James Moore: Funds have the power to stop malpractice
For managers to simply sell the shares of companies that misbehave is a copout
L&G's decision to take a tough line with the companies in which it invests is important because of its huge business running index tracker funds.
A tracker has to hold all the companies in the index. It can't pick and choose even if the managements of some of them behave badly. A tracker manager's only option to effect change and improve performance is therefore to use its power to vote down resolutions that aren't in the interests of shareholders at annual general meetings.
Active managers such as Fidelity or M&G argue that they can simply sell the shares of companies that misbehave. That represents a cop-out. Malpractice over issues such as executive pay is now so widespread they would have to sell off huge chunks of their portfolios if they were to do that in all cases.
Second, many big fund managers operate "closet trackers". These funds look very similar trackers because they hold a wide range of companies, but their managers have the option of taking big positions in businesses they like, reducing holdings in those that they don't.
Some argue that active fund managers should still make their votes count because that would improve practice across the range of companies in which they invest and generate better returns for investors in the long run.
- 1 Al Pacino on suffering from depression: 'It can last and it's terrifying'
- 2 Half of young women unable to ‘locate vagina’ and 65% find it difficult to say the word
- 3 Saudis risk new Muslim division with proposal to move Mohamed’s tomb
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Mexican woman becomes world’s 'oldest person' at 127
Perez Hilton apologises for publishing Jennifer Lawrence naked photo leak
Jennifer Lawrence 'nude photo hacker' claims there are hundreds more celebrity images to come
Victoria Justice on naked photo leak: 'Let me nip this in the bud right now – pun intended'
Saudis risk new Muslim division with proposal to move Mohamed’s tomb
Ariana Grande nude photos leak: Pictures are completely fake, say singer's representatives
Rotherham child sex abuse scandal: Labour Home Office to be probed over what Tony Blair's government knew - and when
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Ashya King: Parents of five-year-old boy refused permission to visit him in hospital and denied bail at Spanish court
With Douglas Carswell joining Ukip, my party has taken another giant step forward
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
iJobs Money & Business
£600 - £900 per day: Harrington Starr: Infrastructure Lead, (Trading infrastru...
£35000 - £38000 per annum + benefits: Ashdown Group: A highly successful, glob...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...