Friday, March 23, 2007
UK Pension Fund voting - extract from Ed Balls (UK Treasury Minister) speech to NAPF
71. The exercise of voting rights attached to shares is a crucial element of an effective engagement strategy. It is clear to me that savers, as ultimate owners, have a right to know how their agents are managing their investment. This knowledge will help to improve the accountability of institutional investors to their clients, and it will also reduce the potential for conflicts of interest that arise when institutional investors vote on resolutions by companies with which they have, or indeed might have, a relationship.
72. I applaud the progress made by institutional investors in voluntary disclosure of voting. In 2003 only 2 institutions disclosed how they voted their shares. In a group of the largest firms, that figure is now 16 out of a possible 33, and represents 42% of managed UK equities. But there is clearly a long way to go before all savers can know how the ownership rights of shares - bought with their money - are exercised.
73. The Government's objective is to achieve a practical and workable regime that provides reasonable levels of disclosure at a proportionate cost. Our clear - and stated - preference is for industry to work to a voluntary approach. Regulation is neither the Government's or industry's first best choice. But, any voluntary approach needs to be effective. An effective voluntary 'comply or explain' code would result in industry:
acknowledging the desirability of disclosure of voting disclosure
having a disclosure policy in place;
considering the basis for disclosure against that policy and making disclosures where appropriate; and
where voting is not disclosed, providing principled reasons where voting is not disclosed, either in general or in specific cases.
74. I met the Institutional Shareholders Committee last week to discuss progress with a voluntary approach and I am encouraged that the ISC have said they will have an industry comply or explain code up and running by the Summer, following a period of consultation. The Treasury will cooperate fully with the ISC in this and we will encourage them to involve a wide range of interested parties in the development of this code.
72. I applaud the progress made by institutional investors in voluntary disclosure of voting. In 2003 only 2 institutions disclosed how they voted their shares. In a group of the largest firms, that figure is now 16 out of a possible 33, and represents 42% of managed UK equities. But there is clearly a long way to go before all savers can know how the ownership rights of shares - bought with their money - are exercised.
73. The Government's objective is to achieve a practical and workable regime that provides reasonable levels of disclosure at a proportionate cost. Our clear - and stated - preference is for industry to work to a voluntary approach. Regulation is neither the Government's or industry's first best choice. But, any voluntary approach needs to be effective. An effective voluntary 'comply or explain' code would result in industry:
acknowledging the desirability of disclosure of voting disclosure
having a disclosure policy in place;
considering the basis for disclosure against that policy and making disclosures where appropriate; and
where voting is not disclosed, providing principled reasons where voting is not disclosed, either in general or in specific cases.
74. I met the Institutional Shareholders Committee last week to discuss progress with a voluntary approach and I am encouraged that the ISC have said they will have an industry comply or explain code up and running by the Summer, following a period of consultation. The Treasury will cooperate fully with the ISC in this and we will encourage them to involve a wide range of interested parties in the development of this code.
