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Lombard Odier

PRI reporting framework 2020

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

(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

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

Approach

Based on

12.2. Provide an overview of how you ensure that your agreed-upon voting policy is adhered to, giving details of your approach when exceptions to the policy are made.

Any change we encourage companies to make through the exercise of voting rights or related engagement is intended to improve a company's long-term performance. Accordingly our voting decisions (i) favour proposals that in our view tend to maximise clients' long-term shareholder value; and (ii) are not influenced by conflicts of interest. These principles reflect our belief that sound corporate governance and effective management of social and environmental risks create a framework within which a company can be run in the interests of its shareholders.

As an overriding principle we have regard to the two main global governance standards (G20/OECD Principles of Corporate Governance (2015) and ICGN Global Corporate Governance Principles (2017)) when determining how to vote.

The G20/OECD Principles cover six main areas:

  1. Ensuring the basis for an effective corporate governance framework
  2. The rights and equitable treatment of shareholders and key ownership functions
  3. Institutional investors, stock markets, and other intermediaries
  4. The role of stakeholders in corporate governance
  5. Disclosure and transparency
  6. The responsibilities of the board Lombard Odier Investment Managers

The ICGN Principles cover eight main areas:

  1. Board role and responsibilities
  2. Leadership and independence
  3. Composition and appointment
  4. Corporate culture
  5. Risk oversight
  6. Remuneration
  7. Reporting and audit
  8. Shareholder rights

We also use Institutional Shareholders Services (Europe) S.A. ("ISS") to provide operational, record-keeping, research and reporting services. ISS prepares written analysis and recommendation of each proxy vote, based on our custom voting guidelines.

Our voting falls into five broad categories (it being understood that in practice certain topics may not fall into any of those categories and will be dependent on the view of either the stewardship or portfolio management teams).

  • Routine matters: Unless we determine otherwise in any particular case, the routine matters below are voted in accordance with our guiding principles, as determined by best market practices (audit, income distribution, amendment to Articles of Association, capital related resolutions, etc.)
  • Predefined matters: Certain pre-identified matters will be voted on in accordance with predefined guidelines that we have notified to the Proxy Voting Service.
  • Voting against a Company's Board: Certain Board-related topics, listed below, will be referred to the relevant portfolio management and stewardship team when the proposals are not aligned with our guiding principles (fixing the number of Directors and/or Auditors, eliminating Cumulative Voting, approving discharge of Management and Supervisory Board, electing Directors)
  • Material events: Material events, including those below, will be systematically referred to the relevant portfolio management team for a voting decision: (merger agreement, reorganization/restructuring plan, joint venture agreement, plan of liquidation, spin-off agreement)
  • Sustainability topics: Sustainability related topics, including those below, will be systematically referred to our Stewardship team for a voting decision: robust oversight structures around ESG issues, climate-related risks and opportunities (including: taking action to address climate change and to establish environmental/social issue board committee, genetically modified organisms (GMO), weapons related, and M&A activity when it involves sustainability issues)

In addition to the above five broad categories, certain matters will be referred to our Stewardship team when the Proxy Voting Service recommend to vote differently to our guiding principles. When we have an Active Engagement with a company, the vote will require input from the Head of Stewardship.

In line with our strong commitment to stewardship and transparency, from Q2 2020 we will disclose retrospectively our voting records on our website.

This information is reflective of our asset management activities.

12.3. Additional information.[Optional]

As an integral part of the ongoing development of our active ownership activities, we continue the development of updated voting guidelines, closely aligned with our strategic focus on alignment of companies' business models and practices to the transition to a sustainable economy. We continue to place a particular emphasis on business model alignment with the decarbonisation of the economy. This strategically systemic issue cuts across all geographies and all sectors and will allow us to exercise our voting rights in a way that maximises our impact.

This information provided above is reflective of our asset management activities.


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


LEA 14. Securities lending programme

14.1. Does your organisation have a securities lending programme?

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

14.4. Additional information. [Optional]

This information is reflective of our asset management activities.


