Investment heavyweights revealed as UK’s most rebellious fund managers

Date published: 06 October 2018

Attracta Mooney

BlackRock, Legal & General Investment Management, Aviva Investors and UBS Asset Management have emerged as the biggest scourge of British directors.

The investment heavyweights are the most rebellious at annual meetings when it comes to holding directors to account on issues ranging from high pay to a lack of gender diversity.

Asset managers have traditionally been reluctant to vote against directors, taking aim at resolutions rather than individuals.

Figures from data provider Proxy Insight, however, show that the four asset managers have refused to support 7 per cent of directors’ elections in the UK so far this year.

The actions helped cement a trend where directors are under pressure at UK shareholder meetings. Boards at companies ranging from Royal Mail to British American Tobacco have suffered big rebellions on re-elections this year.

Sacha Sadan, director of corporate governance at LGIM, said the company took aim at individuals over issues such as overboarding, where individuals hold several posts, a lack of gender diversity or a failure to address concern over high pay.

“In the next year or two, votes against directors will increase. More investors will use their votes against directors rather than on specific resolutions [such as the pay report],” he said.

LGIM ranked as the biggest fund manager least likely to support a director’s re-election, according to Proxy Insight. It voted against 7 per cent of director re-elections in Britain’s largest 350 companies and 8.1 per cent in the wider UK market.

BlackRock, the world’s largest asset manager, Aviva Investors and UBS voted against in between 6.3 per cent and 7.7 per cent of director elections or re-elections.

By contrast, Franklin Templeton, Axa Investment Managers and T Rowe Price were among those least likely to vote against a re-election, dissenting in less than 1 per cent of votes.

Peter Reilly, director of corporate governance at FTI Consulting, said fund managers were targeting directors over any slow pace of change on core issues.

“Chairs of each key committee are in the line of fire. They are easily identifiable and have taken on additional responsibility. They are supposed to take an active role and to spur action in an active way. The threat of going to an AGM and being voted down would be significant for a director,” he added.

A report from Institutional Shareholder Services, the adviser to big investors, this month found that companies with a lack of gender diversity or poor remuneration practices were more likely to see higher levels of dissent on director re-elections in the UK.

It also found that there had been a rise in dissent over director elections across Europe. France, Belgium and Italy rank among those with the highest levels of dissent.

“The trend can be partly explained by a closer scrutiny of boards by investors,” said ISS, which added that shareholders’ ability to hold boards accountable was fundamental to good governance.

Mirza Baig, global head of governance at Aviva Investors, said the company used its voice as a shareholder to “oppose the re-election of individual directors whose conduct and decision-making falls short of our expectations”.

The number of resolutions on director re-election where at least 20 per cent of investors voted against rose to 80 in 2018 from 38 last year across the FTSE All-Share index of all quoted companies, according to a register compiled by the Investment Association.

Amra Balic, head of BlackRock’s Emea investment stewardship team, said: “We hold directors to account for their roles and responsibilities through engagement but if we have concerns that remain unaddressed we will withhold support from the re-election of these directors.”

Paul Clark, head of stewardship at UBS Asset Management, added: “We do not underestimate the importance of the role of a board director of a listed company.”

Source: FT.com

Link To FT.com: https://www.ft.com/content/3984cc54-815e-3c13-b59b-6b8deef930bb

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