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Capital Group

PRI reporting framework 2020

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.

We are focused on delivering superior, long-term sustainable returns for our clients and this goal is at the forefront of all of our voting decisions. We consider proxy voting an integral part of our commitment to clients. Our voting process ensures that each proxy vote is analysed on a case-by-case basis, and has the force of multiple decision-makers bringing the weight of their collective experience to bear on the specific issues.

Our internal Governance and Proxy (GAP) team coordinates and facilitates the proxy voting process. The team comprises analysts, specialists and proxy administration and members are based in London, Los Angeles, San Franciso, Hong Kong and Singapore. The team has considerable experience in voting and other governance issues. GAP analysts and specialists provide our investment analysts with detailed information around votes and our voting guidelines which are incorporated into our voting recommendations. Investment analysts are responsible for developing the voting recommendations. Their experience and in-depth knowledge of each company and their sectors enables them to factor in particular relevant circumstances and any idiosyncratic characteristics into the voting recommendations. This ensures that the voting decisions of our proxy committees are in line with the analyst's overall long-term investment thesis and forms part of our ongoing engagement and interaction with the company. The intimate involvement of the investment group in the voting process enables them to explain and discuss our voting position with company management and the non-executive board; this access broadens our understanding of the business and ensures the voting decisions of our proxy committees are integrated closely with our wider company engagement. Voting recommendations are reviewed by proxy coordinators (senior analysts with experience in corporate governance and proxy voting matters), and then further reviewed and debated by our regional proxy voting committees who make the final vote decision. The proxy voting committee comprise primarily of investment professionals, bringing a wide range of experience and views to bear on each voting decision. Our proxy voting committees, delineated by geographical region, are responsible for overseeing proxy voting, globally.

This four-stage process ensures that each proxy is critically analysed and evaluated on its merits and considered in the context of the analyst’s knowledge of the company, current management, management’s past record, and the proxy committee's general position on the issue.

We review our voting policies annually which continue to evolve and reflect the changing corporate landscape and regional differences.

12.3. Additional information.[Optional]

Using company materials we produce our own internal research to facilitate our proxy voting recommendations.  We have the option to supplement this with external research if required but do not use voting recommendations from third parties or recognise their voting policy. 


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]

We use securities lending as a way to increase returns to our clients. We will recall the security on loan if we believe that it is in the client’s interest to recall the security and forgo the lending revenue. In the event we wish to exercise voting rights, securities on loan will be recalled. Important issues being raised on the proxy that might cause us to recall our shares:

  • Mergers & Acquisitions
  • Environmental & Social Shareholder Proposals
  • Contested Meeting
  • Activist Involvement
  • High Executive Compensation

Other items, such as Capital Structure or Equity Compensation Plan proposals might cause us to recall shares, provided there is appropriate rationale. 

There may be instances where we determine that the benefit from lending may outweigh our interest in a particular proxy vote.


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]


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]

We communicate our votes against management via meetings, emails or conference calls. We aim to inform companies in advance of our intention of voting against management recommendation, when the company have made contact with us via pre AGM consultations expressing the importance of the resolution. Our communication outlines the resolution which we are opposing and the rationale for our voting decision, highlighting our voting policy and any areas of focus which may have driven the recommendation. If we are unable to communicate with companies ahead of the AGM, we may incorporate this feedback into future engagements with the company.

We do not make public our rationale for voting abstain or against management. However, we produce detailed quarterly proxy voting reports, which are available to all clients for whom we have the authority to vote. These reports detail the shareholder meetings held during the period in respect of securities held by our client and provide details on how the votes have been cast. Report formats are available which show votes cast against management and abstentions with the reasoning behind this decision and an overall statistical summary of all votes cast.


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%)

98.29 %

Specify the basis on which this percentage is calculated

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

Sanctions

Legal liabilities associated with voting

Voting on our own funds

17.3. Additional information. [Optional]


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
89.4 %
Against (opposing) management recommendations
8.95 %
Abstentions
1.65 %
100%

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

19.38

18.4. Additional information. [Optional]

As an active manager, having rigorously selected the companies which we hold in our portfolios we generally support management in their long term strategic endeavours. 

We review our votes at the time of voting and communicate our votes against management to the company on resolutions that need further explanation. We relay to management the Capital proxy voting and decision making process, alongside the reasons for our vote detailing our voting policy. When meeting with the company to discuss other topics, if appropriate we may also notify them of our votes at other times of the year. 


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]

We review and report all rejections on a quarterly basis. We remediate any issues under our control to ensure that future votes are processed and accepted.


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]

We do not submit any shareholder proposals. Where we identify issues that we believe will have material long-term impacts to shareholder value, we will engage with companies on these confidentially. We believe this is a more effective and constructive approach to solving problems and avoids the risk of damage to shareholder value caused by polarized public positions.
 


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
Executive Remuneration
Conducted by
Objectives

To ensure that executive remuneration creates incentives for superior long term investment returns and is aligned with all shareholders interests.

Scope and Process

We engaged with a food retailing company regarding a proposed Long Term Incentive Plan (LTIP) during the year, expressing our view that proposed performance targets were too low and would lead to outsize rewards for executives that would not accurately represent the shareholder experience. The company revised its targets following our engagement, raising performance thresholds and strengthening the requirements for payouts.

Outcomes
ESG Topic
Shareholder rights
Conducted by
Objectives

To discuss proposed amendments to shareholder voting rights and to continue to emphasise our preference for a 'one share, one vote' approach 

Scope and Process

Our analyst engaged with the management of an Italian company regarding the proposed introduction of extended voting rights for shareholders who had held longer term positions, and reinforced our preference for a single voting rights structure where contextually appropriate. The company has agreed to further disclose how the proposed structure will operate, and will seek to ensure that other provisions will mitigate potentially dilutive outcomes for shareholders.

Outcomes
ESG Topic
Executive Remuneration|Climate Change|Pollution
Conducted by
Objectives

Proactively engaged with the Board, including the Chairman, of a large European building materials company to encourage an active role in developing carbon emission reduction approaches.

Scope and Process

The company acknowledged the need to lead the industry practices in this area, and has implemented CO2 reduction targets that aim to follow the Paris Accord glide path for executive remuneration plans.

Outcomes

21.2. Additional information. [Optional]


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