IFSA members should vote on all company internal issues where they have voting rights, despite recent media speculation of a policy change, says chief executive Lynn Ralph.
The power of institutional voting has been the subject of much debate, with proposals to limit individual shareholder’s abilities to call special meetings.
Ralph pointed out that on a number of occasions, IFSA members had caused boards to take decisions in the shareholder’s best interests without attending meetings. Working behind the scenes, institutional shareholders had forced changes at both Coles Myer and AMP in recent times.
“In Australia, because the market is smaller institutions can work with boards to solve problems,” Ralph says. “IFSA members can use proxy voting to improve the performance of companies if necessary.”
“However, the most powerful tool in a fund manager’s war chest is the ability to sell the shares,” she says.
Ralph admits that IFSA needs to know more about institutional voting patterns and motives, so the association has commissioned research into the subject.
IFSA is opposed to mandatory proxy voting as the association can see no evidence of this leading to changed corporate outcomes, she says.
“Mandatory voting outcomes will increase costs and IFSA is not convinced this is worth the extra expense,” Ralph says.
The future of proxy voting by institutions could become more difficult due to the globalisation of companies. There is also the question of how institutions deal with the new economy, which has structures different to traditional organisations.
A number of tech stocks have boards where the independent director has significant shareholdings in the company and possible ownership of the intellectual property, perhaps the only asset.
“We have to look at risk and entrepreneurism in the new economy,” says Ralph.
“How we deal with independent directors is not in the same way as we did in the past.”
