Proxy voting of shares is undertaken by our stewardship team EOS on behalf of the investment teams. We vote in line with our Federated Hermes' Responsible Ownership Principles and the voting guidelines for 21 major countries. Voting guidelines differ by country to reflect the differing regulatory, legal and corporate governance practice that exists. The policy is also in line with OECD and ICGN global governance guidelines. We will vote by exception to the policy where doing so we judge will further the engagement and be most likely to achieve beneficial change.
EOS files shareholder proposals in markets where it is relevant to do so, typically in Germany and the US, either as lead filer or as co-filer alongside other investors. Consistent with our intelligent voting approach, this typically forms part of a wider engagement with the company and is used as a tool for leverage in its dialogue with management.
EOS has a value add and cost-effective mix of automated and manual voting, ensuring coverage of all client equity holdings while focusing our resources on key topics and companies where clients have significant holdings and/ or there are contentious issues or ongoing engagement objectives. Proactive voting exceeds 90% of the value of assets under advice. EOS' 'intelligent' voting approach also enables clients to influence beneficial change through voting and engagement around the vote.
In terms of the process for manual votes, EOS undertakes detailed research into the particular circumstances of each company and the items on the general meeting agenda prior to voting its clients' shares. This includes a careful analysis of the company's annual report, meeting agenda, and any other publicly available information to identify particular issues of concern. Crucially, with any company where there is a live engagement, the context of the specific engagement objectives will also be considered. Our extensive database of company contacts, which includes more than 10 years of details of all communications with companies, is also key to the decision-making process. All of the other inputs - from advisory agencies, brokerages, portfolio managers, news flow and elsewhere - are also considered in arriving at our voting decisions.
We believe that a flexible 'comply or explain' approach to voting is appropriate for most companies. However, to be effective, such an approach requires significant resources at the appropriate level. Our voting recommendations and actions are made by and for experienced and business-oriented investors in order to support companies' sustainability and long-term performance. We believe that the EOS team is well placed to research and make judgments as to the degree to which companies can reasonably comply with local best practice and where exceptions are appropriate.
In cases where we feel it appropriate to vote against management, we will commonly discuss the issue directly with the company ahead of the vote and, where the international business of Federated Hermes as a holding, we will also discuss the issues with the relevant portfolio manager. The aim of these discussions is to establish the facts and circumstances surrounding the issue and check our interpretation of the resolution and its context.
While it is difficult to provide a general description, we will typically vote against management when we consider that a vote with management would not serve the best long-term interests of shareholders. This may be either, for example, with respect to a proposed remuneration policy or where we consider there are insufficient skills on the board to govern the company effectively. There may also be specific instances where a vote in favour of management would be actively detrimental to the company, for example in the case of a proposed merger or acquisition that does not look to be in the long-term interests of the company.
EOS always seeks to obtain the required information to make an informed voting decision, but this may not always be possible. Where we vote against the recommendations of company management, we may contact the company, generally in writing, after the meeting to inform them of the decision and the reasons for it. This communication is designed to provide reinforcement of the discussions surrounding the vote and give clear guidance as to our clients' position.
Typically, due to the large number of votes we process on behalf of clients, we do not attend AGMs and vote by proxy. However, we will do so selectively where doing so will further our engagement or to support a resolution we have lodged at the meeting on the rare occasion that we do.
Where we have long-standing concerns that may affect the company's long-term prospects, it will be considered as a candidate for company-specific engagement.