Church of England Pensions Board. Report Proxy Voting 2013 H2

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1 Church of England Pensions Board Report Proxy Voting 2013 H2 Introduction This report provides a record and analysis of votes cast in respect of the shares owned by the Church of England Pensions Board at meetings taking place during the second half of The report is split into two parts A and B covering respectively: the UK 1 ; Rest of the World (excepting shareblocking markets) 2 Each part of the report provides an overview of voting during the six month period, as well as more detailed analysis of voting in respect of remuneration and director issues. Advice was prepared and voting enacted by the specialist proxy voting firm ISS Europe Ltd ( ISS ) in line with an agreed bespoke policy template. ISS acts for both the Pensions Board and the Church Commissioners on a global basis, and for the CBF Church of England funds on a non-uk basis. Whilst the majority of votes cast were as generated under the approach set out in the template, on occasion discretion was exercised to cast a different vote. Discretion is applied whenever the vote generated under the template is misaligned with the Board s ethical investment objectives. In these instances, the explicit consent of investment staff is first obtained before votes are cast. All voting activity was overseen by the Secretariat of the Church of England s Ethical Investment Advisory Group, principally by the Corporate Governance and Engagement Specialist. 1 Including companies domiciled in similar markets: these are Bermuda, Guernsey, Jersey and the Isle of Man. 2 Shareblocking (and equivalent provisions) can either arise as part of established market practice or through requirements introduced by custodians operating within particular markets, meaning that voted shares must be held until after a particular future date. Markets in which the Board s voting practice has been affected by this or similar provisions include Finland, Norway and Switzerland. 1

2 Part A - UK (including Bermuda, Guernsey, Jersey and the Isle of Man) A1. VOTING OVERVIEW 3 Management Resolutions Resolution type: Total All % of Total Number of meetings voted during the period 125 Number of companies holding meetings (including investment trusts) 115 Shareholder Resolutions Resolution type: Total Shareholder resolutions raised by management, the classifications and distinguish votes cast to indicate satisfaction with/disapproval of the company s management. resolutions raised by shareholders, the classifications and indicate situations in which adoption of the shareholder resolution is believed to be / not to be in the best interests of shareholders. 2

3 A2. VOTING ON REMUNERATION-RELATED RESOLUTIONS Resolution type: Total Remuneration report/policy % of Total It is our intention that reporting in this section should focus on companies where shareholders are given a vote on a company s executive remuneration approach. Accordingly, to the extent possible, the statistics presented above have been adjusted to remove the impact of voting in respect of investment trusts; this corporate structure does not tend to feature executives on the board, and so proposals relating to remuneration are normally supported without contention. Tech company: engagement led to clarification of plan terms, leading to a positive vote Retailer: although non-financial factors are considered under pay plans, the metrics chosen were not considered to be sufficiently relevant. In combination with the lack of explanation for the recent salary uplift experienced by a senior executive, a negative vote was cast 3

4 A3. VOTING ON DIRECTORS Resolution type: Total Election of Directors % of Total Media: in view of long-standing concerns, the decision was taken that supporting the reelection of members of the remuneration committee would be inappropriate. In addition, votes were cast against the re-election of two further directors in view of our experience in engagement with another company with which they were both very closely connected. 4

5 B1. VOTING OVERVIEW Management Resolutions 4 Resolution type: Withhold Total All* Withhold Withhold % of Total Number of meetings voted during the period 321 Number of companies holding meetings 292 Shareholder Resolutions 5 Resolution type: Withhold Total Shareholder The classifications and again distinguish votes either in support of or against the wishes of the company s management. Withhold votes can only be registered in the USA/Canada and can only be registered against certain classes of resolutions such as the election of directors or the election of corporate auditor. 5 shareholder resolutions, the vote applied represents the position taken in response to the specific resolution. votes indicate situations where we do not believe that adoption of the shareholder resolution is clearly in the best interests of shareholders. *So-called Say When on Pay resolutions have not been included. 5

6 B2. VOTING ON COMPENSATION ISSUES Different jurisdictions have different rules governing the reporting of compensation issues. Whilst some require that shareholders are given the chance to vote on a company s practice, others do not. The figures provided below represent a holistic view of voting on a range of compensation issues and reflect proposals such as: remuneration policies; remuneration reports; long and short-term incentive plans for executives and/or employees; remuneration for directors and certain other specified individuals; retirement benefits and severance packages; advisory votes on executive compensation (also known as Say on Pay ); and requests for authority to issue stock to employees. Resolution type: Total Compensation Issues % of Total US tech company: notwithstanding the fact that pay plans breached some of the terms of the established policy, in view of the pay restraint demonstrated in practice, and the fact that the long-term incentive plan included non-financial metrics, discretion was applied to vote in support of management. 6

7 B3. VOTING ON DIRECTORS Resolution type: Withhold Total Election of Directors Withhold Withhold % of Total US tech company: advice received was considered to be overly critical of the Board as, if implemented, it would have resulted in votes being cast against the vast majority of directors. The decision was made that two of the non-executive directors could be supported in view of the fact that, as academics, they appeared likely to be able to offer independent judgement. US pharma company: in view of repeated failure to adopt proposals raised and approved by shareholders, votes were cast against the long-standing chair of the governance committee. 7