A big British pension fund adviser is coming to shake things up at some large U.S. banks.
"The state of shareholder rights in the U.S. is dismal," said Colin Melvin, chief executive of Hermes Equity Ownership Services Ltd., which advises clients who hold $100 billion of assets. "We'd be delighted to help change that."
Mr. Melvin, whose firm has lobbied for reforms at such huge European companies as Royal Bank of Scotland and Siemens, is now spending more time in New York to meet with big financial institutions and suggest needed changes in their business practices and boardrooms. He declined to identify the institutions, "but you can probably imagine who they are," he said in an interview in New York.
Citigroup? Bank of America? AIG? Mr. Melvin wouldn't say. But, among other things, he'd like to see U.S. companies grant investors an advisory vote on the pay of top executives and make it easier for shareholders to nominate and elect board members of their own choosing.
The arrival of London-based Hermes to New York comes as institutional money managers around the globe show signs of discarding their traditionally passive ways after the economic collapse savaged so many of their holdings.
Hermes Equity Ownership Service is a unit of London-based Hermes, which manages about $40 billion in assets.
A group sponsored by the United Nations, the Principles for Responsible Investment Initiative, on March 2 called for its 500 members including some of the nation's top money managers, such as BlackRock Inc., JPMorgan Asset Management and several major public pension plans to admit to mistakes they made during the run-up to the crisis and urged them to more actively address companies "where risks are not being managed appropriately." In board elections at many leading corporations this spring, the U.N. group urged, investors should "ensure their shares are voted in an informed and robust way."
Such signs of institutional investors taking a more aggressive stance come as corporations brace for what looks like especially contentious annual stockholder meetings later this spring. Activist shareholders are planning to voice their dissatisfaction at these affairs.
Mr. Melvin said Hermes would rather not display its displeasure in public by filing shareholder resolutions or releasing its correspondence with companies, as some hedge fund managers do. Rather, it prefers to discreetly lobby for change in private meetings.
"We don't make a fuss," Mr. Melvin said, "publicly."
Aaron Elstein is a reporter at Crain's New York Business, a sister publication of Pensions & Investments