Shareholder engagement is on the up according to the UK’s Investment Management Association which has just published its fifth annual Engagement Survey. The report brings together a review of IMA members general approach to voting disclosure between July 2007 and July 2008 as well as taking a look at seven contentious issue case studies.
The IMA gives a robust defence against recent government accusations of oversight failure by the City. Since 2006 votes against have risen from 1.8% to 3.3% in 2008. But by counting resolutions rather than meetings or companies it isn’t clear where the dissent is focused.
Key Take-Aways
- Voting Direction: One third of IMA members are directed to follow particular 3rd party instructions, which is down from a half two years ago.
- Communicating votes electronically: Most of the respondents to the survey now appear to be using one or more electronic ‘front-ends’ for voting. Strictly speaking this isn’t electronic voting as the survey suggests. Not all registrars for UK quoted companies take electronic instructions in any format, especially if their clients are registered in offshore centres such as the Channel Islands or the Isle of Man, for example.
- Voting Deadlines: Given the dependence that some investors place on their custodians as voting counterparties, it isn’t surprising to see how many are faced with excessively long and unecessary voting deadlines.
- Number of agencies firms use in the UK for processing instructions: Very few firms now use more than one agency for processing resolutions, however this belies the problem of the vexed “Chain of Intermediaries” and how many hops down the chain the votes go through before finally reaching the company.
- Share blocking:Blocking is singled out as a reason why respondents do not vote although it’s not clear whether this is real share blocking or custodian re-registration quasi-blocking which is to blame.
The focus of this report is very heavily towards engagement and policy, a key political concern for the IMA at the moment. And while voting is not the be all and end all in the governance process it is disappointing to see how little attention the operational aspects of governance are afforded.