ACSI defines engagement as any medium of company communication where there is a meaningful discussion or response produced. This can be through letters, email, telephone/conference or an in-person meeting.
        

          •	Company research, including formal and informal sustainability disclosure mechanisms
•	Thematic research
•	Analysis
•	Third party providers
•	Company engagement
•	Issues arising from company AGMs
•	Public disclosures, government reporting and media reporting
        

          ACSI uses a range of company-disclosed and independently-sourced information to create comprehensive analysis and research for our members, to help determine ACSI’s priority engagement themes and target companies, and to evaluate company progress towards ACSI’s objectives (which are set in consultation with members). 
ACSI also analyses and commissions information from third-party providers, arranges company engagements to pursue issues arising from AGMs, and uses that information to inform its proxy voting, engagement and research projects.
        

          ACSI’s engagement program seeks to influence companies through constructive engagement with ASX300 boards about material ESG issues. Currently, ACSI has five priority engagement themes, which for 2016 consisted of 49 companies in the ASX200 index. The issues are drawn from a range of sources, based on a significant amount of internal and external research, proxy voting outcomes and current issues. ACSI then further prioritises companies by taking into account the holdings of our members, focusing on the largest aggregate member holdings. For engagement, ACSI creates a list of priority engagement companies which is reviewed annually and monitored and evaluated semi-annually.
        

          ACSI annually creates a list of engagement priority companies with specifically defined concerns and objectives for each company. ACSI’s objectives are to achieve meaningful changes in company behaviour, alongside some more binary company-specific objectives, such as 30% women on boards in the ASX200 by the end of 2017. ACSI also sets objectives for the proportion of all priority companies where objective are met, for example, ACSI may aim for over 50% of all priority companies’ objectives to be met. 

This process  is overseen by a Member Council, in consultation with Management. ACSI members actively contribute and set the goals and direction that ACSI takes.
        

          ACSI is made up of 29 Australian superannuation funds, and six overseas pension funds, which actively contribute and set the goals and direction in consultation with ACSI Management, via a Member Council. This ensures that ACSI’s engagement model is aligned with the values and goals of the member funds. 

ACSI does further ad hoc, specific work for certain members, where requested, in pursuit of fulfilling their own additional ESG requirements and objectives.
        

          Both ACSI’s annual engagement priority targets and its Guidelines for operation are set in consultation with its Member Council. This means that the targets and objectives are approved by members, and the principles are adopted are signed off by their representative members on the ACSI Council.
        

          During 2016, ACSI met with 135 ASX300 companies in 181 formal engagements. These meetings are generally organised ahead of the companies’ shareholder AGMs, or shortly after those events, where material issues have arisen or are perceived as likely to arise. The meetings almost always occur with Non-executive members of the boards, usually at the level of company Chair, often including board committee chairs responsible for People and Remuneration issues. Most boards also bring investor relations, general counsel or HR executives for part of the discussions.

Our ‘execution method’ relies on identification of specific issues, and the actions/outcomes we are seeking from the company, and the company’s actions to address the issues identified. 

Some engagements are driven by thematic issues, either through ACSI’s pre-determined priority programs or where issues emerge in specific sectors which are seen as potentially damaging to long-term investment values: - i.e. ethical sourcing after the clothing manufacturing tragedies in  Bangladesh or in franchising structures in relation to underpayment of workers, or when ACSI’s research highlights a particular risk within a company or sector. 

For all companies covered by ACSI’s voting service, ACSI usually corresponds either via meeting or teleconference around the time of the company meeting, or writes to each company where there was an ‘against’ recommendation expressing its rationale and concerns. Companies where there are more material concerns become corporate governance engagement priorities where ACSI typically holds face-to-face meetings with the company seeking a change its practices.

Alongside meetings, ACSI sent 314 letters to company chairs on topics including board confidence, sustainability reporting practices and board gender diversity. 

The general process undertaken as a part of the engagement process include taking into consideration:
•	Priority company issues 
•	Internal and external research
•	Proxy voting research and outcomes
•	Any type of publicly available documents e.g.: annual reports, sustainability reports. 
•	Media
•	Controversies
        

          ACSI generally meets with ASX300 company chairs, with the preference of an independent chair or lead independent board member.
        

          ACSI notifies our members of the upcoming engagements and asks for feedback and participation in both the meetings and on the agenda set for the meeting.
        

          ACSI endeavours to ensure all its meeting are held in a non-confrontational manner, while still communicating any issues it has. Follow-up communications or discussions are often had on more contentious matters, particularly post-meeting where ACSI has recommended its clients oppose a particular resolution.

In some circumstances, ACSI may ask the company to arrange a separate briefing by with board members or executive specialists for its members on specific matters of interest/concern, to allow unfiltered examination of the issues and chance for both sides to communicate openly.
        

          Success is when a company modifies it behaviors or practices in a way which meet, all or in part, ACSI’s pre-determined objectives for the engagement.
        

          “Success” is measured differently, depending on the objectives set. In areas such as gender diversity at board level, appointment of a woman director – or a guarantee from the company that one will be appointed – is easily measurable.
Where more qualitative changes are sought, such as the setting of policies and greater detail in public disclosure on labour and human rights issue, or how a company is responding to (and reporting on) the challenges of climate change effects on its business, achievement of objectives will often require several meetings and several staged steps towards “best practice”.
Similarly, changes in remuneration practices often require a longer time horizon because of the wider-ranging effect of altering structures.
        

          ACSI would communicate again with the relevant organisation, either in written form or by telephone, to detail where it believes the company is not meeting objectives and, usually, explains that will result on a negative voting recommendation on relevant resolutions at the next shareholder meeting.