EUROPE – Pension funds must strive to become more than simple "faceless investors", a corporate governance specialist at Dutch asset management giant APG has insisted.
According to Mirte Bronsdijk of the €316bn manager, it is important for institutional investors to create a situation where there is a mutual understanding that investment is "not about delivering the next quarter and preventing profit warnings".
Speaking in London last week at the National Association of Pension Funds' (NAPF) corporate governance conference, she noted: "It's about creating mutual trust also that, as a long-term investor, you've got to stick with them for the longer term and not try to push them in certain directions for the next couple of months."
"When discussing governance with one of the companies we are investing in, a board [member] said: 'I feel pressure from faceless investors. I don't know who my investors are because I don't see them, I don't have the discussions with them that I would like to have'."
Speaking on the same panel, Sir George Cox – board member at NYSE Euronext and formerly director general of the UK's Institute of Directors – insisted that companies were eager to engage with shareholders.
He said engagement was not simply a matter of applying pressure or dealing with remuneration, but communicating the risk of forthcoming strategies.
"The current engagement we're seeking isn't just policeman, it's a positive engagement [process]," he added.
However, Catherine Howarth, chief executive of charity FairPensions, noted that there was sometimes a conflict between engaging and keeping management costs low.
She said she had recently heard of a situation where an asset management company offering engagement lost a mandate to a rival with no stewardship function – as the rival's fees were a single basis point lower, sending a "fairly clear message" to the industry.
However, Bronsdijk once again stressed the importance of engagement, citing the approach Swedish companies often take by staffing nomination committees with their five largest shareholders, allowing them to be involved in issues such as succession planning.
"That demonstrates the right kind of pressure, where you don't try and push a company in a certain direction on the short term, but really sit down and build that relationship," she said, noting that, by influencing such decisions, shareholders could impact governance in the long term.
"This is a good way to give the institutional investor a face," she added.