December's topical questions for your manager
1. Background: The COP 21 summit in Paris set out ambitious targets for the reduction of greenhouse gas emissions that many say are incompatible with the business models of major companies across a number of sectors.
QuestionHow would a reduction in the extraction and consumption of fossil fuels commensurate with a target of global temperature rises no greater than 1.5 degrees Celsius impact on the anticipated returns from your current investment portfolio?
2. Background: The FCA market study highlights the sustained profit margins, price clustering and high levels of remuneration in the asset management market, suggesting that these are not indicative of a fully functioning market and that a truly competitive industry with well-informed clients would have resulted in greater downward pressure on costs.
Question: What is the basis for the costs charged by your firm? What steps are you taking to offer your institutional and retail clients a more competitive pricing structure?
November's topical questions for your manager
1. Background: Dividend pay-outs at BP and Shell have increased significantly (partly as a result of post-Brexit currency effects). The two companies accounted for approximately a fifth of total UK dividends in the year to September. However, there are ongoing concerns regarding the sustainability of these pay-outs in light of factors such as the low oil-price and rising debt levels at the companies.
Question: Do you have concerns about the sustainability of dividend payments at Shell and BP? Can you give an example of an occasion when you have promoted dividend parsimony in favour of investment in the long-term interest of the company?
October's topical questions for your manager
Background – The Business, Innovation and Skills Parliamentary Select Committee has issued a consultation looking at corporate governance issues* including Director’s duties and boardroom diversity.
Question – How do you ensure that the Directors of investee companies fulfil their responsibilities to run the company for the benefit of its members while having regard for other stakeholders, including workers, customers and the wider community? Can you give examples of cases where you have successfully engaged with a company in order to improve the diversity of gender, social background and professional experience at boardroom level?
September's topical questions for your manager
Background: The Securities and Exchange Commission is investigating accounting practices at ExxonMobil, including how they account for the future costs of complying with regulations to curb greenhouse gases. The investigation has prompted renewed criticism of those investors who opposed the shareholder resolution at the Exxon AGM asking the company to assess and disclose how its business model will be effected by efforts to mitigate climate change.
Question: How will companies in your portfolio be affected by efforts to mitigate climate change? How do you understand the extent of climate-related risk to your investments and what do you do to mitigate them?
August's topical questions for your manager
1. Background: The Investment Association recently published the findings of its working group on executive pay. The report proposes a number of different models for paying UK business leaders, such as a restricted share award for Chief Executives to be held for a fixed period of years. These models could expand pay structures beyond the established practice of payments comprised primarily of a salary, annual bonus and a share based ‘long-term’ incentive plan (LTIP) awarded annually based on performance over the preceding there years.
Question: Do you intend to encourage the uptake of any of the models for executive pay proposed in the Investment Association’s working group? Do you think this will result in a reduction in the size of executive pay awards, which have been such a subject of controversy in recent years?
2. Background: Background: A resolution at the Sports Direct AGM on September 7 will call for an independent review of the company’s working practices, following widespread criticism in the media and from a Government select committee. Concern about the sustainability of Sports Direct’s working model has contributed to the company’s share price falling to 60 per cent of its value at the time of the 2015 AGM, according to the trade union Unite. Sports Direct have undertaken a review involving Mike Ashley, the public face of the company and its majority shareholder and a law firm that has acted for Ashley on previous occasions. As such, the resolution sponsors have serious doubts that the existing review will be sufficiently independent.
Question: Will you support the shareholder resolution at the Sports Direct AGM? How have you engaged with other investee companies to ensure that their employment models and working practices are sustainable and fit for purpose?
July's topical questions for your manager
1. Background: Investors that have signed up to the UK Stewardship Code are required to issue a public statement outlining how their stewardship practices fulfil the Code’s principles of responsible investment stewardship. The Financial Reporting Council has now written to all signatories assessing how completely their statement complies with the spirit of the code, and categorising them into two tiers, depending on the quality of their statement.
Question: Are you a signatory of the Stewardship Code? If not, why not? If so, have you been classified in the top or second tier and how will you be incorporating feedback from the FRC to ensure that you achieve or retain the highest possible standards of stewardship?
2. Background: The Association has this week published a toolkit for pension funds, providing advice on the type of information our members should request from the companies they invest in about their workforces and corporate cultures. The report recommends specific workforce-related performance indicators that investors should ask companies to report against each year, as well as suggesting specific questions to ask of boards when meeting with individual companies.
Question: Do you ask the same questions of investee companies about their workforces, and request the same levels of disclosure in annual reports, as the standards outlined in the PLSA toolkit?
June's topical questions for your manager
Background: Sports Direct founder and Deputy Chair Mike Ashley’s appearance at the Department for Business Innovation and Skills Select Committee attracted widespread media attention this week, as a result of Ashley’s introspective attitude to his oversight of the company and his claim that he was not aware of some of the more controversial employment practices at Sports Direct operations. The company fell out of the FTSE 100 earlier this year amidst criticism of the accountability of Ashley and senior colleagues at Sports Direct (Ashley’s daughter’s boyfriend to a key management position) and the treatment of warehouse employees.
