Schemes poised for shareholder action at National Express Group

Shareholder action hit a peak in 2012, but has been less common since then as companies have sought to engage with concerned shareholders.

Their actions piled levels of risk on the US business that I found unacceptable

Kieran Quinn, GMPF

Greater Manchester Pension Fund, Islington Pension Fund and Nottinghamshire Pension Fund are all taking part in the action at the National Express Group annual general meeting tomorrow. The funds will be joined by UK-based trade union Unite and US-based union the International Brotherhood of Teamsters.

GMPF chair Kieran Quinn raised concerns with National Express Group around 15 months ago about its labour relations record. "Three or four months ago a colleague asked me to come along to a meeting and it was the exact same story," he said.

The fund then decided to pursue voting action. GMPF owns a 2.5 per cent stake in the group.

The resolution calls for the company’s safety and environmental committee to have a broader remit that would include human capital strategy and wider corporate responsibility. 

He added that concerns about the company’s workplace and labour relations policy were enough to pose a financial risk to the scheme, given the litigious culture in the US.

Concerns centre on the labour relations record of Durham School Services, a US-based subsidiary of National Express Group. “Their actions piled levels of risk on the US business that I found unacceptable,” said Quinn. 

In 2012, a report commissioned by unions Unite and the Teamsters claimed that Durham School services workplace rights policy “neither creates a higher standard than that required by US law, nor brings the company’s labour practices in line with standards promoted by respected international institutions”. 

Durham School Services could not be reached for comment.

A spokesperson for National Express said the group had the proper policies in place and had made significant improvements in safety and employee satisfaction.

"Safety and employee welfare is the responsibility of the whole National Express Board, but this special resolution seeks the highly unusual step of delegating responsibility to a subcommittee," the spokesperson said.

"We’re recommending that shareholders vote against it. National Express’s Workplace Rights Policy protects the right of all our employees to join or not to join a union.

"In the US, union membership has doubled in the last five years and we recognise 15 unions, three more than this time last year,” the spokesperson added. 

Greater consultation

Investor action reached a peak in 2012 with the so-called shareholder spring, when shareholders voted against remuneration packages for executives at companies such as insurer Aviva, bookmaker William Hill and bank Barclays.

“Things simmered down a bit last year,” said Leon Kamhi, executive director of Hermes Equity Ownership Services. “There may be the odd one that will come up this year, it’s difficult to predict.”

Kamhi said that companies were likely to look to consult with their shareholders to avoid “showdowns”.

“The right to file shareholder resolutions is very underused,” said Catherine Howarth, chief executive at responsible investment charity ShareAction. “This is the only one in the UK this year as far as we’re aware.”

In order to file a shareholder resolution the members filing must either represent 5 per cent or more of the total voting rights of members entitled to vote, or there must be at least 100 members who have each paid an average of £100 or more on their shareholding.

The motion is only the second put forward by GMPF in the last 10 years. The Local Authority Pension Fund Forum – which Quinn chairs – issued a voting alert in October 2011 highlighting concerns about media giant News International following the phone-hacking scandal.

However, Howarth predicted that as increasing numbers of UK pension schemes use passive tracker funds, shareholder engagement would become a crucial method of protecting value.

“Nest uses exclusively passive tracker funds so they use engagement because it’s the only way they can protect value,” said Howarth. “It’s the key way of protecting money for most pension funds.”

Despite this, Howarth said it was difficult to quantify the benefits of engagement as, even when companies make changes, they are often reluctant to attribute the changes to shareholder action.