UK - The number of fund managers making their voting records public increased from just two in 2003 to 24 five years later, so the UK's Investment Management Association (IMA) has revealed amid calls for more effective engagement.

Figures from the IMA's fifth Fund Managers' Engagement Survey - which examines how managers engage with the companies they invest in - showed in the last five years the firms surveyed had increased their engagement and become more transparent.

The survey of 32 fund management firms, which manage around 68% of all UK equities managed, covers the two years to the 30 June 2008 and in particular looks at compliance with the Institutional Shareholders' Committee's (ISC) statement of principles.

Examples of seven "particularly contentious issues" between companies and shareholders were highlighted in the survey, and findings included that 21 of the firms had a total of 59 separate meetings with the Royal Bank of Scotland about its rights issue in 2008.

In addition, 14 of the 32 firms confirmed they held a total of 28 meetings with Bradford & Bingley, of which 17 were held with the chairman, to discuss the company's financing.

On issues of transparency, the survey showed all of the respondents have policy statements on engagement, with 28 of these publishing them on their websites and the remainder making them available to clients on request, while all firms report to their clients on the issue.

The findings meanwhile suggested all firms vote their UK shares in a considered way, with different approaches used by firms to the same issues, while the number of fund managers making the voting records public has increased from two in 2003 to 24 in 2008.

Richard Saunders, chief executive of the IMA, suggested the survey demonstrated a "widespread commitment among fund managers to engagement and transparency", as it revealed the extent of the activity, which goes on with individual companies.

That said, he added: "It is also very apparent that corporate governance failings in banks, and the unwillingness of bank boards to engage with investors in scrutiny and challenge of strategy, were factors that contributed to the crisis. There are lessons for both boards and investors from this experience, which is why we are now engaged with our ISC colleagues in a review of the framework."

The findings of the survey were published following comments from the IMA chairman Robert Jenkins at the annual dinner on 19 May, in which he claimed the fund manager's primary responsibility is to their clients, and the main objective is to maximise returns within set limits and "not to maximise the quality of corporate governance across the kingdom". 

He said: "The pursuit of good governance may be a means to that end. Some managers believe so. Some do not. Some clients believe so. Some do not. But it is for the client to decide. Only the client has and should have the power to decide how his money should be managed."

However, following calls from Paul Myner, City minister to the Treasury, for more active shareholder engagement, Jenkins pointed out the challenge is to make engagement "effective", as in the past managers either "voted with their feet" or with their shares, but neither approach was particularly useful in forcing boards to change.

Jenkins therefore called on the investment industry to make its views on corporate management "more clearly known" and to be more vocal on policy issues, as in previous situations, for example regarding banking regulation, "we stood silent to our own detriment".

He also called for the investment industry to hold boards accountable for the failure of management, adding: "Let us put a body on the street when past engagement fails so that future engagement might better succeed. Voting a director down is likely to do more good for governance than all the Code revisions in the realm".

To aid the improved engagement, Jenkins called on the government to "remove obstacles real or perceived to acting in concert for this purpose", but warned against legislating for engagement and how it should be done, as it is the clients' money not the government's.

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