July 19th - Pension Board, LAPFF AGM, UNISON HAB, West Ham Labour GC (Sarah Jones MP Shadow Minister Housing)

Belated report on a busy Labour movement day last Thursday 19 July.

I started the day with a quarterly meeting of the London Borough Tower Hamlets Pension Board as an UNISON appointed representative.

The £billion plus fund is doing well and we are planning to try and safeguard very significant financial improvements against any possible future stock market crash.

Afterwards I went to the AGM of the Local Government Pension Fund Forum (LAPFF) in Westminster with my Newham hat. I was late due to the Tower Hamlet clash but appreciated the touching tribute at the meeting to the former forum Chair, Cllr Kieran Quinn, who died unexpectedly late last year.

Kieran was a proper working class socialist who had a traditional grassroots trade union background but was also an effective Council leader, a tolerant and decent man who wanted to bring about change for the better. He is missed.

After LAPFF I went to my UNISON Housing Association Branch in Holloway to speak to staff and sign stuff as branch secretary. A member of our small team is now also a London Labour Councillor and Deputy Cabinet member for housing!

In the evening there was the General Committee meeting of West Ham Labour Party. We had Shadow Housing minister, Sarah Jones MP as our guest speaker.

Sarah gave a great speech and Q&A. She reported on the really welcome change in public opinion polls towards housing issues and that Labour policy is now 12% ahead of the tories (like the NHS).

Our West Ham MP, Lyn Brown, also joined in with the Q&A.

Afterwards a few of us retreated to the nearby garden of the historic Black Lion pub to rehydrate after a very long and hot day. 

#LAPFF16 Annual Conference - Thursday

This is the day 2 report of last weeks Local Authorities Pension Funds Forum (LAPFF) annual conference by John Walker, who is a UNISON member and sits on the Cambridgeshire Pension Fund Committee as a Member nominated representative. See Wednesday report here

Thursday morning commenced with a presentation on Share Buy Backs. The City Editor of the Evening Standard gave a broad sweep approach pointing out that Company’s often bought back their own shares for tactical reasons but said that this policy often benefited the Company and its Directors and not necessarily the Shareholders.

This was followed by a presentation by an American author Robert Tietelman who had written a book entitled ‘Bloodsport’ about Company Mergers, Acquisitions and Takeovers in the USA that had influenced the UK markets. He concluded that mergers and acquisitions meant growth for the Company involved whereas share buy backs did not.

This was followed by an interesting presentation entitled Human Capital Management by the Director of Sustainability of SSE one of the bigger Energy Companies. She outlined a whole raft of statistics showing how SSE was evaluating the performance and worth of its workforce under the banner of ‘A Responsible Employer’. As it progressed and developed the Company paid detailed attention to promoting redevelopment and retraining rather than redundancy. There was also a presentation by the Pensions and Life Savings Association focusing on the importance of Human Capital.

The final morning session was on Directors Pay – the Challenge of Quantum. The speaker was a Director of the High Pay Centre who had been giving evidence to a Commons Select Committee charged with the preparation of a Green Paper for Parliamentary debate early in the New Year. His statics proved that top pay fir Directors and more particularly Chief Executive Officers had grown out of all proportion in the past decade – and continued to grow. He sought (perhaps unsuccessfully) to justify this trend but pointed to checks and balances including the recent legal obligation of workers on Boards. He questioned whether a CEO should justify high pay on the basis of having the ‘final decision’ and whether that was justifiable or desirable. Predictably two of the questions from the floor mentioned PRP and professional footballers’ wages.

The afternoon session began with a session entitled ‘Are the Activists Winning?’ Owen Walker from the Financial Times had produced a book entitled ‘Barbarians in the Boardroom’ which related to shareholder activists that had mounted a challenge to targeting and removing some directors and executives from some of the world’s largest Companies and taken their places. Some Companies subsequently suffer asset stripping.

