Our service provider carries out daily and weekly vote audits to ensure that each step in the voting process is followed and that votes are cast in accordance with their and our own policies. In the case of standard votes, the proxy voting advisor will cast the votes in accordance with the relevant BMO Global Asset Management governance policy (which reflects our own) with oversight from relevant individuals. In the case of non-standard votes, the governance specialist for the market or region concerned will directly instruct the vote.
To ensure reliable execution, BMO contracts directly with ISS for electronic proxy voting execution services via their ProxyExchange platform. Through this system and working with custodians and Broadridge, ISS generates electronic ballots for all companies held in client accounts and then processes voted ballots, which are executed through the client's custodial chain. Except for the actual voting decisions, other aspects of vote execution (i.e. ballot delivery, vote processing and certain elements of vote administration) are outsourced to ISS.
Voting administration matters, including client set-up for proxy voting and reporting and ongoing administration of client accounts, are dealt with internally by the GSI team. GSI's Data & Systems and Data & Reporting analysts will liaise as necessary with the clients' custodians and other agents to ensure smooth operation of the voting process. BMO also has access to a large operations support team within ISS who help us resolve any operational/administration issues.
ISS also provides BMO with global proxy voting research, which includes analysis of resolutions. BMO uses ISS research to understand details of companies' proposals. Please note that BMO does 58
not implement ISS' standard voting recommendations, they cast their votes in accordance with voting policies agreed with the client and on the basis of their judgement.
Their voting process uses a risk-based approach to achieve high quality voting while delivering comprehensive coverage of a wide portfolio of stocks. They deploy their specialist governance team on the most complex and sensitive cases and partner with ISS, to deliver voting on the simpler, routine votes through the careful and consistent application of detailed in-house voting policies. In practice, the process works as follows:
Meeting notifications and ballots for clients' accounts will appear in the voting queue on the electronic voting platform used by BMO;
Voting policy will be applied to each shareholder meeting through an automated voting recommendation process;
The voting queue will be checked every morning to determine upcoming votes, particularly those that may require analyst intervention;
All votes designated for analyst intervention in the voting allocation spreadsheet are voted by the team members. This includes large holdings, priority engagement companies, potentially controversial votes, votes on investment matters and issues not covered by voting policies, and shareholder meetings of companies engaged by BMO;
Analysts monitor the voting queue for any votes designated for analyst intervention, and will look at the meeting materials as early as possible to allow sufficient time for research. When analysing the ballot and determining the vote, GSI analysts will:
check the internal database for voting and engagement history to inform current vote;
read proxy research reports on company and review supporting materials (e.g. annual report, CSR report, external reports) for further information on key issues, as relevant;
contact company if clarification is needed to determine vote direction;
determine the intended vote direction and consult with colleagues, fund managers and clients if necessary, particularly in instances where the vote concerns an investment matter or could create controversy. Analysts will also determine if there are any significant ESG issues that go beyond the ballot that should be addressed through engagement outside the annual meeting.
Trained analysts are responsible for voting in each market covered by our voting service;
Automated voting recommendations can be manually overridden any time prior to the cut-off date. If a vote needs to be cast after the cut-off date but prior to the meeting date on a client instruction, ISS will be alerted by BMO to ensure execution of the vote. Their internal "voting policeman" monitors the voting queue and alerts analysts if votes remain outstanding on the cut-off date (e.g. late ballots)
GSI team regularly audits the votes auto-executed under the voting policy to make certain that our voting policies are applied properly by ISS;
Clients who want to monitor voting decisions outside the normal reporting cycle can receive a preview of voting intentions for an entire portfolio or a subset of holdings. BMO can accommodate clients who want to vote, by exception, in a particular way on particular resolutions; this request would need to be triggered by the client. Alternatively, clients can have a "look-through" into the ISS platform.
BMO engages companies before and after general meetings, using their vote to deliver change. At the start of each year, the GSI team sends a copy of its Corporate Governance Guidelines to each investee company, outlining their position and voting strategy for all key governance issues. Through our pre-vote engagement, they highlight the most common governance concerns in each market and invite companies to contact them if there are special circumstances that should be borne in mind when voting at their meetings. After any shareholder meeting, BMO engages companies again to explain the reasons for votes cast in opposition to management; this provides further opportunities to raise key corporate governance and sustainability issues not addressed in the ballot.
Voting is highly integrated with engagement. For priority companies, and for resolutions which are controversial and fall outside BMO's standard voting policy, BMO has governance experts in the team.