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Alliance Bernstein

PRI reporting framework 2019

Export Public Responses

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(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

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


Based on

12.2. 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.

Our Proxy Voting and Governance Policy is annually reviewed, and updated as necessary, by the Proxy Voting and Governance Committee (which includes senior members from Investments, Legal & Compliance, and Operations) to ensure it captures our latest thinking and reflects new governance issues. Our Proxy Voting and Governance Committee meets at least three times per year and as necessary to address special situations.

Our RI team votes our proxies globally. In evaluating proxy issues and determining our votes, we welcome and seek out the points of view of various parties. Internally, the RI team may consult the Proxy Voting and Governance Committee, Chief Investment Officers, Directors of Research, and/or Research Analysts across our equities platforms, and Portfolio Managers in whose managed accounts a stock is held. This ensures consistent application of our policy while at the same time leveraging the company specific knowledge of the investment teams who can provide an extra level of insight. Externally, we may engage with companies in advance of their Annual General Meeting, and throughout the year. In addition, we engage with shareholder proposal proponents and other stakeholders to understand different viewpoints and objectives. We believe engagement provides the opportunity to share our philosophy, our corporate governance values, and more importantly, affect positive change.

Our Proxy Voting and Governance Policy and our historical voting records are available on our public website. 

12.3. Additional information.[Optional]

LEA 13. Percentage of voting recommendations reviewed (Not Applicable)

LEA 14. Securities lending programme

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

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

14.4. Additional information.

LEA 15. Informing companies of the rationale of abstaining/voting against management

15.1. Indicate the proportion of votes where you or the service providers acting on your behalf have raised concerns with companies ahead of voting.

15.2. Indicate the reasons for raising your concerns with these companies ahead of voting.

15.3. Additional information. [Optional]

As active investors, we value constructive dialogues with companies. Explaining our voting rationale for an “abstain” or “against” vote can be part of these discussions, and, in some cases, is important to promote change at the company. There are companies with whom we have ongoing discussions over multiple years. These discussions occur after we cast our vote.  

LEA 16. Informing companies of the rationale of abstaining/voting against management

16.1. Indicate the proportion of votes participated in within the reporting year in which, you and/or the service provider(s) acting on your behalf, have communicated to companies the rationale for abstaining or voting against management recommendations.

16.2. Indicate the reasons your organisation would communicate to companies, the rationale for abstaining or voting against management recommendations.

16.3. In cases where your organisation does communicate the rationale for the abstention or the vote against management recommendations, indicate whether this rationale is made public.

16.4. Additional information. [Optional]

LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities where you and/or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

99 %

Specify the basis on which this percentage is calculated

17.2. Explain your reason(s) for not voting on certain holdings

Abstain was not an option.

17.3. Additional information. [Optional]

LEA 18. Proportion of ballot items that were for/against/abstentions

18.1. Indicate if you track the voting instructions that you and/or your service provider on your behalf have issued.

18.2. Of the voting instructions that you and/or third parties on your behalf issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
87 %
Against (opposing) management recommendations
12 %
1 %

18.3. In cases where your organisation voted against management recommendations, indicate the percentage of companies you have engaged.


18.4. Additional information. [Optional]

LEA 19. Proportion of ballot items that were for/against/abstentions

19.1. Indicate whether your organisation has a formal escalation strategy following unsuccessful voting.

19.2. Indicate the escalation strategies used at your organisation following abstentions and/or votes against management.

19.3. Additional information. [Optional]

LEA 20. Shareholder resolutions

20.1. Indicate if your organisation directly or through a service provider filed or co-filed any ESG shareholder resolutions during the reporting year.

20.6. Describe whether your organisation reviews ESG shareholder resolutions filed by other investors.

We generally review all shareholder proposals filed by others. We vote shareholder resolutions based on our Proxy Voting and Governance Policy. Each year, before the start of the proxy season, our Proxy Voting and Governance Committee reviews our firm's Policy to ensure it captures our latest thinking. At that time, we also formulate our approach to new shareholder proposals. In cases where new issues arise during the voting process, we convene a portion or all of our Proxy Voting and Governance Committee to discuss and develop a policy or come to a decision on an individual proposal. In addition, we may engage with shareholder proposal proponents and other stakeholders to understand different viewpoints and objectives. 

20.7. Additional information. [Optional]

LEA 21. Examples of (proxy) voting activities

21.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Topic
Cyber security
Conducted by

Objective: Review the company’s approach to data privacy in light of a recent scandal. 

