Sound Shore’s experience has been that high standards of corporate responsibility including good business practices, transparency and accountability, reflect good business sense and are directly related to long term investment outperformance. Our fundamental company research includes active engagement with management. Before owning a stock, we generally meet with management directly. Additionally, we conduct cross-checks with suppliers, competitors, clients, and other relevant primary sources. We have approximately 600 management meetings annually.
Criteria we evaluate to assess risk include:
- Operating performance
- Rigor in capital expenditure budgeting and allocation
- Compensation practices
- Director accountability
- Climate and environmental risks and changes
- Social factors and changes
- Focus on total shareholder return versus appropriate market benchmarks
- Free cash flow per share and shareholder yield (dividends plus share repurchase)
- Time allocated to non-core activities
- Other company specific responsible investing factors
As long-term investors of our clients’ capital, we view active ownership as our fiduciary responsibility. Our company-specific due diligence process includes financial statement analysis, focusing on risks and liabilities, including ESG considerations. Sound Shore discusses material items with management, providing remediation input. Our target valuations for stocks will include estimate for these factors if relevant. We also utilize external sources such as Bloomberg ESG data.