

Good piece from the Fair Pensions folks here.

Fair Pensions report on fiduciary duty

This is a really good report, on a really important subject, that's come out of a really well-managed process, and its conclusions are really not what you might expect. I am, frankly, green with envy. It was also an impressive launch event, with Ed Davey from BIS speaking a good turn out from the investment world, including the FRC. Great job all round by Fair Pensions. I suspect that there is scope to get somewhere on fiduciary duty, and now we have some ammo to deploy.

Here's the blurb.

New research by FairPensions calls for an ‘enlightened fiduciary' model for institutional investors to parallel the new duties of company directors introduced in 2006. The report argues that such a provision would provide a valuable ‘nudge' towards sustainable, long term investment to overcome narrow interpretations of fiduciary obligation which emphasise profit maximisation at the exclusion of all other factors, including financial system stability.

According to the report, which was funded by the Nuffield Foundation, intense debates about corporate governance since the financial crisis have paid insufficient attention to the underlying savers whom fiduciary obligations exist to protect.

Christine Berry, author of the report, said that "There's been a lot of talk about the relationship between asset managers and asset owners, but little about the ultimate beneficiaries. There is an urgent need to refocus debate onto the individuals whose money is at stake."

FairPensions, which campaigns for transparency and accountability in finance, argues that current interpretations of fiduciary obligation have lost sight of the core ‘duty of loyalty' to beneficiaries. The complex chains of financial intermediaries involved in today's pension investment have introduced widespread conflicts of interest which are inconsistent with a strict understanding of fiduciary obligation. The report calls on regulators to confirm that asset managers, investment consultants and insurance companies providing pension products are all fiduciaries by law.

Ms Berry went on to say that "From 2000-2009, pension investment returns collapsed to 1.1% per year while funds' payments to intermediaries rose by more than 50%. Against this backdrop the industry needs to ask itself whether it is truly fulfilling its fiduciary obligations to beneficiaries. The current situation simply does not offer enough protection for savers from self-serving or reckless behaviour by their agents." The report, which is being launched with a keynote speech from government minister Ed Davey MP, will call on the government to give savers more say in how their money is managed and to promote long term thinking in order to protect the savings of beneficiaries.

The research also highlights the part that investors played in the financial crisis of 2008. FairPensions points out that, unlike bankers, the people managing pension savings have emerged from the financial crisis with their reputations virtually unscathed despite evidence of their significant role in encouraging risky corporate behaviour in the build up to the crash.

Fair Pensions asset manager analysis

Responsible investment campaign group Fair Pensions has released its analysis of the transparency (or otherwise) of asset managers, which is available here and worth a read.

What I like about it, as opposed to say the regular IMA survey, is that it does attempt to rate the quality and depth disclosures, rather than just counting disclosure as good. For example, anyone who has spent any time looking at the issue of voting disclosure will know that simply reporting votes against and abstentions is an inherently flawed model of reporting, as it hugely skews the picture (see the annual TUC survey for the explanation why). The only method of disclosure that is actually any use - to the end user rather than the institution that is - is disclosure of all votes on all resolutions.

Good stuff.

Bits n bobs

1. PIRC's governance reform agenda is here.

2. Fair Pensions has published it latest pension fund rankings, you can download the report here.

3. I hadn't spotted this, which looks like an interesdting initiative. The Bill probably won't make it, but the commentary from Lord Davies is encouraging.

Fair Pensions analyses asset managers

This (PDF) is worth a read. It has a serious stab at analysing how fund managers address evironmental, social and governance (ESG issues. No surprises here for me:

Our findings suggest that asset managers’ focus on ESG more often than not is limited to governance issues such as board structure and remuneration. Of the 22 asset managers that disclosed a policy on ESG issues 19 covered only corporate governance issues, while only F&C, Insight and Standard Life could explain their policy on environmental and social factors in any detail. Similarly, on corporate engagement, although the overall score for the 30 asset managers on ESG engagement was 53%, this fell to a mere 25% when environmental and social issues were considered separately from governance. It appears as though investment analysis of environmental and social risks/opportunities is confined to a small niche in the industry. This is a significant cause for concern as the risks associated with environmental and social mismanagement by companies can be as damaging to value as governance issues both in the short and the long run.

Here is the TUC reaction. As they say, there's not much evidence of the S in ESG.