Do trustees risk creating a 'dangerous illusion' about member voting input?
Pardon the Interruption
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Giving members a 'vote' is a dangerous illusion that the industry needs to be wary of, professional trustee firm PTL has said.
The pensions industry should "proceed with caution when it comes to giving members’ the illusion they have voting rights on the shares in their pension schemes", the firm argued.
Managing director Richard Butcher said that while voting is much talked-about at the moment, "when it comes to giving members a sense they have a say in those votes it becomes far more complicated and we risk creating a dangerous illusion for them".
Butcher said stewardship is investors' chance to influence companies, not least to make them become more sustainable. "But, and it’s a big but, most schemes invest in pooled funds which presents two critical challenges that are hard for trustees to overcome. First and foremost, due to intermediation, schemes rarely have ownership rights and are often several steps removed from the actual legal owner. Then there’s the issue of scale; a handful of schemes may command the attention of the managers, but the majority, in isolation, will not," he said.
The ability of most schemes to influence is therefore "pretty weak", he argued, questioning also the effectiveness of the threat of divesting from the manager. He said rather than creating illusions of power, trustees should focus on demonstrating to the members that their investments are doing good.