NETHERLANDS/EUROPE - Pension funds have a responsibility to help keep banks on the straight and narrow, says Neelie Kroes, European Commissioner for Competition.
Kroes made her remarks last week at a symposium on responsible investing organized by APG, the asset management daughter of giant public pension scheme ABP.
In their role as shareholders, pension funds can call financial corporations on their behaviour at a much earlier stage than the European Commission, as the Commission can take action only after court approval, Kroes said. Therefore she calls on pension funds to waste no time to confront and denounce corporate misbehaviour in corporations they invest in.
In this regard pension funds should give voice to the concerns and interests of the 'average Joe', according to Kroes: "Think of it as the Dutch version of the ‘Main Street versus Wall Street' debate," she continued, offering that the Amsterdam business quarter ‘Zuidas' might be considered the Dutch version of Wall Street.
Ironically, the symposium also marked the festive opening of APG's new quarters in the Symphony office building located on - of all places - the Zuidas. Kroes' remark touched a nerve by calling attention to the ambiguous position of pension managers, who on one hand serve as responsible investors and guardians of the public good, while on the other hand they themselves belong to the maligned financial sector.
The fact that APG's new offices are under a cloud has not escaped APG chairman Dick Sluimers: "We're only three tube stops from the Bijlmer Prison," he joked. However, he assured the audience that APG did not have a thing to do with the office tower's development or any of the shady deals involved. The pension manager merely rents office space.
Office space that befits a responsible investor, as the Symphony tower carries energy label A, marking the building highly energy efficient and thus ‘green'. In addition the move from APG's previous offices at Schiphol signifies what Sluimers calls "an appropriate bit of economising," as the pension manager has "moved from offices equipped with their very own airport to offices equipped with a bicycle rack."
Whether bike riding investors can be expected to realise higher returns than investors travelling by plane remains to be seen, according to Sluimers. "Extensive scientific studies have failed to produce evidence that responsible investing produces better returns." But if SRI doesn't help, at least it doesn't hurt, he argues: "The cost of doing good is zero."
Sluimers took the opportunity to introduce APG's new director of asset management, Angelien Kemna, and to announce that APG intends to "intensify" its SRI (socially responsible investing) efforts.
This means that APG will "step by step" pay closer attention to good corporate governance but also to remuneration policies, he explained, "including remuneration practices within APG."
Whenever people receive a relatively large performance related compensation package in addition to a base salary, this increases the chance that they will "do things that are not very good from a risk management perspective," Sluimers said, "and this holds true both for the firms we invest in and for our own firm."
APG therefore explicitly denounces overly flexible and aggressive remuneration policies. "This is why we have voted against remuneration practices at Philips and Shell," says Sluimers. "We will increasingly take a stand against these practices and not only in The Netherlands."