'Protecting Our Best Interests: Rediscovering Fiduciary Obligation'

On Wednesday evening I went to the launch of the latest report by "Fair Pensions" the respected campaigning organisation for "responsible investment". 

"New research by Fair Pensions calls for an ‘enlightened fiduciary' model for institutional investors to parallel the new duties of company directors introduced in 2006. The report argues that such a provision would provide a valuable ‘nudge' towards sustainable, long term investment to overcome narrow interpretations of fiduciary obligation which emphasise profit maximisation at the exclusion of all other factors, including financial system stability".

Lib Dem Government Minister for "Employment Relations, Consumer and Postal Affairs" Ed Davey gave a positive but guarded welcome to the report. 

Hermes fund manager, David Pitt-Watson was also one of the speakers and gave his usual demolition job (how going dutch can double the value of the average Brit personal pension) on most private pension schemes.

He also pointed out that pension "trustees" came about historically to prevent pensioners from being ripped off and still perform this role.  I made a comment about this and the anomaly that if trustees are seen as a "good thing", why are there huge penison funds run by insurance and investment companies where there is no such representation to look after the interests of beneficiaries?

Our pensions under attack: organise now!

The latest leaflets from UNISON on pensions.  Double click to bring up details.

TUC Trustee Pensions Conference 2010: “Shareholder Resolutions”

This post is yet another very late "catch-up".  The  annual TUC Pension Conference is the "Trustee" event of the year.  It was held at Congress House in London on 22 November 2010 and was packed out.

I missed most of the morning due to a regional committee meeting and came in during the end of the Stewardship Panel Q&A. 

I then went to a workshop on “Shareholder Resolutions” led by Tom Powdrill from PIRC, the notoriously shy and retiring UNISON National Capital Stewardship officer, Colin Meech and Unite National officer, Jack Clarke (see above left to right).

Tom explained that in December 2010 fund managers must explain why not or publish their voting record at the AGM’s of the companies whose shares they “hold” on behalf of investors.

To be able to table a motion at a British AGM you need 5% of total voters or 100 x £100 nominal value (Nominal £10k). You must table this motion within strict time limits to prevent the company charging you the full costs of circulating details of your motion.

There have been 8 Environmental Social and Governance (ESG) motions in the last 5 years. Mostly led by trade unions. Warning that many companies see such motions as a confrontational tactic. So you should try and make it appear constructive? Not "anti-company". Instead of appearing to give instructions make suggestions. However, direct motions may well be the only realistic option if companies are being unreasonable. To get the vote out you must contact all major shareholders, investor representative bodies and meet them - preferably face to face.

But you must demonstrate you have tried to engage with the company first. Note fund managers generally vote against ESG motions. Even those who claim to be supportive of ESG principles.

The LAPFF "Marks and Spencer" motion against a combined company chief executive also being the company chair was a landmark occurrence. There had been significant engagement beforehand about best practice. Stuart Rose now says that it was his worse mistake (not to separate the roles of Chair and CEO). Marks and Spencer have now a separate Chair and CEO and comply with best practice. The panel were "disappointed" that L&G tracker fund managers voted against this (why on earth did L&G do this?) and that they had 4.5% share of the company. Remember that there is only usually 50% turnout of shareowners at AGM's.  So you can have a greater affect even if you only have control of a smaller number of shares.  The ESG motion on anti-trade union activities of First Group in the USA did result in significant change in company behaviour.

Colin talked about the Fair Pensions BP/Shell Tar Sands motions and the UNISON staff pension fund which helped bring it about. UNISON staff pension scheme has a broad screening programme such as not to invest PFI contractors.They cleared the proposed motion with the Canadian PSI trade unions beforehand. The motion fitted UNISON policy on climate change. It was crucial to get the support of the large American public sector funds. 45% global pension funds are in the USA. He reminded us all of the Freshfields legal opinion's that such “responsible” investment is a fiduary duty of Trustees. Colin recommended the book Hawley and Williams “The Rise of Fiduciary Capitalism”.

Jack Clarke pointed out that Unite spend 10% of their budget on organising. He talked about the Meat workers campaign. They gained 10,000 new members and 250 new stewards. A key issue was agency working. Agencies undercut permanent workers and exploited staff. The Union wanted equal treatment. They worked on a supply chain strategy. 85% of the meat market goes to retail shops. They pushed Tesco and other large UK retailers in a pincer movement, above (by share motions) and below (from workers). Tesco is a key market driver. They tabled a solution at the AGM with West Yorkshire Pension Fund on this issue. 11% shareholders voted in favour and 7% abstained. There was widespread press coverage. ASDA signed a deal with Unite for equal treatment in the UK and Ireland. 50,000 workers affected in the UK and gained parity of pay and were now usually made permanent after 13 weeks agency work. Lessons: Resource intensive; you need to have economic as well as morale case. Needs to be more active engagement with trade union trustees. It is vital to deliver bottom up pressure on fund managers.

Snow on the Bournemouth beach

I'm in Bournemouth for the LAPFF Pension conference.  It started snowing late last night and this morning before breakfast instead of my usual Bournemouth run along the beach in shorts and tee-shirt, I wrapped myself up with loads of layers and walked along the Pier and beach in hiking boots. It must be horrible for people travelling or working outdoors but I don't think I have ever walked along a beach in thick(ess) snow.  I'll post on LAPFF Conference later. 

