Trustees should be able to hold asset managers to account through an industry-wide AGM structure rather than each fund or fund manager being asked to hold individual AGMs, an asset manager has said.
Speaking at the National Association of Pension Funds (NAPF) Annual Stewardship Conference, Aviva Investors chief responsible investment officer Steve Waygood called on the industry to build upon the Kay Review on UK equity markets, which provided an “excellent analysis” of the issues and conflicts of interest in the capital market supply chain, but “failed to put forward tangible recommendations that are sufficient in scale to overcome the cultural barriers and financial conflicts of interest that are such significant barriers to effective stewardship”.
Waygood threw the gauntlet down to the industry to develop an Investment Industry Stewardship AGM to bring trustees and fund managers together to enable the asset owners to hold their clients to account.
He explained: “An Investment Industry Stewardship AGM could be convened by industry associations such as the NAPF and would allow asset managers to present their stewardship statements to an audience of trustees who would then ask questions and vote on the statement. This event could have a potentially transformative effect on communication between trustees and asset managers and could also serve as clarification from government of the fiduciary issue that Kay highlighted.
“It will hopefully start to shift culture and approach to stewardship of pension trustees without the need for regulation or heavy-handed intervention. The results of the vote could be disclosed, with the best statements singled out for special mention by the government and NAPF, and the worst being asked to improve.”
Waygood added: “Although asset managers are expected to comply or explain against the Stewardship Code, they are not currently held to account on it by asset owners. The analogy is that companies are held to account for delivery on the Corporate Governance Code against which they must also comply or explain in part by investors voting at the AGM. This means that investors can evaluate the explanation and take action accordingly. Currently, no such equivalent forum exists where investors’ explanation for their own stewardship work can be formally evaluated by their clients. Consequently, the chain of accountability is broken.”
This comes as the NAPF’s latest annual survey of pension funds’ engagement with investee companies revealed 96% of pension fund members (up from 93% in 2012) believe institutional investors have stewardship responsibilities that include engaging with companies and voting shares.
Yet it found only 25% of survey respondents were able to say their investment consultants had raised the issue of stewardship with them this past year and in only 17% of those cases did respondents say that their investment consultants had suggested signing up to the Stewardship Code.
NAPF chief executive Joanne Segars said: “Three years on from the formal introduction of the Stewardship Code, it is time all those who have signed the code support both its spirit and letter. Pension funds should be able to rely upon their key advisers to do so and therefore I urge the consultant community to reflect upon the evidence in our survey, which demonstrates the importance attached to stewardship by pension funds, and respond accordingly.”
Comments