LONDON (Reuters) - Some asset managers sided with company managements too often in contentious votes at annual general meetings last year, according to campaign group ShareAction which suggested they were not fulfilling stewardship responsibilities to clients.
But the fund firms defended their positions, saying that - unlike many investors - they engaged with companies throughout the year to ensure boards were held to account.
Since the financial crisis, politicians and regulators have sought to encourage asset managers to be better stewards of the shares they manage on behalf of clients, to ensure companies are well run and maximize returns for investors.
While the number of votes needed to vote down a company resolution can vary, the actions of the asset managers is crucial as they often hold quite large blocks of votes.
ShareAction, a shareholder activist group, compared the records of Britain’s 33 largest fund firms - which manage 13.8 trillion pounds in assets - in a series of “controversial” votes, defined as resolutions put forward by UK companies that attracted more than 30 percent of dissent among investors.
Nine votes saw that level of opposition in 2014, and ShareAction chose the eight that related to pay or board composition.
It found a wide spread of votes among the asset managers.
But it highlighted that six asset managers, including M&G (PRU.L), Hermes Investment Management and Aberdeen Asset Management, were found to have backed company managements in most of the votes, “despite apparent problems with the proposed resolution”.
“Our survey suggests a wide range of big names in asset management aren’t exercising their stewardship responsibilities at some of the world’s biggest companies,” said ShareAction Chief Executive Catherine Howarth.
At the other end of the scale, however, some asset managers, including Columbia Threadneedle Investments, Alliance Bernstein, Aviva Investors (AV.L) and Goldman Sachs Asset Management, opposed management or abstained in each of the eight votes.
Hermes said it voted at more than 10,500 company meetings in 2014 and engaged with more than 400 companies in more than 50 countries. “Our approach to engagement, including voting, as directed by our clients is with the objective of achieving beneficial change, not to mount a campaign or ‘box tick’,” said Executive Director Leon Kamhi.
M&G also said it preferred to engage with companies before potentially voting against them, if needed. “Successful stewardship is not demonstrated by the frequency of votes against AGM resolutions,” a spokesman said.
Paul Lee, head of corporate governance at Aberdeen Asset Management, said: “We are prepared to be tough when we believe a company is doing the wrong thing or when change is required, be that in our regular discussions with management and the board or at the AGM.”
Editing by Pravin Char