Background: We hold this large Internet Software and Services company in several of our US Growth portfolios.

In early 2018, this company was the center of a data privacy scandal that revealed that the company allowed a third party to access data from millions of customer accounts without customer consent. When this information was publicized, there was a lack of communication to shareholders and an apparent reactive approach from the company.

The company later promised to improve user privacy and security policies, as it was not clear how the company was collecting information from customers and who had access to it. This controversy also resulted in significant leadership changes within the company, including the departure of their Chief Information Security Officer.

In addition to these data leaks, the company faced increased scrutiny around the management of content on their social media platform. Questions around what kind of content the company allowed on their platform were largely unaddressed.

In light of these controversies and increased importance around data privacy, we met with company management to understand what changes were made in order to address these risks.

Scope and Process

During our engagement, the company was clear that data privacy was a priority for the board. While we appreciated this recognition, we questioned the audit committee’s capacity to provide effective oversight of such a sensitive and large area of their business. Although the company was bringing two new members onto the board and audit committee, they believed there was no need to change their current process or functions around risk oversight on the board.

The company  disclosed that they were allocating a tremendous amount of resources to handling content management and review on their platform. While it was evident that the company was addressing this issue, the management structure around it was unclear. The company confirmed that it didn’t have  a central person or team in charge of this oversight as the scope is so broad.

Overall, we were unconvinced of any real proactive structural changes and thought further action was necessary.

At the annual general meeting, we voted in favor of a shareholder proposal asking the board to review and report on establishing a separate committee to oversee risk. We also supported a shareholder proposal asking the board to report on risks associated with content management controversies.

ESG Topic
Diversity|Other governance
Conducted by

Objective: Discuss our updated approach to Japanese board outsider membership with the company and review board composition. 

Background: We hold this large Japanese automobile manufacturer in several of our International Value portfolios. 

In 2017 the company changed its board structure from traditional statutory auditor to audit committee structure. We see this as a positive development, but told the company that we view the three-committee structure as the strongest form of board composition. 

In 2018 we updated our Japanese policy around board composition. We expect at least 50% of the board to be comprised of outsiders for non-controlled companies. If a board fails to meet this threshold, we may vote against the top member of management on the board, typically the President or Chairman, who we believe should be held accountable for board composition. This requirement only applies at companies with either the two-tier statutory auditor structure or the audit committee structure.

The company currently complies with previous AB guidance which was at least 30% outsiders on the board. We reached out to the company to discuss their current board composition and inform them of our new approach.

Scope and Process

The company acknowledged that 50% outsiders was a positive aspirational goal, but that they believe this will take a few more years to achieve this target. The company also expressed concerns about the drive to increase outsider participation leading to lower quality of candidates. We haven’t seen observed this and it appears that the market is well-equipped to add outside directors as evidenced by the dramatic increase of qualified directors in the market. 

We also noted that we expect diversity to be part of the refreshment process and candidate pool. We pointed out that while the company had two female directors (strong for the market), it would be beneficial to add geographic diversity to the board in the form of a non-Japanese director, especially considering their global footprint. The company noted that they are targeting a foreign board member. They’re increasing their director remuneration levels for this reason because they cannot attract foreign directors at current pay levels.

At the company’s annual meeting, we voted against their President in line with our new policy and in hopes of encouraging a greater number of outsiders on the board. We will continue to engage with this company on their board composition.

ESG Topic
Conducted by

Objective: Review our approach to gender pay equity and related proposals. 

Background: We own this large internet software company in several of our US Growth portfolios. This past year the company received a shareholder proposal at their annual meeting around reporting on the gender pay gap. The proposal asked the company to, “prepare a report on the risks to the company associated with emerging public policies on the gender pay gap.”

The proponents of this proposal pointed to some research that suggests that this company has a pay gap and lower retention rates for female managers compared to male mangers. They also note that gender pay equity can be advantageous to a business and mitigate risk. In addition, women only account for about one-fourth of the company’s leadership.

The company’s board argued that this report was not necessary as they “are committed to diversity and equality in all areas of [their] business, including hiring and compensation.” The company also sets pay targets by job in order to prevent gender pay discrimination.

Scope and Process

In this case, most of the company’s large peers publicly reported on, and pledged to, gender pay equity. This negates the argument that there is a competitive disadvantage to be the first to disclose. The company also faced a class-action lawsuit regarding their alleged segregation of women into lower-paying jobs and paying men more than women for similar roles. Due to mandatory disclosure, we know that in the U.K., the company’s female employees’ average hourly rate of pay was 17% lower than male peers.

