Minister pledges more power for trustees to vote own shares

Writing in a foreword to a report by the Association of Member Nominated Trustees, Guy Opperman wrote that he was “determined to bring about real change” on the issue of schemes being unable to vote shares held on their behalf.

With intermediated securities like those held in pooled funds, asset managers rather than asset owners are usually named on share certificates and other documents.

This limits schemes’ legal right to engage with companies, although a Law Commission consultation last year set out to investigate the issues further and is now in the policy development phase.

Mr Opperman wrote of his frustration, having imposed new duties on trustees to justify their stance on environmental, social and governance risks, that some are clearly still unable to take meaningful action.

“We have held trustees to a standard commensurate with their role in the financial system, and in society more widely. However, they are not the only actors in the investment chain — fund managers also need to step up and to play their role, for their clients,” he argued, agreeing with the recommendation of a Department for Work and Pensions-led working group.

The statement of support is a change of direction for Mr Opperman, who has previously taken a harder line on trustees complaining of their limited influence.

In November 2019, the minister gave a speech urging trustees to leverage their power of supply and demand to realise the change they want to see.

“Remind me, who hired the asset manager?” he asked. “You as trustees are far from limited in what you could do — put simply you could fire them. You have a great deal of power.

“If trustees think they cannot do anything, where do they think the power lies; and also, what are they doing in their job?”

However, the AMNT and others have long argued that firing managers does not work when fund houses refuse en bloc to implement work-arounds.

The new report, written for the AMNT by Iain Clacher, professor of pensions and finance at Leeds University Business School, finds that barriers, such as cost and technology, exist but are not insurmountable, with the main reason for inaction being manager reticence. Managers, for their part, have previously argued that their power to influence companies is diluted when they are forced to split funds into distinct stewardship stances.

Janice Turner, founding co-chair of the AMNT, said: “Fund managers whose policy falls far short of what is needed have refused to accept their clients’ policies, and failed to align their own with that of their clients. There is now a clash between the asset owners and the fund managers over who should direct the voting policy of the investments.

“This is an untenable situation that requires immediate attention, especially given the new, greater regulatory obligations placed upon trustees. Power needs to shift from fund managers to pension funds, and I am confident that the proposed working group can help to make this a reality.”