Next came thought provoking presentation entitled Redefining the Responsibilities of the Corporation. The speaker set out in great detail the responsibilities and duties of Company Directors whose main aim should be to create value on behalf of the Company and its Shareholders. He touched on the vexed question of executive pay and related to the inequality of the north/south divide quoting the outgoing HM Inspector of Schools about those ‘north of the Wash’ having less advantageous education. It was a semi-interactive session with audience participation encouraged.

The final session of the day entitled Shareholder Resolutions – the Last Chance Saloon brought together three unlikely bedfellows in the shape of LAPFF Chairman Kieran Quinn, a Climate Change expert and a representative of UNITE – the Union. The UNITE presentation centered on the recent success of Shareholders led by the Unions (including UNISON) who had forced major changes in the working practises, pay rates and Health and Safety implementation for staff of Sports Direct. Kieran Quinn related the success of the well documented campaign against National Express in the USA and the third speaker gave details of the pressure on Exxon Mobil and other American oil/gas Companies.

Sports Direct: Treating workers like dirt is bad for business (and investors)

I was pleased that UK Council leaders are supporting the resolution at the Sports Direct AGM next week for a review of its HR practices.

UNISON staff pension fund have backed this campaign via the TUC organised Trade Union Shareholders Organisation.

 

Both LGPS pension funds I am associated with have instructed their fund managers to vote in favour of motion 19.

 

If a company treats its workers like dirt there is a long term risk to investors. If you have workers collapsing at work since they are too scared to report sick if they are ill and female employees sexually exploited to keep their jobs then there is clearly a dysfunctional employer causing massive legal,  reputational (and moral) risks to any pension or insurance fund that seeks to invest in it.

 

If they do all this to their workforce then what else is going on? Fiddling taxes? Excessive payments to Executives? Faulty accounts? Corrupting public officials? Trashing the environment?

 

LAPFF press release. "Leading shareholder group, the Local Authority Pension Fund Forum (LAPFF), has backed a shareholder resolution at Sports Direct’s Annual General Meeting. The resolution calls for an independent review of Sports Direct International plc’s human capital management strategy and requests a report on the findings of this review to be released to shareholders within six months of the AGM.

 The UNITE union has filed the resolution after extended criticism of Sports Direct’s labour
practices. This criticism includes reports of severe health and safety violations and sexual
abuse at the Company’s Shirebrook facility in Derbyshire, as well as use of so-called ‘zero
hour contracts.’ The labour practice concerns have been coupled with a massive drop in share price over the last year and Sports Direct’s departure from the FTSE 100. Some commentators have alleged that the two issues are related.

According to LAPFF Chairman, Cllr Kieran Quinn, “LAPFF’s view is that responsible business practices by companies lead to sustainable returns for investors over the long-term. We are worried that this view is not shared by Sports Direct.”

In support of the resolution, LAPFF has produced a proxy advisory briefing which has been
distributed to its Member Funds. This briefing expresses concern that although Executive
Chairman and controlling shareholder, Mike Ashley, has committed to conducting a workplace review himself, this review would not be independent. LAPFF is further concerned that Sports Direct’s promise to have its lawyers, RPC, issue a summary of Mr Ashley’s report would just rubber stamp the Company’s version of affairs.

A Trade Union Share Owners statement has said: “The [C]ompany’s proposed review outlined in its explanatory note on its opposition to resolution 19 is to be carried out by an organisation that is not independent of Sports Direct and lacks relevant expertise in employment and industrial relations practice.”

Cllr Quinn stated, “LAPFF’s hope is that an independent human capital strategy review will
rectify any workplace practices deemed inappropriate and will help Sports Direct to move
forward from the reputational and financial damage it has suffered.”

The Sports Direct AGM takes place at its controversial Shirebrook facility on 7 September.

Engagement Panel at LAPFF14

The next item at the Local Authority Pension Fund Forum (LAPFF) conference was a panel on  "engagement" with Cllr Kieran Quinn GMPF, Chair Sir Merrick Cockell, Cllr Richard Greening LBI and Cllr Cameron Rose LPF.