As this is a US company, required EEO-1 disclosure reduces the reporting burden of publicly disclosing data as it has already been collected.

We generally support shareholder proposals calling for reports, while also considering existing policies and procedures of the company and whether the proposed reporting is of added benefit to shareholders. We recognize a company’s gender pay gap as an indicator of their culture and human capital management. We also believe that there is substantial evidence that gender diversity leads to better performance.  

After reviewing the shareholder proposal and the company’s existing policies, we voted in favor of the proposal. 

ESG Topic
Shareholder rights|Other governance
Conducted by

Objective: Discuss company’s current governance structures, our stance on their structures and suggested improvements. 

Background: For this small landscape supply company, we withheld our vote for the Governance Chair due to poor governance practices including: supermajority vote requirement to change bylaws, classified board, plurality voting and no shareholder access rights.

This company had an IPO in 2016 and the majority shareholders sold their final equity tranche in July 2017. In light of these events, we would expect the company to mature from a governance perspective. We held the Governance Chair accountable, as the classified board structure limited our opportunity to do so for the next three years. We support strong investor rights that hold directors and management accountable if they fail to act in the best interests of shareholders.

We reached out to the company to understand their plans for governance structure improvements and met with them in October 2018.

Scope and Process

In their second year post-IPO, the company was engaging shareholders to further understand expectations around board structure and finalizing a timeline to change governance practices. We expect a company to have an adequate sunset provision in place around a classified board. We also wanted to clarify that this company had a plan to change policies around the supermajority vote requirement to change bylaws, plurality voting and no shareholder access rights. The company recognized the need to change these structures and confirmed that they would be implementing a majority vote standard at the next meeting.

The company disclosed benchmarking efforts against peers to determine an appropriate sunset provision around their classified board. They also confirmed that proxy access will be provided in the evolution of the company’s governance structure.

While the company wasn’t clear on exact timing for these changes, they acknowledged that these are priorities for the board. We indicated that we recognize different board structures are appropriate for different companies but we expected to see changes going forward. 

We’ll continue to monitor the company’s governance practices and may vote against additional board members if changes are not made.  

ESG Topic
Executive Remuneration
Conducted by

Objective: Understand how the company plans on improving alignment between pay and performance of its compensation program.

Background: The company has been increasing base salary and equity grant award amounts for its CEO for the past three years since its IPO. However, the increase in pay is not substantiated by the company’s shareholder return.

In 2017, the CEO’s total pay increased 34.2% year-over-year when the company’s ROE, ROA and ROIC decreased and its TSR fell short of both S&P 500 and GICS peers on 1-, 3- and 5-year bases. The annual equity grant increased 45% compared to the prior year, and the concern is exacerbated by the fact that it is determined based on undisclosed goals. 

Additionally, the one-time vested retention equity, which amounts to $1M each for the CEO and CFO and was granted for both executives, is entirely time-based for the purpose of retaining these two executives beyond July 2018. 

On annual cash bonus, the CEO was paid 227% of his base salary even though 67% of the performance targets were missed.

For these reasons, we voted against executive compensation at the 2018 annual meeting.

Scope and Process

Our Equity Analyst and an ESG associate had a call with the company in November 2018. The goal of this call was to inquire about the company’s thinking behind its executive pay program, particularly in regards to its pay to performance alignment.

The company explained that it froze its CEO’s target pay as well as other NEO’s salary and target bonus. In order to enhance its pay level closer to its financial performance, the company will review its peer group to exclude those with larger market capitalization who tend to inflate the company’s peer median benchmark. Additionally, company will remove its large life insurance perquisite, which was carried over from the legacy program of its acquirer.

AB also requested the company incorporate more transparent and rigorous performance goals in its equity grant awards and exclude peers that do not have similar business operations to make the peer median benchmark more relevant and appropriate.

The company acknowledged the need to improve its compensation program. We will monitor how the company implements its promised enhancements in the coming year and whether the company’s alignment between pay and performance improves. We may vote against compensation if no changes are made.

ESG Topic
Executive Remuneration|Health and Safety
Conducted by

Objective: Review the company’s approach to mitigating exposure to the widespread opioid crisis across the industry, confirm the company’s long-term business strategy and understand their compensation structure.

