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Deutsche, Nomura Push Back Most Against Corporate Boards, Morningstar Finds

Passive fund managers are increasingly voting against companies’ boards to shape corporate policies, according to Morningstar.

The asset management units of Deutsche Bank and Nomura Holdings are increasingly aggressive in voting against company boards, signs of the rise in active stewardship among passive funds, according to Morningstar.

Nomura Asset Management had the biggest jump in votes against companies’ proposals in the last three years: The firm voted against boards 22 percent of the time last year, up from 18 percent in 2015 and 13 percent in 2014, Morningstar said in a report Wednesday. Deutsche Asset Management voted against companies’ plans 23 percent of the time last year, rising from 21 percent in 2015 and 17 percent in 2014, the report shows.

Nicolas Huber, head of corporate governance at Deutsche Asset Management, said in an email that the fund manager takes corporate governance “very seriously.” The German firm cast the largest percentage of votes against companies’ proposals last year, according to Morningstar, which tracked the voting records of 12 passive fund managers globally.

“Whether it’s an index or active investment, we have the same rules,” Huber said in the email. “This has given us the advantage of having a very clear position on what is important to us. Our voting policy is very clear and precise and strives to reduce room for interpretation.”

The other passive fund managers in Morningstar’s report include Amundi, BlackRock, Geode Capital Management, LGIM, Lyxor Asset Management, Nikko Asset Management, State Street Corp., Charles Schwab Corp., UBS Group’s asset management unit and Vanguard Group.

While the report shows Deutsche and Nomura being the most aggressive in their voting against corporate boards, Vanguard’s track record was starkly different. The firm cast votes against companies’ proposals just 6 percent of the time in the year through June 30, according to Morningstar.

In an interview, Simon Jones, a senior investment consultant and head of responsible investment at Hymans Robertson, said the difference in voting patterns can be explained in part by the engagement policies of individual fund firms.

“Certain companies will vote quite explicitly against directors if they are not getting the engagement or the change they are seeking,” he said. “You will have managers that only vote against resolutions where channels of engagement have been unsuccessful, whereas others will use voting.”

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In a statement accompanying its report, Morningstar said that U.S. asset managers have traditionally been more unlikely to challenge companies through voting, compared to their European competitors, particularly in relation to environmental and social issues. But there are signs that this is changing, the firm said.

LGIM declined to comment. Amundi, BlackRock, Nikko, State Street, Charles Schwab and UBS and Vanguard didn’t immediately return phone calls seeking comment.

In an August interview with Institutional Investor, Glen Booraem, global head of corporate governance at Vanguard, said the firm believes it has a shareholder obligation to “advocate for actions” at companies, where necessary, to “enhance the long-term value.”

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