Investor engagement is probably one of the most significant things that LAPFF does on behalf of its members. "By bringing local authority funds together to work collectively, the Forum is able to maximise their influence" .

Cllr Quinn started by pointing out how important it was for investors to engage and keep an eye on  all the companies they invest in - who would have expected Tesco's to have behaved in such a way? Trinity Mirror refused to accept that they had a problem with the Hacking scandal but all the information from "Hacked off" proved to be true. How could Barclay's justify giving three times as much money in bonuses as they returned to investors?

One of the most positive engagements he experienced was after the Rana Plaza garment factory collapse in Bangladesh when reputable companies were coming to us to explain what they had done and what they were planning to do. There was no investor rush to exist Bangladesh which would have not helped.

Sir Cockell pointed out that with engagement "you may lose the vote at Company AGM but still win the argument"

Vice Chair of LAPFF, Cllr Rose discussed the engagement he has had on Carbon risk with the UK major oil majors and the fall out from falling prices.

Cllr Geening talked about how engagement can take time and be difficult. Such as the lack of progress with National Express on their anti trade union activity in the USA. Management don't think there is a problem. However, it took time for similar issues to be dealt with at First Bus and engagement did eventually work.

I raised a question to the panel about whether they would support disinvestment in a company as a last resort if engagement failed?

The panel response was as a very last resort they would consider disinvestment but it would have to be at the very end of the road. The whole purpose of engagement is to change company behaviour and if we walk away from a company then it won't necessarily change anything.

There was a good point made about what would be the future of engagement if the LGPS was forced to invest only in passive (tracker funds) and therefore could never disinvest.

LAPFF Conference 2014: Public Funds & Public Purpose

Yesterday I came back from the Local Authority Pension Fund Forum (LAPFF) conference. I will post more on the conference later on.

It was I think the best attended LAPFF conference I have been to which reflects the huge changes and chellenges that the Local Government Pension Schemes (LGPS) faces and that membership of LAPFF is at an all time high.

The conference opened with a welcome from LAPFF Chair, Cllr Kieran Quinn Greater Manchester Pension Fund.

The Conference Chair was Sir Merrick Cockell, former Conservative leader of Kensington and Chelsea Council and the Local Government Association. He is now deputy Chair of LPFA. I found his remark that "No matter what your politics are you must be concerned about the under supply of housing" interesting.

He also said that we nationally need to invest in infrastructure for not only social purposes, but for sustainable and better returns than gilts & bonds. He believes the future is pooling & collective investments and you don't just need sovereign investment funds such as Qatar for such infrastructure & housing projects.

In the past Sir Cockell has publicly supported the merger of all 101 LGPS into just 5 funds and that this could result in some 300,000 new homes being built every year.

Next was a debate on LAPFF "engagement".

Future of the Local Government Pension Scheme - LAPFF at #Lab14

Still catching up on my posts from Labour Party conference. On the Monday lunchtime I attended the Local Authority Pension Fund Forum (LAPFF) fringe.

The Chair of LAPFF, Cllr Kieran Quinn (standing in photo) spoke first on the future of the Local Government Pension Scheme (LGPS) and that the government had lost its nerve about forcing the merger of the schemes. He doesn't know if it will be on the agenda of any new government post May next year.

Kieran believes that fees are too high and by acting collectively you can drive out costs but decisions should be made locally. The government also seems to be backing off forcing schemes to invest in passive rather than actively managed investment funds.

Next speaker was Henry Boucher (on left), who is a fund manager and partner of Sarasin & Partners.

Henry is an active fund manager. He posed the question "Is active management really worth it?" and answered it by saying not all active managers are worth it and some are indeed over paid. But in the LGPS there are better results for lower fees than many other investments in the world. Research has shown that 40% of all fees are taken by only 10% of asserts,  mostly hedge funds.

He thinks the chief problem is that shareholders fail to hold companies to account. The USA even use to have what was called "bearer share certificates" with no names on them. Companies ran themselves. Chief Executives are being allowed to pay themselves too much. It cannot be right that they get an average $30 million per year.

