European funds join US shareholder proxy battle

Some of Europe’s largest pension funds have thrown their support behind a growing campaign by US investors to quash proposals by the US Securities and Exchange Commission (SEC), which they say could undermine their right to representation on the board of companies they invest in.
The funds, which are believed to include the £31bn (€46bn) Universities Superannuation Scheme, the second largest UK pension fund, are understood to have written to the SEC ahead of today’s deadline for submissions on the proposals. Many European pension funds have significant shareholdings in the US which would be affected by a ruling.
The main proposal being discussed by the SEC would allow companies to reject proxy votes from shareholders if they are seeking to nominate independent candidates to the board. The regulator has suggested that shareholders only be allowed to nominate board members if they have hold at least five percent of the company’s shares for a year.
It is also examining if on-line shareholder/management chat rooms might be a better method for investors to speak with companies on issues of concern rather than the process of non-binding resolutions, which some companies claim is costly and time-consuming.CalPERS, the giant $247bn (€181bn) US pension fund for Californian public employees, recently called for worldwide institutional investors to petition the SEC on the issue. The US fund said that lobbying for shareholder access to a company’s proxy materials in order to nominate candidates for board election was the most effective mechanism to protect shareholder democracy and ensure director accountability and long-term value creation.
The $86bn State of Wisconsin Investment Board and the $26bn Connecticut Retirement Plans and Trust Funds have joined CalPERS in writing to the SEC to oppose the proposed rule changes.
The US Council of Institutional Investors, the country’s largest shareowner-rights organization representing 130 public, labor, and corporate pension funds with assets exceeding $3 trillion, is also believed to have challenged the SEC proposals. It joins investors from the US Social Investment Forum and the Interfaith Center on Corporate Responsibility (ICCR), a coalition of nearly 300 faith-based institutional investors, representing over $100bn in invested capital.
The Universities Superannuation Scheme could not be reached for comment.