UK - Almost half of all UK pension funds intend to spend more time scrutinizing the actions of fund managers on engagement issues in the future, as 93% of schemes currently delegate engagement tasks to managers or third parties.
Findings from the National Association of Pension Funds (NAPF) 2009 Engagement Survey revealed of the 49% planning greater focus on engagement issues, 78% said they will concentrate on reviewing reporting as 56% of the survey's respondents felt manager reporting could be improved.
Meanwhile, at least 57% of those polled predicted there will be increased attention to the votes cast by managers as in the past two years only 38% of schemes have asked managers to review how voting instructions have been implemented, although only 13% suggested they would spend more time telling managers how to vote.
In 2009, however, general voting records remained high among the 45 respondents, who manage assets totaling nearly £200bn (€235.6bn) as, in addition to voting at UK company meetings, 93% exercised voting rights in the US, 88% did so in Europe, 69% engaged in Japan and 57% voted in companies based in emerging markets countries.
The survey of engagement policies in pension funds also revealed the majority - 93% - delegate at least some of the engagement tasks to investment managers or third parties, while 44% prefer a policy of direct engagement, particularly among larger schemes.
However, the findings suggest 62% of respondents felt competing work priorities was a barrier to greater levels of engagement, and 59% cited a lack of relevant skills, while a further 54% said they were concerned about the cost implications of greater engagement.
This is even though 70% of respondents felt engagement was effective in changing company policy in at least one of four key areas - board membership, company strategy, remuneration and social/environmental policies.
The figures did, however, show that despite 51% of schemes stating the Institutional Shareholders Committee (ISC) statements of investment principles had been included in contracts with investment managers, 42% admitted responsible investment policy does not and will not in the future affect manager and consultant selection.
David Paterson, head of corporate governance at the NAPF, said: "Our survey demonstrates that pension funds are increasing their focus on engagement policies. They have an inherent interest in the companies in which they invest being run well given their long-term objective of being able to meet the pension promises of their members."
However, he admitted there is "more work to be done to ensure that pension funds improve the effectiveness of their oversight of both their investment managers and the companies in which they invest."
Elsewhere, figures from the Trade Union Congress (TUC) 2009 fund manager voting survey revealed the "vast majority of institutional investors did not challenge the remuneration reports of leading banks" in the run-up to the financial crisis in 2008.
The survey, which received only a 40% response rate, revealed only one investor - the Co-operative Insurance Society - voted against the takeover of ABN Amro by Royal Bank of Scotland, seen by many as one of the main reasons for the bank's financial trouble.
Findings revealed differences in investors' general approach to boardroom pay, with six of the 23 respondents supporting every remuneration report covered in the survey while six supported less than half.
Incentive schemes also revealed a similar gap, as eight managers were found to support all schemes and eight opposed the majority.
Although almost three-quarters of the respondents now make some voting data publicly available, the TUC claimed the information provided is of "varying quality".
Brendan Barber, general secretary of the TUC, said: "The theory is that in modern capitalism company boards are accountable to their owners, the shareholders. But this is far from what actually happens. Instead share owners - mostly ordinary people saving through their pension funds - have no say."
He argued the fund managers who are meant to exercise ownership rights and responsibilities "often fail to do so. What is worse is that many will not even tell the unions that represent thousands of pension fund savers whether or how those ownership responsibilities were exercised".
"The tragedy is that this system has been tested, with the result being the near destruction of the global financial system. In practice, big banks were accountable to no-one, their boards free to chase big bonuses without any regard to safeguarding the long term interests of their share-holders," added Barber.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com
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