With its investments in the Polish public equity market already amounting to €900m, representing approximately 2% of total Polish equity market capitalisation as well as 6.2% of free-floating capital, ING Nationale Nederlanden Poland OPF (ING OPF), the Warsaw-based Polish pension fund of Dutch financial group ING, announced in May 2004 that it would publish its Code of Corporate Governance. The code, effective from 1 June, is available on ING OPF’s website and consists of four building blocks: an introduction – detailed description of investment and governance targets; code of best practice – a reference to OECD principles; ING OPF’s standards – specific voting policy, and ING OPF’s commitments – disclosure of voting records.
One of the focal points of the code is ING OPF’s commitment to register and publicly disclose its full voting records covering all shareholder meetings it attends. All voting records will be disclosed on an annual basis before 31 March of the following year and will be available on ING OPF’s website. Since the code became effective, ING OPF has already attended and cast votes at 23 shareholder meetings.
Taking into account the significant growth of ING OPF’s assets under management and corresponding influence on the corporate policies of its holdings, the fund found it necessary to revisit its internal corporate governance procedures. The transparency and predictability of its corporate actions and voting patterns remain the main principles of the code. This explains ING OPF’s decision to publish its rules and procedures as well as publicly disclose its voting records. This procedure can also be considered a step towards fulfilling its fiduciary duties and responsibilities towards its clients and other stakeholders.
Having voting and governance policies publicly available is of particular importance in a market like Poland where most of the listed companies either have an international strategic investor holding more than 50% of their capital or are yet to be fully privatised, with the Polish government retaining a significant stake or influence in them. ING OPF currently holds stakes of more than 3% in 28 companies, of which it holds more than 5% in 17 and 8% in a further seven.
The code provides detailed voting principles in three main areas, which are more often than not submitted for shareholders’ approval: acceptance of stock option plans; issues connected with takeovers, and issues connected with the equal treatment of stockholders’ rights.
As an example, the code stipulates that ING OPF will vote against stock option plans that anticipate an issue larger than 5% of the total outstanding shares or issues with a minimum exercise price that is lower than the prevailing market price at the time of granting. It is common practice in Poland to arrange management stock option plans with a stock price that is significantly below the market price. ING OPF feels its opposition to practices of this type may prove effective as generally 80% of votes are needed to pass such plans at the moment. The code also anticipates voting against any measures or plans aiming at hindering the potential takeover of underperforming companies.
ING OPF says its initiative has been warmly welcomed by the local financial community, the supervisory commission and, in particular, local corporate governance activists. As the code seeks to enhance the transparency of governance execution, ING OPF believes its move has been regarded by some as an early example of the success the Polish pension fund industry would like to see in achieving greater transparency in Poland’s overall financial markets.
Thus far, the fast growing domestic Polish pension fund industry has invested nearly €3.8bn in Polish equities, which amounts to some 25.3% of the Polish equity markets whilst Polish-based pension funds hold significant double-digit stakes in many listed companies there.
Two months following ING OPF’s announcement, the Polish Insurance and Pension Funds Supervisory Commission (KNUiFE) issued a statement recommending that Polish pension funds prepare and implement their own rules of corporate governance. KNUiFE believes these codes should be made publicly available as well as be aimed at boosting the transparency of pension fund activities in that area.
As mentioned above, ING OPF has already attended 23 shareholder meetings since the code became effective in June. Four of these involved the election of supervisory boards, five involved proposals to amend that particular company’s own legal framework and two involved voting on stock option plans.

Highlights and achievements
ING OPF’s proactive policy regarding transparency and publishing its code of practice online have already led to the Polish pensions industry watchdog to call on other domestic funds to do the same and many see it as a positive step towards enhancing transparency in the Polish financial markets overall as well as fulfilling its fiduciary responsibilities.
Crucially in a market like Poland, where foreign ownership of shares is high and the government retains a strong influence over partly privatised companies, ING OPF has used its influence as a shareholder and position as one of the country’s fastest growing pension funds positively rather than abusively. Responsibly voting on stock option plans and making its own voting records publicly available will instil confidence in the growing Polish pensions market and aid its future development. Moreover, publishing investment targets and performance will allow members to see how their investments are developing.