Time for pension funds to control executive pay‏

Paying for the bail out of bankers is the reason for cutting the incomes and pensions of UNISON members we are told. This is even more ironic when you consider that over a million UNISON members held shares, via their pension and savings funds, in the same banks.

A double hit then…..we owned the banks, they caused the recession, we bail them out and our incomes are hit to pay for it. How can this be?

Paul Myners, the Minister for the City put it like this…."Disengaged investors lead to ownerless corporations and the risk of unaccountable executives and boards running amok."

The failure by institutional investors, that’s fund managers to you and I, to scrutinise and monitor board decisions and hold management accountable have been a major contribution to the upsurge in Directors pay, particularly in banking.

Fund managers have the power to move markets, to intervene in companies and influence decisions that can have either positive or negative effects for millions of working people. Any organisations wielding such great power should be required to account for their actions.

Pension fund trustees need then to re-examine relationships with fund managers and hold them more accountable. Are the fund managers they employ too close to those they are expected to monitor?

Should our trustees hand over the voting rights of our shares to the fund managers? It’s our money after all!

The least we should do is ask our trustees who is responsible for voting our shares and report back on the way they were voted, particularly on Directors pay.

But if the trustees are managing our money, shouldn’t we empower ourselves as well? We can start be having a read of the TUC’s fund manager voting survey; it tracks the voting records of some of the largest fund managers in the UK. http://www.tuc.org.uk/extras/fundmanager2009.pdf

The 2009 TUC report which reviews fund management voting records at company AGMs highlights two interesting points.

Fund managers do not appear to have had a particular issue with remuneration arrangements at UK banks, as votes on the banks’ remuneration reports are not out of line with those at other companies.

Only a single investor in the report – Co-operative Insurance Society – opposed the RBS acquisition of ABN Amro, which is blamed for the bank’s collapse. All other fund managers voted in favour.
So the lesson for us is clear – make sure you know what is happening to your money.

Our money savings are invested in shares, those shares give us the right to vote at company AGM’s, on the company strategy and on the directors pay.

We should not give away that right to the fund managers, we should tell them how to vote, and then we can have a chance to curb the excesses of directors pay, the trustees should at a minimum report to us on how our shares were voted.

We can’t afford to be fooled again.