Background: The issuer has been in financial recovery for various reasons, including issues stemming from the acquisition of a biopharmaceutical company in late 2011. The acquired brand’s off-label marketing of a drug targeting chronic pain patients became controversial as the marketing did not specify that the drug was intended only for the end-stage cancer patients. The drug also led to substance abuse and addiction and the company is now the subject of ongoing litigation based on the charges brought by the Attorney General of Ohio.

The company also has a short-term incentive program that solely focuses on EPS target, which does not align with AB’s proxy voting approach. However, given that the company is in an extraordinary situation as it recovers from problematic acquisitions, AB wanted to confirm that TEVA will adjust its pay metrics once it has re-entered a growth phase.

Our Equities analyst, Fixed Income Analyst, Head of Governance and an ESG associate had a call with the company’s Chairman and its Chair of the compensation committee in November 2018.

Scope and Process

We wanted to understand how the company plans to resolve its involvement in the opioid crisis, namely its unethical off-label marketing practice that led to drug addiction for numerous patients.

The Chairman explained that marketing of the two branded products of concern had been halted and that the company is working with community stakeholders to ensure that the drugs are being distributed appropriately. The company also mentioned that it is investing in research and development of a non-addictive pain killer.

Regarding the Ohio lawsuit, the company could not provide further details other than that it is working to resolve the case. However, the company raised a valid point on its limited capacity in controlling its drug distribution via black markets. This issue has only become more complicated with technological advances that support black market transactions.

The company disclosed that it would re-evaluate its pay program once it had resumed growth. We will continue to monitor how the company evolves in both resolving the ongoing crisis and in preventing similar incidents. We gave a pass on 2018’s compensation proposal and will monitor how the company re-adjusts executive compensation in the 2- to 3-year timeframe to focus on a long-term profitability.

ESG Topic
Executive Remuneration|Company leadership issues
Conducted by

Objective: Gain a clear understanding of executive compensation and board structure as the company continues to recover from a large scandal.

Background:  We have a multi-year engagement history with this large US bank. In 2016, the bank was fined by US regulators for opening false customer accounts without consent. This controversy has exposed several issues with management and board oversight and led to the CEO departure and major board refreshment.

In 2014, the board began to focus on these issues and implement positive changes. In 2017, we voted against all board members who joined prior to 2014, as it was clear that board oversight was poor and refreshment was warranted. 

In 2018 we spoke with several board members, including the chairman, before the annual general meeting. We identified concerning compensation practices and questioned the rationale for keeping two legacy directors on the board. Regarding compensation for the CEO and CFO, this plan year represented the first full year they were both in these roles. We wanted to understand the differences between the plan in this year compared to subsequent years. 

Scope and Process

The board explained that the size of increase to components of pay reflected the assumption of the roles, and the level of leadership and performance during a turbulent year. The size shouldn’t be expected to normalize at these year-over-year levels, but the plan’s construction should remain the same. The board withdrew the cash bonus from the CEO, although he qualified for it, due to ongoing concerns. We reviewed several performance-enhancers to the plan, including the addition of a returns-based relative goal and other features. The board also reduced previously granted equity pay-outs to executives due to ongoing concerns. 

Regarding the two remaining board members who participated in the oversight failures, the Chairman noted that they needed to remain in order to provide institutional knowledge. However, she acknowledged a collective board responsibility of legacy directors for past failures, including the two remaining members. We indicated that the current CEO, several executives and directors who have been brought onto the board since 2014, provide similar and possibly identical knowledge. 

After our discussion with the Chairman, we concluded to support pay as it appeared sufficiently performance-based and positive changes going forward will better align the overall compensation plan with the shareholder experience.  

ESG Topic
General ESG|Other governance
Conducted by

Objective: Obtain updates on company’s board structure related to their CEO’s combined role as Chairman of the board. 

Background: In 2018, this pharmaceutical company’s annual meeting ballot contained a shareholder proposal asking the company to require an independent board chairman. We believe there can be benefits to an executive chairman and to splitting or combining the positions of chairman and CEO, depending on the specific circumstances of the issuer. When the chair is non-independent, the company must have sufficient counter-balancing governance in place, generally through a strong independent lead director. However, for companies with smaller market capitalizations, separate chairman and CEO positions may not be practical.

In this case, the company’s lead independent director had a robust role with clearly defined duties and responsibilities, such as the authority to call meetings and approve agendas. At this time, we voted against the shareholder proposal to require an independent board chairman due to the strong lead independent director on the board. With this counter-balance in place, we believed the company should retain the ability to make changes to the board structure as they see fit and within their desired time frame.

