xyz Pension Scheme,
Stewardship and Engagement
I have followed with interest the developing debate on the obligations associated with the ownership of shares, which started with the Myners Report, continued with the Walker Report on the banking crisis and has culminated in the UK Stewardship Code. Most recently I have been reading coverage on these issues in the Financial Mail on Sunday.
It seems to me common sense that long-term owners such as pension funds have a duty to ensure the well-being of the companies in which they invest. The alternative is not very palatable: I am one of many to have lost money as a result of the shareholder value destruction that followed Marconi, the dot com bubble, and the banking crisis.
I would like to ask how seriously you are taking your stewardship obligations. I see that you have not so far signed the Stewardship Code and I would like to know why you appear to be less active than other pension schemes. I would be grateful if you could explain the reasons for this discrepancy and how my pension scheme intends to ensure that its stewardship responsibilities are carried out. In particular, do you recognise that the stewardship of assets under investment is an essential aspect of risk management? In this regard I would in particular draw your attention to the recent report by Tomorrow’s Company on Tomorrow’s Stewardship, Why Stewardship matters.
I would particularly like to know whether stewardship quality is an explicit part of this scheme’s criteria for assessing fund managers both in awarding mandates and subsequently. Also, I would be keen to understand how the scheme ensures that the pay of fund managers is structured so that they take the long-term view required for pension scheme assets rather than the short-term view so prevalent in the City. How often do you review investment performance? Is there a danger that the short interval between these reviews creates undesirable pressure on fund managers to trade shares rather than engage with companies to improve their performance?
I look forward to your reply.