Custody and proxy voting
MOST custodians acknowledge there are some value added services which
are simply not part of their core business and would be difficult to turn to
profitable use.
Share voting is becoming increasingly important as awareness of
corporate governance issues grows among UK pension fund trustees, though Bank
of New York and Northern Trust are two of few custodians to offer support
services to clients in this area.
In this niche sector, at least one external service provider is
currently working closely with custodians to ensure relevant votes are cast on
shares.
Share voting agency Manifest acts as a counterparty to custodians and
serves on behalf of the beneficial owners of shares. According to managing
director Sarah Wilson, the company acts to "take custodians out of the loop" on
share-voting issues. Its systems link the share-voting requirements with
custodian records and Manifest acts as a bridge to ensure shares are voted
according to the preference of clients.
Wilson says custodians are generally delighted that Manifest has
stepped into an area in which they often have limited time and resources. A
traditional lack of focus on such arrangements, she believes, may have been
partly responsible for poor levels of share voting in the UK.
"This type of activity is more akin to dealing in shares than general
custodian activity and involves decision-making by share owners or fund
managers. Custodians are normally delighted we can help satisfy client needs
and in the case of custodian mergers and so on we can monitor records to ensure
that votes will continue to be cast effectively despite provider changes.
"We enjoy a good working relationship with several custodians and find
them to be staffed by thoroughly sensible and committed people. But most
custodians would admit share voting was not a core part of their business".
Professional Pensions
9 September, 1999
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