I move amendment No. 11:
In page 17, subsection (1), lines 39 and 40, to delete paragraph (d).
I have severe doubts about this section and about the virtues of fund managers. I note it refers to internal ethical and compliance guidelines. Ethics is not a concept unknown to the Government in the Bill, but it is unknown in the presentation and in the specific investments made and rejected in that way. I have a specific problem of principle with the exercise of voting rights by investment managers on behalf of the fund. The purpose of the amendment is to address that.
The Minister of State may be aware that there was a very controversial vote recently at the annual general meeting of Eircom. The wishes of shareholders were defeated by the block votes of fund managers. This was most apparent in the case of the largest block. Bank of Ireland Asset Management, which manages the largest number of funds in the country, cast over 100 million votes in favour of the board of Eircom. That was a vote decided upon and cast by an investment manager. In almost all these cases, one investment manager makes a decision. That is patently ridiculous for several reasons, the most obvious of which is the following good example.
There were between 3,000 and 4,000 small shareholders in that hall and, as far as I could see, not one of them voted the same way as the board on the more controversial motions, yet they were defeated. That happened because individual fund managers, as will happen in this case, were given hundreds of millions of votes to cast at their discretion. That is bad enough because it gives far too much power to one person.
The real crime against democracy is that the people who cast those votes were quite patently voting against the wishes of the underlying shareholders and pensioners they represented. That is apparent from the fact that popular opinion, popular shareholding opinion and small shareholders were patently against the board on that issue, as could be seen by the small shareholders' votes and their expressions.
The fund managers voted the other way, but they were voting for the same people that were in the hall. I was one of them. I only take myself as an example because it is so obvious to me. I was in the hall with a few thousand votes and voted against the board. My pension fund was in the back pocket of the chairman, voting for the board totally against my wishes. The biggest number of pensions in the country was also voting for the board against the wishes of the pension holders.
It is very simple. This provision is patently anti-democratic. Pension fund managers should not have the right to have absolute and total discretion to vote enormous amounts of power to people who tend to be their friends, colleagues or people they meet at their golf and sailing clubs and in other places. This is what is happening.
At the top of the Irish financial world there is a layer of people and bodies who vote for each other and look after each other at annual general meetings, and this is directly appropriate for this particular clause. The Bank of Ireland always votes for the AIB at its AGM and vice versa. That does not make an awful lot of sense. The directors of the Bank of Ireland are always re-elected by 99.999% because every fund manager in town votes for them. The AIB shares, votes cast on your behalf and mine, vote for the re-election of the directors and in favour of their old controversial motions and options. The Bank of Ireland then goes to its AGM and votes for the AIB. It is terribly cosy and works a dream, but the pensioners are never consulted. We have the ridiculous position that the fund managers are voting in a way that is patently against the wishes of those they represent but patently in the interests of themselves, the system and the oligarchy which exists at the top of the Irish financial world.
This provision is a complete duplication of that patent injustice. I am surprised to see a Fianna Fáil Minister supporting such an anti-populist stance. I am surprised because I understood that there were moves afoot within the Government to change this unjust weighting of shareholders votes. Perhaps the Minister of State will comment on this.
At the Eircom meeting everyone saw the absurdity of the chairman, Mr. Ray MacSharry, saying that 30 million votes went one way while several hundred million votes went the other. That is what happened – the big battalions came in and cast a vast number of proxies against the wishes of the underlying shareholders.
Perhaps I should have tabled another amendment and I will think about tabling one on Report Stage as I spell it out. I suggest to the Minister of State that no pension fund manager should ever be allowed to cast votes of this magnitude without consultation with at least the trustees of the fund, who could instruct him on which way to vote. I am not sure that is enough because I do not have total faith in the trustees of pension funds either, but it would be a start. In this particular case the individual fund manager who holds the shares on behalf of the fund should have to consult with someone who represents the shareholders. In this case it is either the commissioners, the NTMA or the Government.
The pensions fund is the biggest one in Ireland. The Minister of State should remember that it could rock the Irish stock market in a matter of years. The stock market is only worth about £8 billion and this fund is worth £5 billion. It could buy the AIB and the Bank of Ireland. Its size is enormous.