UK - Fund managers fail to take corporate governance seriously and conduct "mindless activism" simply to keep the government off their backs, Paul Myners claims.
The former Gartmore chairman told delegates at the recent Local Authority Pension Fund Forum in Bournemouth that – with only one or two notable exceptions – fund management firms did not even take their own corporate governance staff seriously.
The majority, he said, only had corporate governance policies out of “political correctness”.
Myners said the good majority of fund managers hoped corporate governance would “just go away” and described their corporate governance practices as “mindless activism”.
He noted that the core weakness of the fund management industry was that it failed to act as the surrogate owner of the companies it invested in – a point strongly endorsed by leading US corporate governance activist Robert Monks.
Monks, however, stressed that pension funds should also be putting pressure on companies.
He said: “Pension funds must act as owners to ensure that pensioners not only retire with enough money, but that they retire in a world that is decent to live in.
“With the leverage that pension funds have then they must set the standard.”
Other powerful figures also backed these views saying that well run companies will achieve better returns.
Whitbread chairman Sir John Banham said pension funds must “act like owners rather than speculators” – noting that with this sort of involvement many investors could have avoided the crises of the past.
Sir John added that while corporate social responsibility was perceived by many companies as a low priority issue, pension funds in the UK had enormous power to change this.
He said: “If it emerges that pension funds decided to invest in a company solely because of its attitudes towards corporate social responsibility then it would have a dramatic impact on the boardrooms of Britain.”
This week's top stories include ITS' management buyout from Mercer, and The Pensions Regulator launching a probe into single-employer defined contribution schemes' default funds.
People retiring in the UK will on average outlive their pension savings by 10 years, according to research by the World Economic Forum (WEF).
Steps to improve auto-enrolment are uncontroversial and obvious, but the government is dawdling on introducing the necessary changes, argues Jack Jones.
Professional trustees will be expected to apply for accreditation as part of a framework intended to be launched on 1 July by the Professional Trustee Standards Working Group (PTSWG).