Further details on voting
For more information on the scheme's approach to voting see:
- https://www.uss.co.uk/how-uss-invests/responsible-investment/voting
Voting engagement letter
An example letter sent to a company to outline the rationale behind USS's vote at the AGM is provided below.
The letters are sent to the company's chairman, detailing the scheme's vote, departures from corporate governance best practice and USS's expectations from company's - as outlined in USS's UK Voting Policy and Global Stewardship Principles (both available on the web page above). Less detailed rationales and votes are also published on the USS website.
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Example letter from May 2017
Dear Chair
VOTING AT ANNUAL GENERAL MEETING OF XXX INC, MAY 2017
Universities Superannuation Scheme is the principal occupational pension scheme for universities and other higher education institutions in the UK. The fund is one of the largest pension schemes in the UK, with total fund assets of approximately £57 billion.
The majority of assets are managed in-house by USS Investment Management, a wholly owned subsidiary of USS, authorised and regulated by the FCA.
USS takes seriously its fiduciary obligations to beneficial and institutional members. We aim to be engaged and responsible long-term shareholders of the companies in which we invest and to foster constructive dialogue. Our policies on corporate governance, voting and engagement are available at www.uss.co.uk.
As investors in XXX Inc we have voted at the company's Annual General Meeting on XXX 2017. After careful consideration of the issues and facts available to us at the time of voting, we are writing to explain where we did not support management's recommendations and/or highlight material environmental, social or governance (ESG) issues.
Resolution 1a To re-elect as a director, 1: Against
As noted previously, USS would welcome the appointment of an independent chairman to the board.
Resolution 1b To re-elect as a director 2: Against
We also have concerns regarding the extended tenures of directors 1-6, who have all served on the board for 13 years or longer. We would welcome refreshment and succession planning to better ensure independent oversight.
Resolution 1c To re-elect as a director 3, : Against
Please see our comment under item 1b above.
Resolution 1e To re-elect as a director, 4: Abstain
We note the cross directorships between director 4 and 7. We have concerns regarding the potential for conflicts of interest to arise and challenges to independence. We would also welcome greater transparency regarding the nominations and appointments process to understand how the board ensures a diversity of skill sets represented on the board.
Resolution 1h To re-elect as a director, 5: Against
Please see our comment under item 1b above.
Resolution 1i To re-elect as a director, 6: Against
Please see our comment under item 1b above.
Resolution 1j To re-elect as a director, 7: Against
We have concerns regarding the director’s aggregate time commitments, given his executive role and additional directorships. We also note the cross directorships highlighted above.
Resolution 2 To ratify the appointment of Ernst & Young LLP as auditors: Against
USS encourages the audit committee consider undertaking a tender process to rotate the company's external auditor. We have concerns that the extended, 20 year relationship with Ernst & Young may negatively impact independence and professional scepticism. We would welcome auditor rotation, in line with international best practice.
Resolution 3 To approve an advisory vote on the remuneration of the Company's named executive
officers: Against
USS is concerned about the relationship between the company's payment practices and the creation of durable shareholder value. We would welcome the introduction of a long-term incentive plan that rewards executives for the achievement of corporate strategy and clawback provisions under all variable pay awards. We are also concerned about the large one-time RSU awards issued during the year which vest without reference to performance.
Resolution 4.03 To set the frequency at which the advisory vote on executive compensation shall
be held to triennially: Abstain
We consider an annual say-on-pay vote encourage better communication between shareholders and directors on compensation issues and strengthens the alignment between pay and performance.
Resolution 5 To adopt the 1997 Stock Incentive Plan: Against
We do not support long-term incentive schemes offered to non-employee directors and consultants and would welcome the introduction of performance conditions for all executive awards.
Resolution 7 To request that the board use sustainability as a compensation performance measure: Shareholder Proposal: For
As outlined above, we expect the inclusion of performance conditions for all variable pay awards. We would welcome the inclusion of sustainability key performance indicators as part of the company's performance measurement used in the determination of executive pay.
Resolution 8 To amend the vote counting practices: Shareholder Proposal: For
USS believes that abstentions should not be counted as votes "against" a proposal as we are concerned that reduced transparency regarding abstentions may misrepresent the results for shareholder proposals. USS would welcome a straightforward vote counting formula that aligns with shareholder expectations.
Whilst we acknowledge an improvement in the company's sustainability reporting, we would welcome greater disclosure around performance against key indicators such as health & safety and emissions. We would also welcome the publication of policy statements relating to the company’s position on material environmental & social issues.
We expect timely reporting of material environmental, social and governance (ESG) data from companies to demonstrate how ESG risks and opportunities are being managed within the business. We also request that this information is refreshed at least on an annual basis and made available to investors ahead of the AGM, so that it can be considered within our review of the proxy materials and integrated into our voting decisions.
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