Question: What issues have you raised with Sports Direct regarding their treatment of their workers and their corporate governance? Do you ask boards or management at investee companies how they understand the culture of their company and how it operates at the ‘shopfloor’ level?
May's topical questions for your manager
1. Blackrock, the world’s largest asset manager, holds shares in 15,000 companies but has been criticised for voting in favour of 96 per cent of executive remuneration proposals. Some critics in the UK have suggested that high pay in the asset management sector makes investors reluctant to condemn a system from which they themselves benefit at company AGMs. Against this backdrop, a shareholder resolution at Blackrock’s AGM called on the company to exercise its power to address perceived excessive executive pay awards.
Did you support the shareholder resolution at Blackrock’s AGM (if applicable) and how do you ensure that your own organisation’s pay policies don’t affect your judgement when voting on remuneration awards/policies at other AGMs?
2. The issue of executive remuneration continues to dominate AGM season, with majority votes against reports/policy at BP, Smith and Nephew and Weir Group, as well as sizeable minority votes against at RB, Anglo-American, Centrica and others. Sacha Sadan, the Director of Corporate Governance at Legal and General, has said that CEO pay relative to the average employee will be a ‘hot topic’ of 2016?
Question: Which pay packages have you opposed at AGMs this year, and on what grounds, and do you think that pay ratios between Executives and their workers are relevant to investors?
April's topical questions for your manager
1. World leaders agreed in Paris last December to keep global warming well below 2 degrees Celsius in order to prevent dangerous climate change. Tightening public policy may have major repercussions for the oil and gas majors in which most pension funds are invested. Last year shareholder resolutions were passed at the BP and Shell AGMs, with board support, committing the companies to disclose to investors their resilience in the long-term to a 2 degrees scenario. However, in the US, Chevron and ExxonMobil have resisted the filing of similar resolutions by investors, including Hermes and the Church Commissioners, until forced by a Securities and Exchange Commission ruling to put the resolutions (resolutions number 7 and number 12 respectively) to a vote. Investors can declare their support for the resolutions here.
Question: Will you support, or, if you delegate voting, encourage your fund managers to support, the resolutions at the Chevron and ExxonMobil AGMs which ask the companies to disclose annually to investors their resilience in the long-term to a 2 degrees scenario?
2. Last year BP recorded losses of $6.5 billion and took the decision to axe 7,000 jobs. Despite, this the company intended to award Bob Dudley a £14 million pay package, including the maximum possible bonus pay-out, on the basis of its operational performance. However, 60 per cent of shareholders voting at the company AGM voted against the remuneration report, prompting questions over the future of the Remuneration Committee Chair, Professor Dame Ann Dowling.
Question: Did you support or oppose the BP remuneration report, and do you think Dame Ann Dowling’s position as remuneration Committee Chair is still tenable? What approach do you apply more generally to eight-figure pay packages, and generous pay awards to CEOs of companies that are cutting jobs across their wider workforce?
March's topical questions for your manager
1. The Share Action campaign group have highlightde concernd that the overuse of anti-biotics in livestock production could lead to the development of drug resistant bacteria, creating a serious risk to public health. Share Action and other investors have written to the Yum! Brands corporation, owners of KFC and Pizza Hut, asking them to produce concrete plans for the removal of all medically important anti-biotics from their supply chain. You can find out more about the Share Action initiative by contacting Juliet Phillips via firstname.lastname@example.org.
Have you supported the Share Action campaign on anti-biotics and are you monitoring the use of anti-biotics in the supply chain of investee companies more generally?
2. A study in the US has criticised major asset managers Vanguard, Fidelity and JP Morgan for their failure to support proxy access - proposals for shareholder-nominated Directors to take seats on the boards of investee companies - at company AGMs. Critics of proxy access argue that it hinders company autonomy and agility, while advocates say it is a key driver of shareholder value and corporate accountability.
What is your position on proxy access and under what circumstances do you consider such proposals necessary/merited?
February's topical questions for your manager
1. Leading investor James Anderson has called on Google to pay more tax in the UK, saying it is in the company’s long-term interest.
Do you have a position on whether or not it is in the interests of google and other such companies to aggressively minimise their UK tax bill, and have you engaged with companies on this issue?
2. James Murdoch’s re-appointment as Chairman of Sky has been questioned by some investors, with the media highlighting criticism of his conduct in his previous stint as Chair and the conflict of interest owing to his role at major shareholder Fox.
Do you support James Murdoch’s appointment and what criteria do you use for assessing the integrity and objectivity of board members at investee companies?
January's topical questions for your manager
1. Research from the High Pay Centre found that by the second working day of the year, a FTSE 100 CEO will have already made more money in 2016 than the average UK worker will earn all year.
Do you compare the ratio between total pay awarded to executives and the pay of the average worker at investee companies? Do you think this ratio is important, and if so, what would you consider appropriate for particular sectors?
2. UK companies often operate ‘joint ventures’ with partners overseas. Sometimes the governance structures of these joint ventures limits partners’ oversight of their day to day operation, making it harder to ensure appropriate standards of good governance and respect for human rights, health and safety or environmental footprint.
What major joint ventures are operated by investee companies, and what oversight do they have of the governance of these companies?