NAPF inquiry supports share voting
shake-up
The National Association of Pension Funds (NAPF) inquiry into the low
levels of institutional share voting in the UK is next month set to recommend
the introduction of electronic voting.
In addition, the report will be accompanied by a voting code of best
practice, which will advise schemes to insist they receive an audit trail of
their voting from fund managers.
NAPF officials hope the tone of the code will be enough to head off
government threats to introduce mandatory voting.
The code, which is being drafted with the Association of British
Insurers, will advise trustees to put a monitoring process in place and check
that fund managers votes are being correctly cast.
Typically. fund managers only tell trustees their voting intentions,
leaving no record of the percentage of successfully cast votes.
However, the inquiry, which was set up in October after figures showed
voting levels sticking below 40%, found widespread back office failure at fund
managers and custodians.
Basic administration errors were common. with some managers casting
votes with a success rate of less than 50% thanks to late or misdirected
votes.
It is understood that the NAPF is also considering extending its voting
issues, to offer an NAPF house policy.
NAPF investment head John Rogers said: "The committee of inquiry is
likely to urge boards of trustees to make sure [their policy] is being carried
out. It is not enough for trustees to delegate to fund managers."
The NAPF's stance drew a mixed reaction from corporate governance
specialists, many of whom feel that more should be done to address the
"systemic apathy" behind low voting from pension funds.
Others felt the upcoming requirement for trustees to state their policy
on voting in their statement of investment principles, which will be enacted by
next summer, would have more impact.
Sarah Wilson, managing director of voting agency Manifest, said:
"We welcome the concept of auditing but would say that electronic voting is not
a panacea. What matters is the attitude behind it."
Alex Novarese, Daily Telegraph
28th May 1999
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