31 July 2006
Large institutional investors like pension funds should use
their size and influence, particularly by acting in concert, to
improve the performance of equity markets through effective
Engagement and Voting according to reports by Watson Wyatt.
In a report on Engagement, including Activism, Watson Wyatt
suggests that encouraging better governance of poorly governed
firms can add value to a broad market portfolio. One way in which
this might be achieved would be via an engagement overlay.
In another report on Voting, Watson Wyatt suggests that Fund
Managers in general do not take their role as share owners as
seriously as if they were in fact the owner and not just the
agents. It questions whether they have suitable structures to
evaluate, and engage with, their investee firms on corporate
governance issues. The report also covers the extent to which
investment managers have considered the allocation of resources,
both human and financial, to this area and whether an accountable
and transparent process that enhances value to shareholders is in
place.
