UKSIF report on pension funds and SRI

One of the annoying things about the failure of many corporate pension funds to take SRI seriously is that some of them are sponsored by companies which are leaders in the area of corporate social responsibility. With this in the mind the UK Social Investment Forum surveyed companies which are included in initiatives like the FTSE4Good index to see what their practice was like.

The overall message was fairly positive with about three quarters of respondents saying that they do have an SRI policy. Most common methods of implementation are shareholder voting and engagement. However worryingly (if you have any knowledge of the wide variation in fund manager commitment to SRI, or corporate governance for that matter) most funds said that they also delegate implementation of their policy to their fund managers.

The UKSIF report also ranks pension schemes in terms of their practice. The BT scheme comes top of the list, with the Friends Provident and Stagecoach schemes close behind. Of these I'm actually most impressed by Stagecoach as both the BT scheme and the Friends Prov scheme have in-house asset manager expertise to draw upon.

Anyway, the full report can be downloaded here.

Randomness and chief executives

I've posted previously about the misattribution (in my opinion) of business success to the actions of superstar chief execs, or company boards in general. I think the business press is particularly bad for this. I've also thought for quite a while that what really delivers results may a) happen much lower down the corporate ladder (ie some subtle change in processes that has a significant effect) and b) might not ever actually be identified.

Going further, Nassim Nicholas Taleb suggests in the great book Fooled By Randomness, that great corporate performance might just be ...err... random in any case, and as such this raises questions about how we pay execs. Here's an excerpt from the book's postscript:

Lower-ranking persons in [an] enterprise are judged on both process and results - in fact, owing to the repeptitive aspect of their efforts, their process converges rapidly to results. But top management is only paid on results - no matter the process. There seems to be no such thing as a foolish decision if it results in profits...

Now take a peek inside the chief executive suite. Clearly, the decisions there are not repeatable. CEOs take a small number of large decisions, more like the person walking into the casino with a single million-dollar bet. External factors, such as the environment, play a considerably larger role than with the [lower ranking employee]. The link between the skill of the CEO and the results of the company are tenuous. By some argument, the boss of the company may be unskilled labour but one who presents the necessary attributes of charisma and the package that makes for good MBA talk. In other words, he may be subject to the monkey-on-the-typewriter problem. There are so many companies doing all kinds of things that some of them are bound to make "the right decision."

He goes on to argue that shareholders therefore need to reflect of what executives really deliver, and whether their rewards are appropriate. If only!

PS. On the subject of executive pay, Snowflake5 blog has a nice post asking why institutions aren't under more pressure in respect of their voting on pay.

Now That's What I Call Political Music 3

Following part 1 and part 2, here are a few more musical rants. I've updated the list to include some top suggestions from Ian.

Undercover Anarchist - Silver Bullet
Alternative Ulster - Still Little Fingers
Money Is Not Our God - Killing Joke
Civilization Street - Citizen Fish
Landing Party - Radical Dance Faction
Wrath Of The Black Man - Fun-Da-Mental
Vote With A Bullet - Corrosion Of Conformity
Please Don't Fight - Back To The Planet
That's Progress - Jello Biafra & D.O.A.
Television - The Beatings (though the Hiphoprisy version was better really wasn't it?)
Fight The Power - Public Enemy
I Found That Essence Rare - Gang of Four.
Guns Of Brixton - the Clash
Vengeance - New Model Army.
Walls Come Tumbling Down - The Style Council.

Disinvestment from Burma

I posted some links to Burma campaign sites previously. Unfortunately it currently looks like the military is back in control there. I personally feel that disinvestment is a tool that should be used in support of the pro-democracy movement there, and this is the position of unions around the world including the FTUB.

However there are critics of this strategy, and it always worth at least listening to their arguments. Yesterday's Times ran this piece which is a well-argued opposing viewpoint. I don't agree with it, but it's worth a read. I'm not sure the bit about Premier Oil below is quite on the money from what I have heard from people closer to the action than me. I am pretty sure the allegations of forced labour were well substantiated.

15 years of the UK Social Investment Forum

Anyone interested in SRI in the UK will have come across UKSIF at some point. This is their 15th year of operation and this report provides a history of the organisation. I first came across them around 1998 when the Government first trailed its plans to introduce the disclosure amendment to the Pensions Act requiring to disclose their policy (if any) on SRI and shareholder voting. It was also the first time I realised how conservative the pensions industry is, as even this modest proposal resulted in a ridiculous and hysterial reaction.

UKSIF continues to do interesting work, such as the ongoing sustainable pensions project. They also held an interesting event recently on the psychological (ie behavioural) barriers to the adoption of SRI by pension funds.

Canadian mutual fund voting

A quick plug for this report on voting by mutual funds in Canada on shareholder proposals. The blurb says....

The report notes that socially responsible investment (SRI) funds have a much better record of supporting shareholder proposals than conventional funds. SRI funds gave a combined 79 per cent support to the proposals selected, compared with 31 per cent support by the conventional funds.

Have a guess which mutual fund manager came joint bottom?

Shell fund to take contributions holiday

Now here's an interesting development that has been on the cards for some time. The pension fund of oil giant Shell is back in surplus in a big way and as such is taking a contributions holiday. According to a report on the Professional Pensions website the company will put employer contributions on hold for at least 12 months, but employee contributions continue at the same rate.

I can't believe that Shell is the only company in this situation, especially when you consider the figures for aggregate surpluses across all UK pension funds lately. It isn't being picked up in official stats yet. HMRC recently put out its annual statement on methods and amounts of reductions of pension fund surpluses (it's here) and the trend is still downwards. But surely we will start seeing an increases in the amount of reductions now that a number of large funds in particular are heading back into health.