The vast majority of institutional investors did not challenge the remuneration reports of leading banks or the takeover of ABN Amro by the Royal Bank of Scotland (RBS) in the run up to the 2008 financial crash, the TUC reveals in its annual fund manager voting survey.
The TUC‘s 2008 fund manager voting survey analyses the voting records of 20 fund managers and pensions funds between July 2007 and July 2008, including votes on banks’ remuneration reports and the RBS acquisition of ABN Amro.
The survey shows that investors did not signal any great concern about remuneration reports at bank AGMs. HSBC was the only bank to receive less than 60% for its remuneration report from the survey respondents. The report received just under 82% support at its 2008 AGM.
The survey also shows that out of the respondents only one investor – Co-operative Insurance Society – opposed the acquisition of ABN Amro by RBS in 2007, which is now widely regarded as one of the worst deals in UK corporate history, despite receiving overwhelming support from RBS shareholders as a whole.
The survey reveals big differences between institutional investors in their general approach to boardroom pay. At one end of the scale six respondents supported every remuneration report covered in the survey while six of the respondents supported fewer than half.
A similar gap emerged in investor stances on incentive schemes. Eight respondents supported all incentive schemes in the survey and a further eight opposed the majority of schemes. Most of the respondents took the same position on both remuneration and incentive schemes, suggesting that they have a clearly defined stance on these issues.
But with fewer fund managers responding to the survey than in previous years, it is likely that those who take social responsibility and engagement seriously are over-represented in the responses.
TUC General Secretary Brendan Barber said: “The theory is that in modern capitalism company boards are accountable to their owners, the shareholders. But this is far from what actually happens. Instead share owners – mostly ordinary people saving through their pension funds – have no say.
“The fund managers who are meant to exercise ownership rights and responsibilities often fail to do so. What is worse is that many will not even tell the unions that represent thousands of pension fund savers whether or how those ownership responsibilities were exercised.”