Investors differ on disclosure

As part of its 400-page report examining executive remuneration, the Productivity Commission last week proposed that institutional investors including superannuation funds disclose how they voted on remuneration issues put to shareholders at company annual meetings, suggesting the information be provided at least once a year in the format of the institution's choice.

It said such a move could encourage more institutions to vote, potentially boosting board accountability and "engagement" between boards and shareholders on remuneration matters.

"The likely consequential increase in voting would be consistent with the fiduciary duty of institutional investors to their members," the commission noted. "Voting disclosure might also lead to more informed [potential] investors. This could influence their decisions about which fund they wished to invest in."

But Association of Super Funds of Australia (ASFA) chief executive Pauline Vamos said such a move could increase costs as funds were under pressure to reduce fees. She said AFSA members already disclosed their voting policies.

"The cost burden eventually has to be paid for by members," she said. "Whether to disclose how you voted, and the policy around that and the reasons for that must be a matter for the trustee we have got to be careful not to have a one-size-fits-all approach."

Members of the Investment and Financial Services Association (IFSA) which mainly represents retail super fund managers are required under its charter to vote on all resolutions, and a spokesman said further regulation was not needed.

But David Whiteley, executive manager of industry super funds group Industry Super Network, said disclosure of votes was probably inevitable in the long term. "I think it's inevitable that major institutional shareholders will be required to vote and once that requirement comes in, they will therefore be required to disclose how they voted," he said.

"I think it's something that will happen globally you have got major institutional shareholders holding shares for people's retirement savings, and there's a strong correlation between good governance and company performance."

Information provided to the commission by the Australian Council of Super Investors (ACSI) which advises super trustees on corporate governance-related voting shows average voting participation in Australia for ASX200 companies is about 55 per cent, up from 35 per cent five years ago.

Chief executive Ann Byrne said she did not "see a problem" with disclosure of voting records.

"I don't think it's an issue," she said. "Having worked at a fund where we started to disclose, it did take us a while to work out how we were going to do it. It is a cost in setting up the process . . . most funds will do it on their website."

The commission acknowledged that the compliance burden of voting disclosure would be the "primary disadvantage" for institutional investors, who may vote on resolutions across hundreds of companies. But it felt the cost could be reduced by requiring disclosure only on "key" resolutions such as remuneration reports, and for the reporting to occur through the institution's website.

Some super funds, including AustralianSuper and UniSuper, already provide detailed voting records on their websites.