He wants companies to be run properly and not use slave labour or destroy the environment. We need state of the art governance. The LGPS is good on this but needs some changes. However, it doesn't make sense to have all investments in passive funds.

My question about changes in LGPS governance with the requirement to involve employees more and how the panel thought this would happen?

Kieran thought that a greater scrutiny role by employees is for the good. The more diversity in boards the stronger the decision making process. He understands that some of the trade unions think there is a democratic deficit in the LGPS.

(Chair was Alan MacDougall from PIRC)

National Express - Union busters and Blacklisters?

On 14 May it is the Annual General Meeting of British PLC National Express.

US transport trade union, the Teamsters, are calling for share owners to vote for Resolution 22 which calls for "improved oversight and reporting of human capital policies and practices". 

This relates to an ongoing dispute with the US School bus business owned by National Express called Durham School Services. 

While in the UK National Express has on the whole a positive relationship with British trade unions,  in the US it has allowed local managers to be trade union busters and blacklisters. This has a reputational risk to the brand and value of National Express. Especially when trade union members have been victimised for exposing health and safety concerns. 

In the UK there has been a campaign to "Blacklist the Blacklisters"  and to boycott companies in the UK who blacklisted workers for their trade union activism. 

I note in the US that National Express has been accused of "disparate treatment, discipline and discharge of employees engaged in union organizing; alleged illegal surveillance of workers engaged in union activity; and allegedly threatening workers with reduction in benefits, working conditions and the loss of employment for supporting unionization".

I think this is also Blacklisting and National Express runs the risk that they will be added to British list to be boycotted by responsible public and local authorities.

Check out this post I did last year on the risk to our pension investments from investing in National Express. Didn't the huge losses we took from investing in BP teach us anything? 

Picture above is of US School bus driver, Diane Bence, explaining to a meeting last month of Pension trustees and journalists, how awful it is to be employed by a bullying, disrespectful employer who takes risks with children's safety. 

On the left was Louis Malizia from the Teamsters who pointed out that if National Express wanted to expand in the US then they will have to compete for contracts in areas which have strong trade union membership. If they are seen as "anti-trade union" then it will make it much harder for them to win contracts from local School boards.  By being so anti-union they are cutting their nose to spite their face.

This meeting was chaired by Cllr Kieran Quinn (middle) who chairs the Greater Manchester Pension Fund and the Local Authority Pension Fund Forum. He pointed out that he had asked National Express to publish their safety data if they have nothing to hide? But they keep ignoring his questions. 

I said at this meeting that this failure indicates a wider governance concern about the Board of National Express. Surely after the BP Gulf disaster investors need to wake up to the risk from investing in such companies?

UPDATE: sign the ShareAction petition here

Investor collaboration: LAPFF 2013

"Investor collaboration" is a bit of a buzz word in pensions lately. Nearly everyone seems to think it's "a good thing" although there is less agreement on the best way to bring it about.

First speaker was Daniel Godfry, CEO of the Investment Management Association. As recommended in the Kay review they have set up a "Collective engagement working group". They want to tackle the lack of long term thinking. 

Complete the circle between asset owners, asset managers and the companies themselves. The real objective for pension savers is not what happens in12 months but size of pot when they retire in 20 or 30 years. Long term sustainable investment should be a competitive advantage.

Janet Williamson from the TUC (and "Trade Union Share Owners") spoke about the increased interest by trade unions in shareholder activity (see full account of TUSO here at last months TUC Pension Network Conference). They aim to use trade union staff pensions funds to collaboratively support union values and speak with one voice, share costs and punch above their weight.  They also want to work with other like minded investors.

Next was Richard Nunn of United Reform Church and the Church Investment Group (CIG) which was set by by the Church of England and Methodist Church in 2010.   An early battle was with one of their major fund managers who didn't want to vote in accordance to their wishes in company elections with "pooled" investment funds.  They just made excuses why this couldn't be done even though many other managers did so.  They had to be embarrassed into doing the right thing. They now have 6 members and will soon have real time data and will be able to see what is being done on our behalf.

