We believe voting rights have economic value and should be treated accordingly. Good corporate governance should, in the long term, lead towards both better corporate performance and improved shareholder value. Thus, we expect board members of companies in which we have invested to act in the service of the shareholders, view themselves as stewards of the company, exercise good judgment and practice diligent oversight of the management of the company. A commitment to acting in as transparent a manner as possible is fundamental to good governance.
In serving the interests of our clients, some investment capabilities within UBS AM may at times pursue differing approaches towards particular corporate governance, environmental and social issues, including how to vote or abstain on proposals. This reflects the diverse nature of our capabilities. However, in all cases the interests of clients will be paramount. Underlying our voting and corporate governance principles we have two fundamental objectives:
- We seek to act in the best financial interests of our clients to enhance the long-term value of their investments.
- As an investment advisor, we have a strong commercial interest that companies in which we invest, on behalf of our clients are successful. We promote best practice in the boardroom.
To achieve these objectives, we have established a set of Principles to guide our exercise of voting rights and the taking of other appropriate actions, and to support and encourage sound governance practices. These Principles are applied globally but also permit us the discretion to reflect local laws or standards where appropriate.
While there is no absolute set of standards that determine appropriate governance under all circumstances and no set of values will guarantee ethical board behaviour, there are certain principles, which provide evidence of good corporate governance. We will, therefore, generally exercise voting rights on behalf of clients in accordance with the following principles.
Some significant factors for an effective board structure include:
- An effective Chairman is key.
- The roles of Chairman and Chief Executive generally should be separated.
- The Board should be comprised of individuals with appropriate and diverse experience capable of providing good judgment and diligent oversight of the management of the company.
- The non-executive directors should provide a challenging, but generally supportive environment for the executive directors.
Some significant factors for effective discharge of board responsibilities include:
- The whole Board should be fully involved in endorsing strategy and in all major strategic decisions (e.g., mergers and acquisitions)
- The Board should ensure that at all times:
- Appropriate management succession plans are in place.
- The interests of executives and shareholders are aligned.
- The financial audit is independent and accurate.
- The brand and reputation of the company is protected and enhanced.
- A constructive dialogue with shareholders is encouraged.
- That it receives all the information necessary to hold management to account.
Areas of Focus
Some examples of areas of concern related to our Corporate Governance focus include the following:
- Economic value resulting from acquisitions or disposals.
- Operational performance.
- Quality of management.
- Independent non-executive directors not holding executive management to account.
- Quality of internal controls.
- Lack of transparency.
- Inadequate succession planning.
- Poor approach to corporate social responsibility.
- Inefficient management structure.
- Corporate activity designed to frustrate the ability of shareholders to hold the Board to account or realize the maximum value of their investment.
For more information, our detailed voting policy is available via our website: https://www.ubs.com/global/en/asset-management/investment-capabilities/sustainability.html.