Stewardship Code...

It should be appearing sometime soon, and there are few things worth looking out for.

Coverage - first up, what do we mean by 'institutional investors'? Just the asset managers or their clients (pension funds mainly) too? I suspect that some people are worried that if it only applies to managers then things may continue as before, because the clients won't put any pressure on. Secondly, what about companies that advise investors on ownership issues - the voting advisers. Personally I see no good reasons why they (...er... we) shouldn't be subject to the Code given the influence exerted.

Monitoring/enforcement - this is the biggie IMO. Who is going to monitor the application of 'comply and explain' when it comes to the Code? With the Corp Gov Code monitoring is carried out by the market, in the shape of shareholders and their advisers. But who will do the job in this case? Maybe investment consultants? But is there much dosh in it? The FRC talked about adopting the IMA engagement survey, but that doesn't quite fit the bill. Personally I think there isn't a better alternative than the FRC doing it themselves, but I suspect they lack the resource.

Pooled funds - I know several submissions to the consultation raised the issue of client voting in pooled funds. Any kind of statement here from the FRC would be hugely helpful to nudge managers in the right direction.

Voting disclosure - my hobbyhorse obviously, but I find it hard to see how anyone reasonable could conclude that the current 'comply or explain' system is working (because the vast majority of those who don't comply don't explain). So it will be interesting to see if the wording in the Code has been toughened up. I have no expectation that it will have been, but worth looking out for.

Old, but interesting

This paper (PDF), which puts forward stewardship theory as an alternative to agency theory. Interestingly the paper effectively argues that the roles of chair and chief exec should be combined, and that the research in the paper suggests that splitting them has no value and may have a cost. I'm more convinced by the (brief) critique of agency theory, rather than the propositions that flow through it. But worth a read.

BoJo World Cup analysis

Of course! It was PC and Elf and Safety wot lost it:

We are still paying the price of an educational establishment that developed an aversion to competitive games and an obsession with bureaucracy and elf and safety that made it hard for the voluntary sector to fill the gap.

So...

Can I be the first to point out the correlation between the election of a Conservative prime minister and a truly dismal England World Cup campaign? Those who don't learn from history and all that...

On a more serious note, Shuggy's post on the Lib Dems is worth a gander. Read in conjunction with the latest stats on UK polling report. Support for the Yellow Tories has halved since the peak of Cleggmania. Clearly that was a false dawn but they are still a long way down on the 23% they achieved at the election.

Errr... no

There's some wobbly thinking in this here comment piece on pensions in the Telegraph

Longer lifespans mean we must save more and work longer or retire in poverty. You can opt out of saving but you cannot opt out of growing old. But that does not mean the Government should nationalise our savings, which is what its new auto-enrolled scheme amounts to.

I think the phrase "amounts to" is being used here in the less common sense of "is not at all like". I think a reasonable interpretation of 'nationalisation' would be that the assets are taken into public ownership. Yet that clearly isn't happening under auto-enrolment. Either you are auto-enroled into your employer's scheme, so the assets remain in the trust in a DB scheme or in your own account in a DC a scheme, or you go into Personal Accounts, where you have your own fund. There is absolutely no question at all that the state takes ownership of your assets. (indeed one argument for having a funded national scheme is that politician's can't muck about with it so easily).

What's more the state isn't even going to invest those assets, that will be done by the scheme's asset managers, and scheme members will have a (limited) choice in how to spread their assets around. Theoretically I spose the govt could have, say, expanded UKFI's remit and given it the job of investing the assets of the scheme, but it has not done so.

To be clear: there is no basis whatsoever for saying this scheme amounts to nationalisation of savings.

A Conservative solution to the problem of inadequate saving would be to improve incentives for voluntary pension contributions.

Assuming this is a Conservative who does not accept the arguments in Nudge which advocates auto-enrolment if I remember rightly. (and as I've blogged bwefore, Thaler's research was quoted to back up the introduction of Personal Accounts).

That need not involve extra costs in the form of tax breaks. For example, the Budget proposals to give savers greater choice about how they spend pensions savings, by removing the compulsion to buy a guaranteed income for life in the form of annuitiies, will make pensions more flexible and attractive. Savers do not like being told what to do with their own money.

Once again, I would have thought that anyone who has read much research abour decision-making in relation to saving would reach very different conclusions. Many people find the decision about whether and how much to save too difficult, and put it off, and would rather be guided. Flexibility is only attractive to some.

Pensions would be even more attractive if we knew we could get access to the money earlier in life when we needed it; perhaps to fund a business or buy a home. This flexibility already exists in America and there is no reason it could not be introduced here.

The first bit here merits re-reading because it is a bit contradictory. In essence the argument is that pensions would be more attractive if they weren't pensions. Or to put it another way, we would save more for retirement if we didn't have to use the money we have saved for retirement for our retirement.

Now I'm not actually opposed to flexibility in relation to savings, and there is room to innovate here. But I'm not convinced that opening up retirement savings for other uses is going to be a good way of helping people fund for retirement in the long run. Over time won't people start seeing their pension as just a savings account that they can dip into? And won't we tend to overestimate our need for the money now rather than in the future?

This is a more complex argument than flexibility = good.

The first big porkie from Cameron?

Accrued pension rights for public sector workers won't be touched he claimed. But what about this, eh?

Looks to both pre-empt the public sector pension commission and affect accrued rights (since scheme member won't get the indexation that they thought they had been promised).

Just remember...

If the Guardian had a vote it would be cast enthusiastically for the Liberal Democrats.