Most investment managers are voting proxies without guidance from clients, according to a new survey released this week by the Canadian Shareholder Association for Research and Education. In its annual proxy survey, SHARE reports that 71% of investment managers say that they vote most of their pension fund clients’ proxies at their own discretion, without instructions or guidance from their clients.
“We saw a 10% decrease this year in the number of firms that said they receive guidance or direction from their pension plan clients on how those clients’ proxies should be voted,” says SHARE’s director of Law and Policy, Laura O’Neill. “This suggests that more institutional investors, including pension funds, let their money manager decide how their proxies should be voted. The lack of direction is cause for concern,” she adds.
SHARE points out that proxy votes attached to pension funds’ equity investments are assets of the fund. “Pension funds, and other institutional investors, should give their proxy voting agents guidance on how their proxies should be voted, ideally by adopting a set of proxy-voting guidelines. This is important because pension fund trustees have a fiduciary duty to oversee how the proxies attached to their funds’ stocks are voted.” said O’Neill.
The organization reports that, in 2009, 35 firms responded to its’ voluntary survey, which asked the firms how they voted on a selection of 34 issues that appeared on the ballots of Canadian companies, including board and committee independence, executive stock option plans, and corporate reporting on environmental and social risks, as well as others.
Public disclosure of voting guidelines has increased, with 40% of firms now disclosing, up 11% over 2008. Another encouraging trend according to SHARE is that in this year’s survey is that all but one of the firms handling securities lending for their clients have procedures in place to recall lent shares in time to vote them.