Pension funds slam calls for annual voting

City A.M. Reporter
BRITISH pension schemes with more than &pound;50bn in assets have sharply criticised a call by other major institutional investors for annual re-election of all directors at listed UK companies.<br /><br />BT Pension scheme fund manager Hermes, and the universities pension fund USS &ndash; which manages &pound;21.7bn in assets &ndash; said a move to put the entire board up for a vote at each annual meeting would be short-termist and distracting.<br /><br />Last week, Norges Bank Investment Management, which holds 1.75 per cent of UK stocks, said a move to annual re-elections would bring &ldquo;proper accountability&rdquo;.<br /><br />Legal &amp; General Investment Management, the UK&rsquo;s largest institutional investor, has also called on board directors to face annual votes.<br /><br />&ldquo;Annual re-elections are potentially distracting to the board, (and) create instability and additional work for the shareholders without any material benefit. So it&rsquo;s not a good idea,&rdquo; said Colin Melvin, chief executive of Hermes Equity Ownership Services.<br /><br />Hermes EOS is part of the London-based fund firm which manages the BT pension fund&rsquo;s more than &pound;30bn in assets.<br /><br />Melvin noted that unlike in the US, shareholders in the UK can convene an extraordinary meeting to oust a director if they have the support of other investors.<br /><br />Daniel Summerfield, co-head of responsible investment at the Universities Superannuation Scheme (USS), also backed the existing rules.<br /><br />&ldquo;We believe an annual re-election could engender a short term outlook amongst both shareholders and directors,&rdquo; Summerfield said.