The work and pensions select committee investigating the collapse of Carillion must leave no stone unturned when it questions the asset management firms who held shares in the outsourcing firm, says UNISON.
Earlier this week UNISON general secretary Dave Prentis wrote to the select committee chair Frank Field MP urging him to look closely at the role of companies like BlackRock and Henderson Global Investors, which bet on Carillion’s share price falling in the days before the firm’s collapse. The committee has now said that it intends to do this.
Although short selling is not illegal in itself, major shareholders such as BlackRock, Henderson Global Investors, UBS and Standard Life were all banking on Carillion’s stock value falling. BlackRock are also responsible for running the outsourcing firm’s defined contribution pension scheme. UNISON believes that this could amount to a significant conflict of interest.
In the letter to Frank Field MP, Dave Prentis says it’s important to know if any of the major shareholders were using the Carillion workers’ pensions money to bet against the firm’s share price falling.
He also asks the question whether asset managers can really be acting in a pension scheme’s best interests when colleagues in another part of an asset management firm are attempting to drive down that same company’s share price.
UNISON is also calling for tougher corporate governance rules. The Disclosure of Voting Principles – introduced after the financial crash of 2007 through the Stewardship Code – are meant to encourage transparency, and force asset managers to show how they vote at company AGMs.
But, as Dave Prentis points out in the letter, because the principles are voluntary they have little effect.
For example, the asset management companies involved in the shorting of Carillion shares all refuse to disclose their votes publicly. Yet the remuneration packages for Carillion’s board of directors were approved by more than 98% of the company’s shareholders, just months before its first profit warning.
Commenting on the select committee investigation, UNISON general secretary Dave Prentis said: “Serious questions need to be asked as to whether the behaviour of some asset management firms in the days before Carillion’s collapse ultimately led to its demise.
“In the case of BlackRock, there could be a very real conflict of interest, especially if it was playing the markets with the pensions of Carillion workers, who now face a very uncertain future.
“It shouldn’t be so easy for firms to refuse to disclose how they vote at company AGMs when they are acting on behalf of the retirements of many thousands of employees. The voluntary approach is clearly not working. The time has come for a tougher approach to corporate governance rules.”
Note to editors:
The full text of the letter from UNISON to the work and pensions select committee is here
Media contacts:
Siobhan Cooley T: 0207 121 5555 M: 07903 870786 E: s.cooley@unison.co.uk
Liz Chinchen T: 020 7121 5463 M: 07778 158175 E: l.chinchen@unison.co.uk