Monopolising shareholder votes is dangerous, warns Aberdeen
GLOBAL - Companies offering shareholder engagement must be careful not to monopolise institutional clients' votes, despite engagement services overall being positive, according to James Laing, deputy head of UK and European equities at Aberdeen Asset Management.
Commenting on the ongoing trend of outsourcing the execution of shareholder voting rights, Laing stressed that shareholder engagement platforms were "a good thing in principle".
"But there is a danger in monopolising such advice and the vote going with it - just imagine the majority of institutional investors predictably voting one way or the other," he told IPE while attending a conference in Vienna last week.
"This could lead to voting platforms being subject to conflicts of interest or manipulation if there is not a very clear code of independence," he cautioned. "Ultimately the fund manager who knows the underlying businesses should take responsibility for voting," Laing added.
He urged trustees to get advice on these issues but "then make up their own minds".
Laing feared that some of the service providers were "not giving enough value to the economic fundamentals and the health of a company" and "perhaps adopting too much of a pure corporate governance 'box-ticking' approach".
He confirmed that Aberdeen itself was executing its voting rights globally and was "trying to ensure that remuneration policy is in-line with the long-term strategic goals of the company".
"Anyone can fudge a number short-term that is why we are calling for a significant proportion of bonus payments to be deferred," he said, adding, "Increasingly, fund managers are being rewarded in a similar way."
Laing said he already saw "a bit of a sea change towards more long-term remuneration goals" in companies.
"Additionally management boards are consulting investors more widely on issues ranging from remuneration to dividend policy," he pointed out.
Laing thinks "ultimately the fund managers need to act as trustees of their investors' assets and ensure management acts for the long-term benefit of the company rather than for their own interests".
Speaking of long-term outlooks Laing noted that many institutional investors "who should be the ultimate long-term shareholders are acting more like day traders rather than business owners."