Proxy voting can be timeconsuming and expensive for pension plan trustees, but handing the responsibility over to investment managers without giving direction on how to vote could lead to trouble down the road.

A recent survey by the Shareholder Association for Research and Education(SHARE)showed that the majority of pension plan trustees let investment managers make their decisions for them. It found that 73% of investment managers have been given complete discretion to vote the proxies for more than 85% of the pension fund assets they manage.

“We are still rather concerned,” says Laura O’Neill, SHARE’s director of law and policy. “The survey’s been done over a number of years, and we do continue to see that according to the investment managers who have pension funds as clients, they are not getting––in a majority of cases––a direction on voting proxies, or rather being given discretion to do that voting on behalf of the fund.”

As shareholder activism takes hold, pension funds should be responsible in the way they exercise their right to vote on various ballot issues, explains Ian McSweeney, a partner at Osler, Hoskin & Harcourt LLP and co-chair of the firm’s pension and benefits department.

SHARE believes the failure to manage or guide outside investment firms on how to vote proxies could leave them open to potential liability and possible charges of negligence. And Scott Sweatman, associate counsel in the pension and benefits group at Blake, Cassels & Graydon LLP, says trustees may face a potential lawsuit. “Conceivably, I suppose they could if they were negligent in the assignment of that proxy voting without much thought: they breached or usurped their fiduciary obligations to the plan, the beneficiaries as a whole.”

To protect themselves, SHARE recommends trustees take action by establishing proxy-voting guidelines, setting out roles and responsibilities for voting the plan’s proxies, and monitoring how the proxies are voted.

“There’s no real right answer,” says McSweeney, “but there’s a danger, there’s a warning post there that’s very clear to the extent that proxy voting—that the [pension] fund chooses to own equities and those are voting shares and how those shares are voted is all—is an important part of investing and managing the fund and needs to be handled prudently.”

 

Moving on

After only three-and-a-half years as chief executive officer at the Ontario Municipal Employees Retirement System(OMERS), Paul Haggis is stepping down mid-year.

When he arrived, OMERS, Canada’s fourth-largest pension plan, was a typical fund, an active and passive investor in stocks and bonds. Under Haggis’s direction, it gradually became an “active owner of businesses,” with 40% of its assets in real estate, infrastructure and private equity. “That changed very much the way we manage investments and the way we allocate risk,” he says.

This strategy will remain in place after his departure. “Everything the board has adopted is going to be committed to,” Haggis says. “There’s no change in our strategy.”

What will change, however, is the role of the CEO. With the new twoboard structure, implemented through Bill 206 last June, the incoming CEO will focus more on governance. Haggis will not say if this structure is positive or negative, but says “I think it’s just the idea that you’re going to have more in the way of participation in the plan or different kinds of participation through the sponsor corporation.”

OMERS stated that the parting was mutual, but there were rumours to the contrary. According to a report in the National Post, Haggis and the board of directors had a conflict over the role of the CEO. “That’s a speculation,” says Haggis. “I think that I and the board get along very well. And I try to be as supportive as possible.”

As for life after OMERS, Haggis isn’t thinking that far ahead. “I’m just really responding to what OMERS is asking me to do. I’m working with the board as much as I can. I want to be helpful. I have to recognize that my money’s in here, too.”—Brooke Smith

 

Road to recovery

Many companies offer support for smoking addictions, alcohol abuse and even nutritional counselling, but little exists for a problem that is harder to notice—a gambling addiction.

Shawn Jordan is a gambling recovery specialist (and a former problem gambler)with the newly launched website Stopgambling.ca, based in Calgary. The site provides a 21-step recovery program for employers or employee assistance providers(EAPs)to offer employees with serious gambling problems. Gambling is considered serious when a person is spending $1,500 to $14,000 a year on the habit. “The statistics show that gambling problems in Canada affect about 5% of the population, so about 1.5 million people,” he says.

When trying to cope with his own addiction, Jordan discovered a lot of programs that helped deal with the problem but nothing existed to support a person to full recovery. So with the help of an Alberta Alcohol and Drug Addiction Commission councillor he designed “a full recovery program.”

The first step—which can be downloaded from the site—is getting the person to admit he or she has a problem. After that, says Jordan, the employee should be paired up with an EAP counsellor who will guide him or her through the remaining 20 steps. They are designed to help the person control the addiction, teach him or her responsible financial practices, rebuild confidence and channel the addictive energy into productive behaviour.

Anyone who uses the program also gets access to an online support community through the website where he or she can talk to other gamblers who are on the same step. The steps take from one to three days to complete, or about 60 days to finish the whole program.

Jordan says that gambling addictions are not easy to spot in the workplace. Warning signs that an employee has an addiction are often subtle, such as habitual lateness, long lunches, absenteeism, exhaustion and declining productivity. Other signs to watch for include vacation days taken in isolation rather than a week or two at a time; employees who owe money to colleagues; employees who request salary advances, or pay, instead of vacation days; or employees who volunteer for lots of overtime.

As gambling’s popularity grows and more people are at risk for addiction, the odds of plan sponsors needing to provide coping strategies for employees increases.—Leigh Doyle

 

Worldview

Millions missing
Companies in the U.S. are potentially losing millions of dollars because they do not track employees’ time away from work. A Hewitt Associates survey of 421 U.S. companies found that only 11% use a standard time-off program. This makes tracking of employee sick days and vacation time difficult. Three-quarters of companies could not provide an actual or estimated cost of their sick pay as a percentage of the payroll. Those that did estimated the potential cost to be between 1% and 3%.

Real estate to the rescue
European retailer Marks & Spencer(M&S) is considering a partnership with its pension plan in which the plan would hold the company’s properties— currently worth £1.1 billion($2.6 billion)—and lease them back to M&S. The partnership would make fixed annual distributions to the pension plan of about £50 million($115 million)for a 15-year period. The pension plan would consider the present value of these future payouts as part of its total portfolio, which would reduce its deficit.

Pensions for everyone
Employees in Israel could have a pension plan by January 2010 if a government bill gets passed this month. By the end of 2008, employers would be obligated to reach an agreement with their employees about how much each party will allocate to the workers’ pension funds. Should an agreement not be reached privately, the finance ministry will institute a general guideline requiring employers to contribute 12% of the monthly payroll to a pension fund while employees contribute at least 5% of their wages.

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