Swiss pensions group questions 'mandatory engagement'

SWIZERLAND – The president of Switzerland's pension association has questioned the practicality of proposals that would force the country's funds to exercise voting rights on all domestic shareholdings – noting the inherent cost implications and difficulty in clearly assessing fund members' views on individual votes.

Christoph Ryter's comments come after ASIP, in conjunction with proxy voting company Ethos, business lobby group economiesuisse, first-pillar fund AHV and others published a new voluntary code of conduct on engagement covering all of the country's institutional investors.

The guidelines were published ahead of a plebiscite in early March that could see mandatory engagement forced on the country's pension funds, but not on any other institutional investors.

The Bundesrat has rejected next month's motion, saying it "overshoots the target", and the Swiss parliament has put forward a counter-proposal that would adopt many of the proposals, strengthening engagement, but leave voting voluntary.

"This voluntary engagement is precisely what's important for us," Ryter said.

He told IPE investors in Switzerland were closely monitoring costs and had therefore shifted assets into index-tracking funds.

"Therefore, it is important funds not be forced to engage with every single Swiss company in which they may have a minor holding," he said.

He noted that all steps leading up to a shareholder vote being cast were time and cost-intensive.

He added that, while investors may hire proxy voters, the plebiscite makes such an approach problematic due to wording that insists votes be cast in the best interest of a fund's individual beneficiaries.

"The question is, then, whether following the suggested voting line by a defined proxy voter will always be in members' best interest," he said.

He insisted that it was right for trustee boards to conduct their due diligence on companies and exercise their voting rights, but it was up to trustees to decide when a vote was cast.

"Voting does make sense when voting at larger companies AGMs – such as with Novartis, UBS and Credit Suisse – but we resist moves for a general, binding vote across all investments," he said.

Ryter said the new code of conduct for institutional investors, published last month, was not a direct reaction to the March plebiscite and stressed the importance of the guidelines covering all institutions.

He explained that ASIP was already involved in drafting a Swiss Code of Best Practice in Corporate Governance, which informed the new guidelines.

When the guidelines were announced last month, Dominique Biedermann, director of shareholder engagement platform Ethos, stressed that shareholder engagement was "mandatory" for investors when considering their responsibility to members.

The plebiscite, which is against "rip-off" director salaries at financial institutions, has received support from members of Switzerland's social democratic (SP), Green and Evangelical people's party (EVP).

ASIP previously voiced its concerns about the proposals, noting that the country's pension funds only owned around 6.5% of the Swiss stock exchange.