Standard Life replies to Myners

Reuters reports that Standard Life has made its response to Paul Myners' call to action public, and you can download the letter on their website here. Reuters picks up on the fact that they disagree with UKFI about the use of share price targets in long-term incentives. Notably they also encourage Myners to get stuck into investment banking fees, particularly in respect of capital-raising.

The footballer's defence...

...of high pay is given a doing over here, by the bloke who wrote this, which I blogged about previously.

Notably, for readers who share my interest in the role of shareholders in all this, he says:

The first major obstacle comprises the institutional shareholders, who act on our behalf. The senior executives of these companies, and often those much lower down the scale in the case of pension fund managers, become wealthy precisely because of the talent argument. The ability to do their job is deemed to be highly uncommon, and must therefore be rewarded accordingly. It is unlikely that they would be keen to question the same logic too forcefully in relation to the employees of the companies they invest in, as this would inevitably undermine their own justifications.

Another link

Great post from Will @ potlatch

Caledonia funds Tories' anti-Lib Dem drive

Updated figures on political donations are now available on the Electoral Commission website. I can't see any further donations by Fidelity, but investment trust Caledonia Investments is keeping up the transfer of shareholders' money to the Tories. Notably of the £133,000 they have given to the Tories in the past two year half - £65,000 - has gone to Meon Valley. I'd never heard of the constituency, and a quick look on Wikipedia reveals that it is a newly-created one. What's more it looks like it will be a close fight between the Tories and the Lib Dems, with us a distant third. So a large part of Caledonia's money is being spent on an anti-Lib Dem campaign, rather than an anti-Labour one. Interesting...

Links...

1. Canadian shareholder activists SHARE have published their annual manager voting survey (PDF)
2. There's a big push for support going on in respect of the resolutions at BP and Shell on tar sands.
3. Brendan Barber blogs on M&A. I think policy interest in this area is going to increase again.
4. FSA commentary on hedge funds is interesting, and doesn't actually surprise me.

Voting & long-termism

There's an interesting piece on the Economist website about possible ways to encourage long-termism. It tends a little too much towards the conventional wisdom that the best outcome it one share no vote with no exceptions. I'm not convinced by the idea of differential voting rights, but I'm inclined towards some sort of qualifying period for voting rights. And as I've said before I like the idea of trying to use dividend policy to encourage long-termism.

None of this would guarantee that outcomes would be any better. But I do think companies should be allowed to experiment, whereas they are often faced by a rather fundamentalist stance from shareholders. In addition, I do think that shareholders who had held their shares for a period to qualify for whatever kind of loyalty benefit and who then challenged the management would send a very strong message. Much stronger than talking the language of long-termism but then pushing for structures that suggest investors' focus is primarily on liquidity. The two things don't sit well together.

That said I agree with the final comment in the Economist piece:

Better yet, the investing public, whose retirement savings have atrophied in the financial crisis thanks in part to the short-term way in which they were invested, may sort things out themselves, by demanding a longer-term perspective from the pension and mutual funds that they have entrusted with their money.

If that ever does happen I think we can say for certain that investing intermediaries would need to seriously entertain some of these sorts of structural incentives for long-termism. I didn't see Cadbury workers lobbying for hedge funds to have unrestricted voting rights...

Left-wing rag backs increasing stamp duty on shares

By which I mean Financial News . This from their asset management comment this week (you'll need a sub to see it I think):

The Government has its hands on a lever that would make short-term speculation markedly less attractive than long-term investment.

An increase in the cost of stamp duty, the UK's levy on the purchase of shares, would directly discourage trading. Short-termism has grown as trading costs have fallen, cut by the increased efficiency of electronic trading systems and competition; pushing up stamp duty would be a direct way of countering the trend.

This would be blunt, of course, but the Government need not be so siplistic. A significantly better change would be to modify stamp duty, so that it was charged on sellers of shares rather than buyers, and tapered to zero if the shares had been held for a certain length of time - say, three years.

I should point out that I'm not personally convinced this is a good idea, for reasons I set out here. I'm inclined to the view that it would be better if pension funds and others made a concerted push to reduce unnecessary costs, including high turnover, rather than seeking to whack the problem with a tax. But it's interesting to note that such ideas are getting a decent hearing these days.