To ensure our proxy provider votes in accordance with our position on ESG, we have put in place a minimum standards custom voting policy with specific voting instructions. These instructions apply to all markets globally and seek to uphold what we consider are minimum best practice standards which we believe all companies globally should observe, irrespective of local regulation or practice. For all other issues not covered by our minimum standards, we defer to the decisions to our voting information provider.
In addition, we have also set specific custom voting policies at market level for markets which we adopt a stricter stance on. All our custom voting policies are developed in accordance with our publicly disclosed position on ESG in our Principles document and country specific policies.
Note that we retain the ability in all markets to over-ride the decisions taken by the service provider. This may happen where engagement with a specific company has provided additional information (for example from direct engagement, or explanation in the annual report) that allows us to apply our own voting judgement. For example, it is our policy to oppose the election or re-election of the Board Chair of a FTSE 100 company if they are less than 25% women on the board. We overrode our own policy at eEasyJet’s 2017 AGM in relation to gender diversity on the Board. The company had previously exceeded our 25% target of female representation on the board, however this changed when a non-executive director stepped down from the board four months before the AGM; we therefore took the circumstances into account and decided to support the re-election of the Board Chair.
In addition, LGIM has strict monitoring controls to ensure our votes fully and effectively executed in accordance with our voting policies by our service provider. This includes a regular manual check of the votes input into the platform, and an electronic alert service to inform us of rejected votes which require further action.
We hold quarterly diligence meetings with our voting service provider. Representatives from a range of departments attend these meetings, including the client relationship manager, research manager and custom voting manager. The meetings have a standing agenda, which includes setting out our expectations, an analysis of any issues we have experienced when voting during the previous quarter, and a review of the effectiveness of the monitoring process and voting statistics. The meetings will also review any action points arising from the previous quarterly meeting.
Additionally, on an annual basis the Director of Corporate Governance must certify on LGIM’s internal risk management system that our voting service provider have the capacity and competency to analyse proxy issues and make impartial recommendations.
Our voting process is internally audited and additionally, LGIM obtains a biannual independent assurance of its stewardship and voting processes, in-line with the AAF01/06 framework.