Scope and Process

We noted several concerns at the company that could lead us to vote for such a proposal in the future: the company had multi-year structural compensation issues and the CEO was a director on two outside boards of large companies. These concerns prompted us to reach out to the company for an engagement in order to better understand company plans around changing their board structure and the role of their lead independent director.

During this engagement, the company disclosed that they were considering separation of the CEO and Chairman roles. The company indicated that this was their plan for when the current CEO retired, but based on shareholder feedback, they were considering making this change at an earlier date.

The company expressed concerns around making this change because they have never had a separate chairman from the CEO. i It was apparent that the company did not consider this an urgent issue due to the strength of the lead independent director’s role on the board.

We’ll continue to engage with this company around board structure and the role each director plays. At the next annual meeting, we’ll re-evaluate any proposal to require an independent board chairman. 


ESG Topic
Climate Change
Conducted by

Objective: To review the company’s current environmental policies and its readiness to respond to potential environmental controversies.

Background: The company lacks transparency on how it mitigates risks amidst the regulatory push for low-carbon economy. Approximately half of the company’s operations are in the US, and the company received a shareholder proposal in 2017 to assess portfolio impacts related to meeting the 2-degree warming scenario. We supported the proposal, which garnered majority support.

In response, the company published a report in March 2018 that discloses scenario analysis in line with the 2-degree warming scenario. However, the company failed to explain its plans to reduce exposure to oil and gas, unlike its European peers which include Total and Royal Dutch Shell. Further, the company’s carbon emissions intensity increased by 40% year-over-year in 2016, and its absolute emissions are also notably higher than its industry peer group.

Scope and Process

Our Responsible Investing team had a call with the company in August 2018 to address concerns on the company’s carbon emissions intensity and how it plans to strengthen its environmental policies in order to mitigate the issue. The company reinforced its commitments to regularly evaluate strategy, with board oversight, under various lower-carbon scenarios. These efforts include modelling potential carbon prices and related financial impacts in capital spending plans for major projects as announced by the CEO in March 2018.

The company added that it will end routine gas flaring by 2030 and add an executive compensation metric related to the advancement of carbon capture, utilization and storage (CCUS). As we ultimately promote genuine integration of environmental policies into the company’s business, we emphasized the need for Occidental to incorporate measurable environmental metrics into its reporting process and/or into executive compensation.

We understood that the company plans on strengthening its environmental policies with incorporation of quantifiable goals attached to its environmental program and its executive pay. However, we will continue to monitor how the company evolves in practice and express our view in our proxy voting decisions accordingly, through election of the governance committee Chair and/or the compensation committee Chair.

ESG Topic
Executive Remuneration|Other governance
Conducted by

Objective: review the company’s approach to compensation and governance structures. 

Background: this health-information technology company has inadequate governance structures that affect shareholder rights and result in a poor compensation structure.

We supported the compensation plan in 2017, albeit with several concerns that we shared with the company. The plan hasn’t changed, and our concerns persist. Unfortunately, a proposal to have a tri-annual compensation vote won 52% support last year. As a result, we could not directly vote on compensation in 2018. We were also unable to hold the chair of the compensation committee accountable, because the board is classified. The compensation proposal received 83% support last year. It is worth noting that the company has 20% insider ownership, so that should be factored into vote tallies.

Compensation concerns:

A $20M retention equity grant with 0% performance conditions was granted, vesting over four years. This is in addition to a normal course equity plan. The CEO owns 2% of the company.

Short-term incentive pay was significantly grossed up as a result of the Board of Directors’ discretionary assessment.

The company’s poor governance structures include a classified board, a plurality-vote standard for directors, and a combined CEO/Chairman with no lead independent director.

Scope and Process

In March 2018 we engaged with the company.

During our engagement with the company, management focused on the need to retain the CEO through a time-based grant, because much of his equity would vest within 12 months. We noted that the logic around proper incentivization was questionable: his equity is replenished through the LTI plan, his STI bonus averages are high and he has a lot of skin in the game.

This also calls into question the strength of succession planning. The company had difficulty articulating the plan, although they noted that seven regional business heads are all possible successors. The company has no COO, which could be a concern. We communicated that we would have expected performance measures to accompany the equity grant, but the company said this wouldn't have had the same retention power.

Ultimately, we decided to vote against an over-boarded director and a compensation committee member. For next year, we want to see less discretion in short-term incentive pay for the CEO and no additional one-time retention pay. We will continue to express our concerns to the company.


21.2. Additional information. [Optional]