Institution warned to use voting rights
INSTITUTIONAL shareholders must exercise their voting rights on company
resolutions or risk government legislation on the issue, a report warned
yesterday.
A study, commissioned by the National Association of- Pension Funds
(NAPF), said that companies' voting systems must be modernised and institutions
should regard regular voting as a fiduciary responsibility.
Yve Newbold the former Hanson director who chaired the inquiry, set up
nine months ago, said that "endemic passivity among institutions meant that
voting levels were 40-45 percent, compared with about 80 percent in the US".
She said that a cumbersome voting procedure, apathy and a reluctance to
tackle difficult decisions were behind the low participation.
Ms Newbold said: "We need a sea-change in attitudes and in the system
as a matter of urgency. Of the two it is attitudes that are the greater
obstacle."
The report came down against compulsory voting, which it said would
lead to ill-considered choices. It also did not advocate an abstention option,
which it said would present an "easy option" for institutions when the
appropriate course of action would be to vote against. It called for electronic
voting to be made available.
Lynn Ruddick, chairman of the NAPF's investment committee, welcomed the
report's findings. She said: "It only takes one hiccup for the whole antiquated
system to fall apart. It hasn't changed much for 150 years. It needs to be
reformed for the next millennium."
Sarah Wilson, managing director of Manifest Voting Agency, which
provides computerised voting services to institutions, said: "Companies have
moved on corporate governance but accountability is a two way street and their
institutional owners have not caught up. Unlike America, some institutional
investors in the UK do not see themselves as owners but as simply trying to
maximise returns."
An amendment to the Pensions Act, due to come in next year will make it
compulsory for institutions to set out their voting policy in their "statement
of investment principles". Ms Newbold said that this would force them to use
their voting rights to a greater extent.
Saeed Shah, The Times
06 July, 1999
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