We operate in an environment that is continually changing and subject to vast information flows. As a result, we remain alive to the prospect that any company we invest in may present specific issues that require our assessment. There are also times when we are required to support companies or accommodate requests for engagement from management teams.
Consequently, engagement decisions are taken on a case-by-case basis, and with due consideration for:
§ client-sponsored initiatives or requests
§ collaborative activity
§ the size of holding and overall weighting
§ whether the company is a new position.
Below is a representative list of the types of themes that might trigger an engagement:
§ Routine monitoring or relationship meetings
§ Succession (management and board levels)
§ Leadership changes
§ Mergers and acquisitions activity
§ Corporate strategy and culture
§ Board effectiveness and composition
§ Performance and financial issues
§ Stakeholder agenda (environment, employee and customers)
§ Political risk
§ Regulation, conduct or cyber security
We aim to be reliable owners of trustworthy businesses that are led by managers with a long-term mindset. As stewards of our clients’ assets we believe it is fundamentally important that our approach is not one based on box-ticking but is rather founded on the application of intelligent considerations of what will best support the long-term success of a business.
To that end, we seek to build relationships with company leaders, both the management and non-executive directors, to understand their perspectives and to share constructive views. We seek to encourage long-term value creation and will support boards that have a clear and appropriate strategy. We will provide early feedback when we have concerns about the strategy, or the structures put in place to deliver that strategy.
We identify six key drivers of long-term business performance, which we seek to encourage in our dialogue with management teams and boards, and aim to reinforce through our voting decisions:
§ Long-term strategic planning
§ Protection of investor rights and interests
§ Climate-related risks and strategies
§ Remuneration
We aim to be reliable owners of trustworthy businesses that are led by managers with a long-term mindset. As stewards of our clients’ assets we believe it is fundamentally important that our approach is not one based on box-ticking but is rather founded on the application of intelligent considerations of what will best support the long-term success of a business.
To that end, we seek to build relationships with company leaders, both the management and non-executive directors, to understand their perspectives and to share constructive views. We seek to encourage long-term value creation and will support boards that have a clear and appropriate strategy. We will provide early feedback when we have concerns about the strategy, or the structures put in place to deliver that strategy.
We identify six key drivers of long-term business performance, which we seek to encourage in our dialogue with management teams and boards, and aim to reinforce through our voting decisions:
§ Long-term strategic planning
§ Protection of investor rights and interests
§ Appropriate management of risk exposures
§ Independent and effective boards
§ Tailored and appropriate remuneration structures
§ Transparency and culture
An escalation policy is in place and we have various channels available should a situation not be resolved through considered and continued dialogue with management. The ultimate decision is taken by the fund manager, but the escalation pathway can include: i) further dialogue with chairman/ independent directors, ii) voting against, iii) collective engagement, iv) filing / co-filing resolutions, v) convene and EGM and v) making public statements, vi) reducing position / divesting. The ultimate decision rests with the fund manager and some of these options such as filing a resolution is rare, but it is not uncommon to take concerns to an independent director.
An example of our escalation policy in action was Godfrey Phillips, an Indian company in which we are long term and engaged shareholders. We had previously engaged over several years on the need to improve standards of corporate governance, the group’s reputation in capital markets and the dividend policy. We wrote to the Board following the death of the group's managing director who was also head of the family who control the company. We offered our condolences and also sought to underline the importance of a clear and transparent succession process during the transition period and the Board's oversight role on behalf of all stakeholders, including minority shareholders. The Board appointed the former MD’s wife as his successor, we did not consider this to be an appropriate succession arrangement. There was also a lack of transparency regarding the succession arrangements for the trust which holds the family’s shareholding. We wrote to the CEO relaying our concerns regarding the succession process and seeking full disclosure regarding succession agreements between the company and its major shareholders. We subsequently sent a second letter to the Board reiterating our concerns, which was also copied to the CEO of the group’s US parent company. We also commissioned independent research from a proxy research provided which illustrated shortcomings in the group’s governance arrangements, which was subsequently sent to the Board and parent company. The engagement continued into the 2020 calendar year and we will assess outcomes once a resolution has been achieved.