Principle 3 - How we monitor our investee companies
We are committed to thorough research and strong relationships with the management of investee companies. We believe that thorough analysis and incisive action allows us to understand and keep abreast of a company’s performance and the key drivers of its market price. We generally meet representatives of investee companies at least once a year. These meetings enable us to review corporate progress and prospects and manage the risks introduced to our clients’ portfolios through governance factors. They provide us with an opportunity to ask questions and to challenge constructively strategic and other issues that may influence the value of our clients’ investments.
In support of our ‘focus on change’ investment philosophy, we have an active ESG Investment team who engage with investee companies creating a purposeful dialogue on the oversight of strategy, performance, relations with stakeholders and the management of risk. This team also routinely engages companies on matters that are subject to a shareholder vote.
We recognise the importance of effective communication. We value having focused dialogue with directors and senior executives of companies about corporate strategy & performance, corporate governance, the quality of management and other issues.
More specifically, as part of our monitoring, our investment analysts undertake a significant number of company meetings per year in the UK and overseas allowing them ideal opportunities to monitor the performance of companies and their management. The supporting activities of the ESG Investment team include a regular engagement programme to discuss a range of relevant ESG issues such as, but not limited to, board balance and composition, remuneration policies, audit and risk issues and environmental and social issues. This programme ensures engagements are planned on a systematic basis using specific criteria to identify target companies. The ESG Investment team meets appropriate company officers, with governance issues generally being addressed by non-executive directors and environmental and social issues typically being addressed with executive officers.
On an exceptional basis, when we believe it is consistent with being a responsible investor and it is otherwise in the best long term interests of our clients, we are willing to be made insiders to assist investee company boards and their advisers on matters relating to of ESG factors. However, we do expect company representatives or advisers to check that we are happy to be brought inside before they do so. This must be done in a way to ensure that no inside information is passed to us prior to our agreement. If such discussions are held by phone, these will normally be done using business lines which will be recorded.
We endeavour to vote our clients’ shares at all AGMs and other shareholder meetings. When we vote against management or abstain on a resolution we endeavour to engage with the company to explain our reasons and to encourage improvements when appropriate. Although it is not practical for us to attend the General Meetings of all companies in which we have a major holding, we will attend and speak at AGMs and other shareholder meetings when we feel it is in our clients’ best interests. Also, we shall make public statements at appropriate times when we deem such statements as consistent with our responsibilities. See Principle 6 for more information about our voting policy and disclosure.
When we identify issues that we believe are not consistent with the best interests of our clients we shall engage with the board of the investee company with a view to ensuring it is aware of our views and, when appropriate, to achieving a satisfactory resolution. In this regard, we shall consider carefully explanations given by UK companies for departures from the UK Corporate Governance Code.
To enable a clear audit trail, we have a bespoke database that allows us to record both our engagement and the details of our voting analysis in contentious situations. Full records of votes cast are available on the proxy voting platform provided by our proxy voting provider.
Our monitoring process is reviewed at least annually to ensure that our efforts are appropriately targeted and the process is effective.