Institutionals increasingly concerned about company remuneration – TUC
UK - Institutional investors are increasingly concerned about remuneration reports issued by UK companies and are most likely to oppose their management structure, a new survey has found.
According to the Trade Union Congress (TUC) fund manager survey, company directors' remuneration is the most common topic of engagement for pension funds in the UK, with half of respondents supporting less than half the remuneration reports on which votes were sought.
The TUC report - which included information from the Universities Superannuation Scheme, Railpen and British Airways Pensions Investment Management, among others - estimated that institutional investors were becoming increasingly supportive of shareholder resolutions to put restrictions on director pay and make new board appointments.
Brendan Barber, general secretary at the TUC, said: "Shareholders are supposed to be the ultimate check on our corporate system, but too many fund managers are still failing to use the power of their investments to influence corporate behaviour."
In addition, all five major UK-listed banks' remuneration reports were included in this year's survey for comparison, with three receiving the highest level of support from pension schemes.
Barclays' remuneration report received the most support of any in the sample, backed by three-quarters of respondents.
Barber said: "The fact UK bank remuneration reports received so much backing in the face of diminishing dividends and poor stock market performance is a clear sign institutional investors are not doing their job properly.
"Reform of our corporate culture is long overdue, and ministers need to take the lead in forcing through change, particularly on executive pay, where remuneration committees are frequently failing to act in a transparent and responsible manner."
According to the TUC, this year's survey also showed an improvement in the disclosure of voting records, which is "good news" for pension trustees and pension scheme members, as it "helps them to see how fund managers are using their shareholder mandate to influence companies".
Several respondents indentified changes made as a result of the introduction of the Stewardship Code a year ago, such as improved engagement record keeping.
However, the code has had very little effect on the voting stances taken by institutional investors and needs to be toughened up, the TUC said.
The code has drawn fire in recent months, with the independent adviser Paul Frentrop arguing that stewardship might be incompatible with the way pension funds invest.
Lord Myners said the UK Stewardship Code was a positive step in driving corporate governance forward in the UK, but that it was not enough.