Final speaker was Amy Borrus, deputy director, of the US Council of Institutional Investors (CII).  Amy said that the UK leads the governance world. There are now 120 public, private and endowment funds in the CII.  50% are public sector pension funds. They concentrate on two main things - long term horizons and index investment. This drives their interest in governance. In 1980s they tried to deal with takeovers; in 1990s boardroom behaviour and oversight; 2000s expanded to financial regulatory reform as Encom and Worldcom proved to be massive corporate frauds. The financial crisis of 2007 was a failure of corporate governance.  The big public funds team up with activist managers. Annual elections for directors and transparent pay votes are very important.

Despite progress investors still have a long way to go. You still get in US "zombie directors" of companies despite not getting majority support of shareholders. You should have "one share, one vote" and the right to vote in proportion of shares you hold. An increasing number of new "Start up" companies have duel or even triple shares with different voting rights.

My question to panel was that this conference had heard in the last 2 days plenty of things that suggest something is rotten in the investment world and that can LAPFF on a voluntary basis look into joining like minded organisation such as TUSC or CIG for collaborative voting? This went down well with Janet and Richard. The chair of panel (and LAPFF) Cllr Kieran Quinn said that LAPFF would consider it as they would any proposal from a member.

most of pictures in collage @LAPFForum twitter

The Future of the Local Government Pension Scheme: LAPFF 2013

The Government Minster for the LGPS had dropped out of appearing at conference this year (it was rumoured that he didn't want to be shouted at for the way that the consultation on merger was being handled - Surely not?) and Joanne Segars from NAPF and Chair of LGPS National Pension Advisory Board, who was suppose to replace him was ill.

So chair Brian Bailey now of PIRC, introduced a panel of what he called "three old codgers"-  himself, Terry Crossley (a former Civil servant responsible for the LGPS) and Cllr Kieran Quinn, to have a "chat" about the future of the LGPS.

They firstly discussed concerns about how sustainable the scheme was following the agreement of 2012. Especially mature schemes that had suffered the most in the recent revaluation.

Terry said he thought the current reform was rooted in the politics of the current Government Coalition. He was in the room when the LGA, unions and ministers agreed the deal and was suspicious since it was a big "ask" and a big risk in his opinion. A 1/49th career average scheme with no-one earning up to £43k paying any more?  How are the Hutton Report savings (£900 million per year) to be achieved? Increasing the contributions by staff was missed by the attempt to avoid further opt outs from the scheme.

Senior Firefighters in their scheme pay 17% of salary in pension contributions. Far more than senior managers in the LGPS (who to be fair, retire at a later age). Question mark on how long it can last? The 2016 revaluation is the most important. In 2019 the cost management process may mean that the Treasury in 2020 will insist in either an increase in contributions or reduced accrual (or only for new entrants?).

Kieran thinks that there will be continually uncertainty which none of us here have the answer yet but that the answer to increased costs could come from good investment returns (or of course cut the costs of running the LGPS?). 

Terry thinks LGPS 2014 saving are only £500 million pa. There will be problems with the reduction in numbers of active members as "maturation" occurs.

On the Governance side, Kieran thinks that the National advisory board is working well so far. The "call for evidence" on possible merger of LGPS produced many responses.  The new role of the pension regulator is currently unclear? We have to consider the role of non council employers in the scheme. He believes the role of trade unions and Employers working in partnership is very positive.

Terry is worried that that the National board might seek to be too ambitious. Elected Councillors are responsible for the fund. He believes that the role of local pension boards is advisory and only to scrutinise administrating authorities. (UNISON and others think he is wrong. If scheme members now bear the risk of poor investment then they must have an active say in governance)  He noted that there use to be 8 English local government regions. Is it possible to have 8 LGPS funds?

The treasury cost cap on employer pension contributions will be set next year by GAD (the government actuaries). The National Advisory Board meets on December 16th to consider the results from the "call for evidence".