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

15.1. Indicate the proportion of votes participated in within the reporting year in which where you or the service providers acting on your behalf 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]

This information is reflective of our asset management activities.


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

16.1. Indicate the proportion of votes where you, and/or the service provider(s) acting on your behalf, communicated the rationale to companies for abstaining or voting against management recommendations. Indicate this as a percentage out of all eligible votes.

16.2. Indicate the reasons why 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 abstaining or voting against management recommendations, indicate whether this rationale is made public.

16.4. Additional information. [Optional]

The development of our voting practices and transparency continues to be a key focus area for the ongoing development of our stewardship activity. We are committed to publicly disclosing our voting record in line with best practice and will be doing so, on a quarterly retrospective basis, starting in Q2 2020. We continually review our decisions not to publish our rational for abstaining for voting against management recommendations. We do, however, make these available to our underlying clients upon request. 

This information is reflective of our asset management activities.


LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities in which you 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%)

36 %

Specify the basis on which this percentage is calculated

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

17.3. Additional information. [Optional]

The development of our voting practices and transparency continues to be a key focus area for the ongoing development of our stewardship activity.  We are currently reviewing the potential continued incremental expansion of our voting coverage and, as of January 2020, we had already increased our voting coverage compared to 2019.

This information is reflective of our asset management activities.


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

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

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

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
90 %
Against (opposing) management recommendations
9 %
Abstentions
1 %
100%

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

10

18.4. Additional information. [Optional]

These figures and information are reflective of our asset management activities.


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]

Escalating our engagement is done on a case-by-case basis, and any decision will depend on the severity of the issue, the engagement history (ie whether the company has been responding well to our concerns), previous voting, and immediate controversies affecting the stock. Any decision to use tactical voting, to file a shareholder proposal or divest will require input from the Portfolio Manager, stewardship team and Stewardship Committee.

As mentioned previously, 2019 saw the significant expansion of our active ownership capabilities. In line with this, we continue to develop and build on our active ownership framework and activity. Amongst other areas, we are currently writing our engagement and voting escalation strategy, which will be the public codification of our approach to escalating concerns in the past. We note that the recently created Stewardship Committee will be the final decision maker for escalation matters. 

This information is reflective of our asset management activities.


LEA 20. Shareholder resolutions

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

20.7. Additional information. [Optional]

This information is reflective of our asset management activities.


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
Other governance
Conducted by
Objectives

To increase our understanding around Joint Chairman/CEO roles and, where necessary, encourage change relating to lack of overall independence at board level.

Scope and Process

We engaged with several companies that had either a)  instituted a joint Chairman/CEO role; or b) not a majority independent board to understand the nature, and extent of this deviation from market practice. During our conversations with them, for item a, it became clear that such measures were extraordinary and limited to periods of turmoil and change. On the back of these reassurances, we were able to support the election of joint Chairman/CEOs, together with keeping the matter under constant review. In relation to matter b, we escalated our concerns to voting against some board members when reassurances about upcoming board changes were not strong enough, and we supported the re-election of non-independent incumbents following companies understanding of our view and commitment to change.

Outcomes
ESG Topic
Sustainability reporting
Conducted by
Objectives

Improve sustainability reporting in Hong-Kong listed companies.

Scope and Process

After assessing sustainability reports and identifying areas of poor disclosure, we engaged with several companies to encourage them to improve their reporting. On the back of commitments to improve, we were able to support all resolutions.

Outcomes
ESG Topic
Climate Change
Conducted by
Objectives

Alignment of business strategy to the Paris agreement.

Scope and Process

We engaged with two companies to understand the depth and extent of their commitments to a business strategy aligned with decarbonisation and the 'Just Transition'. Despite intense engagement, no results could be achieved and we were left with no other option but to divest. 

Outcomes

21.2. Additional information. [Optional]

This information is reflective of our asset management activities.


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