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Universities Superannuation Scheme - USS

PRI reporting framework 2018

Export Public Responses

You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions » Process


LEA 16. Typical approach to (proxy) voting decisions

16.1. Indicate how you typically make your (proxy) voting decisions.


Based on

16.2. Provide an overview of how you ensure your voting policy is adhered to, giving details of your approach when exceptions to the policy are made (if applicable).

The USS Voting Policy is shared with proxy voting providers and companies and published on the scheme's website. USS actively considers all voting decisions in-house prior to confirming the vote and receives recommendations and proxy research from multiple providers to gain greater insights into the issues under consideration. Portfolio manager views are sought on votes and engagement letter texts. Recommendations are often made by the service providers that are inconsistent with USS voting policy or perspective. On such occasions the RI team ignore the recommendation and vote in accordance with the in-house decision. Records regarding the analysis and decision are retained.

The RI team regularly liaise with proxy voting service providers to feedback on the metrics, data points and analysis undertaken to facilitate implementation of USS’s voting and engagement policy.

16.3. Additional information.[Optional]

Further details on voting

For more information on the scheme's approach to voting see:


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.


Example letter from May 2017

Dear Chair


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

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.



LEA 17. Percentage of voting recommendations reviewed (Not Applicable)

LEA 18. Confirmation of votes

New selection options have been added to this indicator. Please review your prefilled responses carefully.

18.1. Describe your involvement in any projects to improve the voting trail and/or to obtain vote confirmation .

          Shareholders use their votes at corporate events as an expression of their support or otherwise for management and business strategy, major transactions, capital raisings and share issuances, as well as governance related matters. It is important that the votes we cast are accurately and efficiently transmitted to issuers.  USS continue to work with our custodians and intermediaries in the voting chain, to ensure the system works as effectively as possible and identify areas for improvement.   For example, we encouraged JP Morgan to develop KPIs with their service provider (Broadridge) earlier this year to monitor vote execution performance.

18.2. Additional information. [OPTIONAL]

          In 2016 the scheme implemented a new process for integrating environmental and social issues into its voting decisions.  The scheme’s approach is focussed on company disclosure, with the following key E&S indicators identified: 

• Quality and Timeliness of reporting on corporate social responsibility (CSR) issues 
• Carbon Emissions 
• Fatalities 
• Ethical Business Practices: human rights, child labour and modern slavery
This approach is intended to proactively encourage better company disclosure on key E&S indicators ahead of the company AGM.  Without this information investors will not be able to take a holistic approach to assessing company performance.   Integrated reporting cannot be widely adopted without timely reporting of performance against material E&S KPI’S.  Furthermore E&S considerations cannot be integrated into remuneration frameworks to the satisfaction of investors without this disclosure.  

In addition to the original Australian and UK markets, the process was extended to three new markets over the course of 2017:  the US, Canada and Ireland.   In 2018,  we also intend to extend this process to our quantitative funds and companies in Japan, Singapore and Hong Kong.   We will take an automated approach using the service of external research providers. We are also voting companies from outside these markets that have high environmental / social footprints. 

We have analysed the adequacy of the environmental and social disclosure made by 135 companies in 2017 and have included comments (both positive and negative) in letters to 52 companies. In 2018 we expect to vote against the report and accounts of companies where we continue to identify material gaps in their disclosure on environmental and social factors.

LEA 19. Securities lending programme

New selection options have been added to this indicator. Please review your prefilled responses carefully.

19.1. Indicate if your organisation has a securities lending programme.

19.3. Indicate how voting is addressed in your securities lending programme.

          USS has adopted an approach where we systematically recall some securities to vote on their ballot items for certain holdings; and we recall some securities to vote on their ballot items on an ad hoc basis for other holdings. However, we are unable to tick both boxes above.

Our policy is outlined below:

To ensure that the scheme is able to vote all its shares at important meetings or where USS is a significant shareholder, USS has worked with service providers to establish procedures to restrict lending for certain stocks and recall shares in advance of shareholder votes. 
- Where we hold 3% or more of the issued share capital of a company, stock is recalled systematically. 
- In other circumstances we monitor the meetings and proportion of stock on loan, and will restrict and/or recall lent stock on a case by case basis, e.g. in the event of a contentious vote or in relation to engagement activities, further to discussion with the portfolio manager. 

This is publicly disclosed within the Scheme's Stewardship Code Statement. See

LEA 20. Informing companies of the rationale of abstaining/voting against management

New selection options have been added to this indicator. Please review your prefilled responses carefully.

20.1. Indicate whether you or the service providers acting on your behalf raise any concerns with companies ahead of voting

          Engagement letters are sent ahead of the vote where possible. We send a letter explaining the rationale behind our votes to all our actively held companies, regardless of their size, index or country of incorporation. An example of the type of letter we send is provided in LEA 16.3. In Japan, we send the letters translated into Japanese.

20.2. Indicate whether you and/or the service provider(s) acting on your behalf, communicate the rationale to companies, when , you abstain or vote against management recommendations.

20.3. Additional information. [Optional]

We have analysed the adequacy of the environmental and social disclosure made by 135 companies in 2017 and have included comments (both positive and negative) in letters to 52 companies.  These issues are also followed up in e-mails, calls and meetings.

During the course of the year 255 engagement letters (communicating our voting decision and rationale) were sent to 239 companies.  This was fewer than previous years owing to a greater concentration of the portfolio and consequential decrease in the number of equity holdings in developed markets over recent years.

As a long term shareholder, the voting letters that are sent to USS’s companies are generally a continuation of the engagement from previous years reflecting house views, vote history and engagement meetings.

We meet companies throughout the year and raise concerns about corporate governance issues during these meetings, this often naturally leads to a discussion regarding our voting decision.