Should we have a say over the voting of our shares?

Simon Howard – author of the report

It’s not often that you see a Linked in post that reads like this.

But it’s not often that you read a Government paper that is this forthright.

There is a gap between demand from clients – which needs to grow further – and supply from the industry

Or specific about the problems it is addressing

  • Voting is of growing importance in securing value for pension savers of all kinds.

  • There is enormous complexity in pension and investment structures which makes it hard for pension schemes to exercise control over voting.

  • There is enormous complexity in how voting is delivered which again works against the interests of pension schemes.

  • We are told that there are many issues with splitting votes in pooled funds, but none appears material or insuperable

  • There are significant problems with some stakeholder attitudes and the asymmetry of power between pension schemes and their agents.

And certainly not as clear in the recommendations it makes

We recommend that all fund managers should voluntarily offer pooled fund investors the opportunity to set expressions of wish on request.

To speed the process and avoid any questions on legality, we think the DWP and FCA should give their views publicly

If progress does not materialise at the pace required, we recommend the issue be referred to the Law Commission

The 24 recommendations

The paper ends with 24 more detailed recommendations for change which are supported by  the weight of a formal consultation with asset owners and fund managers.

The tone of the document puts me in mind of Martin Luther’s 95 theses , not least in its conviction

We think voting is a part of investing and certainly plays a part in risk management. These data suggest the system is not currently delivering in these areas.

The central issue is the lack of alignment between what customers want and what service providers (fund managers) think they should have. For instance, with regards reporting templates which trustees consider unhelpful, the report asked whether standardization might help.

You can imagine Martin Luther railing against those 48% of fund managers who felt that offering customers service level agreement would be “unhelpful”!

And the report demands a stripping away of unnecessary obstructions between the ultimate beneficiary of investment (the saver) and those in control of the management of the investment (the executive). Luther had the same idea about the relationship of man to God!

Some may say this is a political stance – we disagree. Politicians on all sides agree that people need to save more into their pensions. That will be easier to bring about if the saver feels engaged and listened to; it will be easier if the people they are paying are seen to be listening; it will be easier if the saver feels a degree of alignment and ownership.

This is not a report that speaks highly of intermediaries, though it was published on the day  when a group of investment consultants announced a “Net Zero initiative” including the aim to

  • Assess and monitor asset managers on the integration of climate risks and opportunities in investment decisions and stewardship and reflect this evaluation in client recommendations

The Taskforce on Scheme Voting reckons they have some way to go.

Consultants exercise significant, and in some cases potentially excessive, influence especially among smaller clients.

Anecdotal evidence supports the idea that investment consultants are not always supportive of trustees wishing to be more robust on voting issues or indeed other aspects of their relationship with fund managers. We think this may be a function of 2 things: the consultants’ fee-driven business model, and their wider position as intermediary between other stakeholders which means signals of interest from trustees, and of receptiveness from asset managers can get lost.

The importance of substance over format

I attended a Pension PlayPen webinar on stewardship the day after the publication of the Taskforce’s report. I seemed the only person on the call who had read it. Those talking were from organizations (Cushon and Tumelo), leading the way in offering a “farm to fork” voting service allowing savers the opportunity to express their wish on voting at AGMs and other key corporate events.

It is crucial that those with technology at the heart of their proposition, deliver as Cushon and Tumelo are delivering. My comment is that – despite an announcement that L&G savers would be able to use the Tumelo service over a year ago, I have never been able to use the software. I am in L&G’s flagship workplace pension. My worry, especially as the Taskforce reports on the link between Tumelo and L&G , is that I and they are being green washed.

This is not a criticism of Tumelo, it is a criticism of L&G who are rather better at presenting PR coups than implementing promised services. I hope that the integration with Aviva goes faster and further.

In reality, we are only scratching at the surface of demand from clients and the pension industry needs to go further. This is an area where workplace pension schemes can differentiate themselves and provide value for our money. The Taskforce referred to the FRC’s refusal to allow Schroders to be a signatory to its stewardship code

Schroders said it was frustrated not to be a signatory, saying FRC feedback had put this down to the format rather than the substance of its submission.

Or as Matthew’s gospel puts it.

Ye shall know them by their fruits. Do men gather grapes of thorns, or figs of thistles?

This report needs to get read by everyone who cares about grapes and figs. Luther did!


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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