Two of the UK’s largest pension schemes have established a forum for global investors to address the issue of cross-border shareholder activism and corporate governance.
The Universities Superannuation Scheme (USS) and Railpen are consulting with schemes worldwide to push forward shareholder voting across borders.
In light of the growing awareness that there are serious governance concerns in the US market which directly affect UK pension funds, the two schemes recently commissioned a study to uncover the extent to which UK institutional investors are active on corporate governance issues with their US investee companies.
Residents of the UK were the largest overseas portfolio investors in US long-term securities as of March 31 2000, holding more than $321bn (E263bn) in equity. The study revealed that UK pension funds and institutional investors are keen to “overcome the barriers to more effective engagement”.
In September, USS held a meeting of over 20 US and UK pension funds to discuss co-operation, and funds in Europe and Australia have since expressed interest in working together on an informal basis to overcome the difficulties of shareholder activism across borders.
“Already, some of the schemes have collaborated on a joint letter-writing initiative to the US Securities and Exchange Commission to draw attention to the flaws in the SEC’s proposed trigger mechanisms associated with access to the proxy highlighting the comparative ease in the UK system of appointing and removing directors,” says Frank Curtiss of Railpen.
A secure website is also going to be set up to enable interested parties to inform one another of developments in respective domestic markets and portfolio companies. “This is a kind of loose alliance which has been christened by some as the international forum for active shareholders,” says Curtiss.
CalPERS, the US’s largest pension scheme, and a large Dutch pension scheme are among the funds which have expressed an interest in working together.
“We think we may be waking up a slumbering giant – there is a desire and a will to do more,” says Curtiss.