Media Standards debate: LAPFF 2013:

This debate was with Martin Hickman (left) who use to be a journalist with the Independent and wrote a book on hacking with Tom Watson MP and with Evan Davies from "Hacked off". Cllr Kieran Quinn chaired.

Somewhat ironically but fully justified in the circumstances this fascinating debate was held under "Chatham House rules".  So I cannot post on this but will say if you have a chance to go and listen to Martin and Evan on this topic then please do.

I had a short chat with Evan afterwards about Libel reform (I declare a interest) and he said that he will be in touch about the threat to "no win, no fee" defence success fees in libel cases.

Social Impact Investing: LAPFF 2013

Brian Bailey, Chair of PIRC and former senior member of LAPFF speaking about the 5 large Local Government Pension funds (LGPS) that are investigating a possible £250 million Social Impact investment.

Cllr Kieran Quinn explained what is social impact investing. It is the use of repayable finance to produce social and financial returns. Such as health, well being, better employment and improved social problems.

LAPFF sponsored a report  in 2012 by the Smith Institute on such investments. I think that most people would think that this is a "good thing" to invest in something has has a financial and social return but there are "challenges".

Small investment funds mean relatively high costs in fees and supervision. It is more risky than conventional investment and there are possible conflicts of interest if you invest a Council pension fund in your own locality.

A shared service approach is believed to be the best way of overcoming these risks and the need to make sure that there is a commercial return and to pass due diligence. Watch this space.

I went to the GIIN investor conference in October on what they called "Impact Investment".

Hat tip LAPFF twitter for photo.

"Licence to Operate. Holding Companies to Account" - LAPFF Conference 2013

Chair of Local Authority Pension Fund Forum (LAPFF) Cllr Kieran Quinn welcoming members to the 18th Annual Conference in Bournemouth this morning. The theme of this years conference is "value for money" and holding asset managers and advisers to account. 

LAPFF is a member organisation of Local Government Pension schemes (LGPS). Its purpose is to promote the investment interests of its funds as well as encourage social responsibility and corporate governance. Collectively it has £115 billion of assets.

Next was an introduction by former Hermes fund manager and joint author of "The New Capitalists" David Pitt-Watson, who is now at the London Business School.  David referred to the changes in Governance that has taken place since The Cadbury Report of 1990.  He called it a "journey not a destination". Companies we own should be doing what we want them to do. At the moment David is writing a new book on Finance.

David made an important final point that it will be no good if you have a good pension but retire in a world that has been destroyed by climate change.

The conference will finish tomorrow lunch time. I'll try and post on as many presentations and speeches as I can.

Kieran Quinn appointed as chair of LAPFF

The LAPFF AGM was last week. "Councillor Kieran Quinn, chair of Greater Manchester Pension Fund, has been appointed as chair of Local Authority Pension Fund Forum (LAPFF) at its annual general meeting this week.

Councillor Quinn takes over from Ian Greenwood, chair of the West Yorkshire Pension Fund, who has led LAPFF since January 2008. Councillor Cameron Rose, representing Lothian Pension Fund, and Ian Greenwood have been appointed vice-chairs of LAPFF.
In addition there are two new members of the Forum’s executive – councillor John Gray representing the London Borough of Newham pension fund, and councillor Patricia Glasman, chair of Merseyside Pension Fund.

Incoming LAPFF chair, Kieran Quinn, said: “I am very pleased to be taking over as chair of the Forum at this exciting time. Over the last few years LAPFF has grown rapidly in both membership and influence. Our work on issues such as accounting standards and remuneration reform has broken new ground, and engagements at companies such as M&S and News Corp have given us a much higher profile.”

“I would also like to pay tribute to Ian’s leadership over the past five years, during which time the Forum has made enormous strides forward. I hope I can build on Ian’s record and cement LAPFF’s position as the UK’s leading shareholder body.”

Ian Greenwood said: “Having decided to stand down as chair at this AGM, I am extremely pleased to see my friend and colleague Kieran Quinn elected. I am certain he will provide the leadership needed to take LAPFF forward. I look forward to working with him in my position as vice-chair.”