World Day for Decent Work - Thursday 7 October

Today is "World Day for Decent Work".  Check out "BloggersUnite" for further details.

"WDDW therefore has three core messages for this year:

1) Growth and decent jobs, not austerity, are essential to beating the crisis and ending poverty.

2) Quality public services are essential for a decent life and must not be slashed in the name of fiscal consolidation.

3) The financial sector must pay for the damage it has caused and be made to serve the real economy and real human needs".
Let's see if Lord Hutton is going mark the occasion by making his interim report on Public Pensions due out at 08:00 today really fair and equitable (see next post).

Labour Party Conference 2010: ETUC Day of Action

Today is European Trade Union's Council "Day of Action" against spending cuts.

Across Europe there was lobbies and protests against cuts.  I missed a Lobby this lunchtime outside Manchester City hall, since I got the timings wrong. 

Local UNISON member Grant Higgerson (carrying placard) had been at the lobby.  Since he had taken the whole afternoon off to attend the rally he had decided to spend the rest of the time reminding Labour Party delegates and visitors about the importance of saving public pension schemes.  Grant is supported here by another trade unionist - from the NUJ!

Update: Picture of UNISON Bromley Health Branch banner at a ETUC rally.

Health SGE member Mike Davey on real left.

Council loses Court fight to duck Housing Association Pension obligations

This is an extremely odd story (to me anyway) and probably completely obscure to most folk. (Inside Housing 12 August). Daventry Council transferred its 3100 homes and housing staff to Daventry & District Housing Association. Despite there being an explicit clause in the transfer agreement that the Council will be responsible for making up the deficit in the (LGPS) pension schemes up to the point of transfer, the Council later went to the high court and claimed solicitors made a "mistake" and both parties were liable.

The High court kicked out the case on the seemingly very logical grounds that D&D HA had never made any plans to pay the deficit or put it in their business plan.

Apart from the legal arguments about who did and said what – there is a basic pension governance issue at stake. Why should a new organisation be responsible for a pension deficit run up before it even existed? Daventry Council before transfer would have had the legal responsibility for trying to make sure that the pension scheme (part of Northamptonshire LGPS) was properly funded and investments handled properly before transfer.

After transfer the housing association as an “admitted body” would then be “responsible” and it would be up to them to play its part in making sure that the scheme was run properly and they would liable for any funding shortage.

The impact on residents (and staff) in a small housing organisation of dealing with an unplanned £2.4 million shortfall could have been disastrous.

Yet another reason why staff members of pensions schemes (who are the real beneficial owners) should be fully engaged in all aspects of their governance.

Public Sector Pensions Commission Minitrue

More choking on my branflakes this morning listening to the latest rubbish on "Today" from the so-called "Public Sector Pensions Commission" - and it being called an "independent report"! 

Checkout out the TUC blog Touchstone for the truth of the matter.  The Institute of Directors are hardly impartial on this issue.

As pointed out elsewhere would the BBC refer to a report by TUC on bankers' pay as being "independent"?

UNISON NDC 2010: Defending the Local Government Pension Scheme

On Wednesday morning there was a debate on Defending the LGPS.  I posted about this excellent UNISON Labour Link leaflet on the threat to our pensions just before the General Election.

I hope those who claim there was "no difference" between Labour and the Tories are pleased with themselves.

Anyway, below is my speech on motion 18.  I tried to speak on amendment 18.4 which for some reason deleted the call for there to be a single LGPS pension fund in England, Scotland and Wales.  I got "bumped off" by a "point of order... for the question to be put" (went to an immediate vote without hearing all speakers) .

Here is my speech anyway.

 "John Gray, Tower Hamlets LGPS Representative, With Voting Rights!!

I speak from inside the pension machine – I’ve been a UNISON LGPS rep for 14 Years...I’ve watched fund managers come and go – at great expense to our fund....believe me on this

Conference there is going to be a Public Sector Pension Commission. It will look at the future costs of all public pension schemes.

The union needs a specific response to the Commission that deals with the funded element of the LGPS.

Just like the situation in Holland in 1996 when public sector pensions were under threat – what did the unions, employers and government do then? They created a new pension system for public sector workers.
1 fund, 12 sets of benefits, governed by 5 trade union reps and 5 employer reps,

Consultation committees for scheme members, pensioners and employers

That body then created its own fund manager, in-house, low costs, responsible investor, it’s now the 3rd largest pension fund in the world with one objective to pay the members pensions and not fill their own pockets and drive away in the latest Porsche

And conference in 2008 a study looking at reform of pension’s management for state workers in Ontario Canada said “lower investment fees are but one of the many advantages enjoyed by large plans over smaller ones and over individual savers.

Conference its clear, everyone who has tackle this question of costs looks to consolidate funds

In London there are 34 pension funds, all competing with each other, all with at least 8 fund management contracts each, pouring money into the pockets of the City traders.

Why 34 funds? They are an accident of History, a system well past its sell by date.

What counts is the economic power and efficiency when it comes to our funds.....anything less than 1 in each country will cost us money in lost fees and no economic power

Why not 5, why not 10 why not 20?

Because they cost us more to run, wasted money that we cannot afford to throw away now or for future generations

So I ask you to reject 18.04

Let us offer the coming generations a chance to thank us in the future..thank us for having the nous to help save decent pension provision for them

Give us the policy to move forward with a coherent and calculated set of demands...let us tell Pickles in a time of austerity we know how to save money