Meeting documents

Pension Fund Committee
Friday, 24 May 2002

PF240502-11

Report by Director for Business Support & County Treasurer

Over that past few weeks there has been considerable coverage in the media of a new executive pay plan for the Prudential, which was to be voted on at its annual general meeting on 9th May 2002. In the end, because of a potential and not insignificant shareholder revolt, the Prudential withdrew the controversial resolution. Annex 1 is a copy of a background article covering the issues that appeared in the Financial Times on 9 May.

The Oxfordshire Pension Fund was monitoring this issue throughout the quarter because it held 666,400 Prudential shares (Schroders held 375,000 shares and Deutsche 291,400).

We were rather surprised to find the National Association of Pension Funds (NAPF) recommending shareholders to support the resolution as this seemed to contradict some of the comments we had read in the financial press. To clarify the position Officers contacted the NAPF who explained that although they had not formally opposed the resolution, they felt sufficiently unhappy with certain aspects of it to write to the Chairman of the Remuneration Committee. A copy of the NAPF’s letter is attached as annex 2.

Last July saw the launch of the FTSE4Good Indices and this was reported to the Investment and Pensions Sub-Committee. The indices were seen as a good opportunity to compare an Socially Responsible Investment (SRI) policy against a more mainstream investment approach. The Committee requested Officers to periodically keep them informed on the progress of these ethical indices. Annex 3 is a copy of an article on the UK FTSE4Good Index that appeared in the Financial Times.

76 of the FTSE 100 index now qualify for the UK FTSE4Good index. The 10 largest stocks in the index are identical to the 10 leading stocks in the FTSE 100. Of the 24 that do not qualify 11 are barred because they operate in excluded sectors, such as tobacco production, weapons manufacture and the nuclear power industry. The remaining 13 are excluded because they fail to meet the criteria on environmental sustainability, social issues and stakeholder relations or human rights.

Within the FT article reference is made to criticism levelled at the composition of the index by a think tank called the New Economic Foundation (NEF). The NEF says the UK index includes companies with "poor ethical and environmental reputations". Oil companies BP and Shell are big constituents, in spite of their obvious links to climate change.

Since their launch the FTSE4Good UK and Global Index have performed roughly inline with their parent indices, though they are currently underperforming by a few per cent. Ironically the 24 stocks excluded from the FTSE4Good UK Index have outperformed their ethical brethren by 13% in the year to April 4.

Annex 4 is a copy of an article, which appeared in the Financial Times on 13 May. It refers to the drawing up of a league table of companies, by Morley Fund Management, ranked by their commitment to social and environmental issues.

Morley’s decision to publish the lists is an attempt to apply more pressure on companies in the FTSE 100 index to improve their social and environmental performance.

A policy of positive engagement on social, environmental and ethical considerations, including the issue of human rights, should have an impact on the environment and people living in poverty.

CHRIS GRAY
Director for Business Support & County Treasurer

Background Papers: The Financial Times, NAPF letter to the Prudential.

Contact Officer: Tony Wheeler, Loans and Investments Manager, Tel: (01865) 815287