UK mulls mandatory disclosure of institutional share voting

The UK government is considering forcing institutional investors to disclose how they vote at company annual general meetings (AGMs). In budget documents published last week, the government said that it would examine whether the existing institutional investor voting disclosure regime “should become mandatory” as provided for in the Companies Act. It said a review of current voting requirements would be part of work the Financial Reporting Council is doing to develop a Stewardship Code for investors, one of the key recommendations of last year’s Walker Review on governance at UK banks and financial institutions. Speaking at an International Corporate Governance Network (ICGN) conference on March 25, Lord Myners, UK Financial Services Secretary, said: “This has the potential to improve the overall transparency framework, and ensure that institutional shareholders – as is only right – be accountable for the voting decisions they take.” The government is also to consult on the role pension funds and insurers have in setting pay in the financial services sector. Myners said: “Given the key role that owners should play in managing remuneration contracts, the government will consult on whether further practical measures can be identified to facilitate the consent, by owners, of executive remuneration in thefinancial services sector. We intend to ask questions about the limitations of ex- post votes on ‘say on pay’ and to explore ex-ante options which could, for instance, require prior approval from owners; getting input from owners to remuneration and nomination committees in certain circumstances; and putting compensation consultants under a clear liability to the owners.”
Myners said there would be considerable resistance to voting disclosure – and that he has personally written to asset managers about how they reflect client interest with regard to bankers pay. The responses are scheduled to appear shortly on the UK Treasury website. Myners has also instructed UK Financial Investments, the body which manages the government’s stakes in bailed-out banks, to publish all its voting records.
Alan MacDougall, managing director of PIRC, a UK proxy voting group, said: “The current voluntary disclosure regime is not working. A number of large institutions still refuse to disclose, and the variety of approaches amongst those that do disclose results in a mess of data that is hard to make sense of. A mandatory regime, requiring standardised disclosures, would work for the benefit of beneficiaries. The current system works only for providers.”