Pension funds baulk at annual board votes

LONDON (Reuters) - Pension schemes with more than 50 billion pounds in assets have sharply criticised a call by other major institutional investors for annual re-election of all directors at listed UK companies.

BT Pension scheme fund manager Hermes, and the universities pension fund USS, told Reuters a move to put the entire board up for a vote at each AGM would be short-termist and distracting.

Last week, Norges Bank Investment Management, which holds 1.75 percent of UK stocks, said a move to annual re-elections would bring "proper accountability".

Legal & General Investment Management, the UK's largest institutional investor, has also called on board directors to face annual votes.

"Annual re-elections are potentially distracting to the board, (and) create instability and additional work for the shareholders without any material benefit. So it's not a good idea," said Colin Melvin, chief executive of Hermes Equity Ownership Services.

Hermes EOS is part of the London-based fund firm which manages the BT (BT.L) pension fund's more than 30 billion pounds in assets.

Melvin noted that unlike in the United States, shareholders in the UK can convene an extraordinary general meeting to oust a director if they have the support of other investors.

Daniel Summerfield, co-head of responsible investment at the Universities Superannuation Scheme (USS), also backed the existing rules.

"We believe an annual re-election could engender a short term outlook amongst both shareholders and directors," Summerfield said.