Schroders plans to scrap an “anachronistic” ownership structure that has deprived some shareholders of voting rights, as one of the UK’s largest asset managers tries to burnish its governance credentials.
Under a plan laid out on Tuesday, Schroders said that each of the company’s non-voting shares, which account for a quarter of the total in issue, will be converted into an ordinary share carrying voting rights.
The move by Schroders, whose founding family is still the group’s largest shareholder, comes as a boom in sustainable and socially responsible investing sweeps across the asset management industry, generating profits for the likes of Schroders but also turning the spotlight on their own practices.
“Permanent non-voting shares felt anachronistic, particularly given our strong position in ESG,” Schroders chief executive Peter Harrison said in an interview.
The long-awaited overhaul by Schroders, which manages £731.6bn, is designed to ensure shareholders’ economic interest in the group matches their voting rights. It was welcomed by analysts.
“It removes one of the ESG problems of the group” and will improve the liquidity of the shares, said David McCann, analyst at Numis. By abandoning a dual voting structure, Schroders is widening the pool of funds that can own the shares, he added.
Harrison said that the change should also bring other benefits. “As we generate surplus capital it is helpful to have the potential option of buybacks, rather than just returning capital through dividends or mergers and acquisitions,” he said.
As part of the plan, holders of those shares that currently have voting rights will be issued three new ones for every 17 they already own to compensate them for the dilution.
The revamp needs to secure 75 per cent of the votes cast by both sets of shareholders, and Schroders is aiming for the plan to be implemented by late July.
Schroders has made a concerted push into ESG investing, notably through its December purchase of a 75 per cent stake in Greencoat Capital, one of Europe’s largest renewable infrastructure managers. That followed its July purchase of a minority stake in Natural Capital Research, a research organisation that helps its clients develop ESG, biodiversity and net zero carbon strategies.
In 2016, Schroders’ decision to make its then chief executive Michael Dobson the group’s chair drew criticism for flouting best corporate governance guidelines on chief executives taking on the role of chair.
Dobson, who has been a crucial bridge between the Schroders executive team and the founding family, is stepping down as chair at the company’s annual meeting on Thursday and will be replaced by Dame Elizabeth Corley.
Last month, Schroders revealed that its shift away from traditional asset management towards faster-growing areas such as private assets and wealth management started to pay off, as its reported profit before tax and exceptional items increased by a fifth to £836.2mn in 2021.