Fund managers have moved to head off the Government’s threat to force institutional investors to reveal how they vote at company meetings by drawing up their own voluntary code of practice.
Treasury Economic Secretary Ed Balls said in a speech t the London Business School last week, that the Institutional Shareholders’ Committee, which represents leading investment and pension fund managers, had agreed to devise a code that will see its members disclose how they voted or explain why.
Balls said: “These changes represent real progress but more can certainly be done, for example, to further strengthen shareholder engagement and the effectiveness of trustee decision-making.”
The Government acquired the powers to enforce disclosure under the recent Companies Act. However, the Investment Management Association has slammed the move, saying it will add to fund managers’ costs and increasing numbers of its members are now disclosing their voting.
Shareholder activism from leading fund managers, including Fidelity and Legal & General, has blocked various board appointments, pay deals and takeover plans at blue-chip companies including ITV, Marks & Spencer and GlaxoSmithKline, among others in recent years.
An IMA spokesman says: “It should remain a voluntary system. Managers have already begun to disclose their votes anyway, with more announcing that they plan to do so on their websites.
“Disclosure is costly, as it can be a prolonged process to ensure a managers’ vote is cast. They need to be passed down through lots of channels from the custodian to the registrar, and there is often an issue of lost manager votes.
“More important, it can also create conflict within a company as the majority of a group may vote against the manager of that company, which could bring out a potential conflict that may not be there.”