Castlefield Stock Story - Governance Engagement with Eckoh

By Barney Timson

We recently engaged with Eckoh, a secure payments company held in our Castlefield Sustainable UK Smaller Companies Fund, ahead of their AGM on a number of governance issues including remuneration and board composition.

Eckoh is a global provider of secure payment products and customer contact solutions, supporting an international client base from its offices in the UK and US. The company specialises in supporting ‘cardholder not present’ transactions. It is held within our Castlefield Sustainable UK Smaller Companies Fund and earlier this year we engaged with them on several governance topics.

Prior to submitting any votes, we like to engage with management teams whenever our in-house voting policy conflicts with what management propose on the ballot. Stewardship topics are often not black and white, and engagement with management provides us with greater context regarding the resolutions in question, which in turn allows for more informed voting decisions.

When it came to voting at Eckoh’s AGM, we were concerned with a few topics. Firstly, we noted that one of the executive directors had received a one-off payment outside the scope of the remuneration policy. In circumstances where a payment of this kind is made, we expect full transparency and justification for it. We also noted that there was not a designated senior independent director on the board.

The senior independent director fills an important role on the board, typically being the main contact point for investors, particularly relating to governance matters. In addition to this, we noted that the CFO was operating in dual capacity as company secretary.

Although not uncommon in smaller companies, in certain situations holding both these roles can result in a conflict of interest, therefore it is not best practice for someone to hold both positions.

Finally, we were dissatisfied with the bundling of auditor re-election and auditor remuneration into one resolution on the ballot. This contravenes best practice because if an investor wished to show dissatisfaction against one of these, the only option would be to vote both down.

Stewardship topics are often not black and white, and engagement with management provides us with greater context regarding the resolutions in question, which in turn allows for more informed voting decisions.

We wrote to Eckoh’s Chairman to express these concerns and explain our thinking. In doing so, as well as seeking further information, we hope to provide insight into investor sentiment and potentially influence future decision making.

The Chairman responded promptly, and we had a call to discuss these issues in depth. While we ultimately disagreed regarding the remuneration, as we did not believe the justification was strong enough for the one-off payment in question, it was pleasing to see that our comments were taken on board and well received.

Regarding the other issues, the Chairman explained that whilst a Senior Independent Director was not identified on any official documentation, there was a director unofficially holding the post and that moving forward this will be made clear on ballots.

In response to the potential conflicts surrounding an individual holding both executive and company secretary roles, the Chairman explained that they were currently considering bringing in another person on a part-time basis to cover some of the company secretary responsibilities and help with the overall workload. This was welcome insight.

Lastly, it was helpful to see that our comments regarding the separation of auditor re-election and remuneration were acknowledged, and we were encouraged to hear that moving forwards, they would be separated on the ballot.

Overall, it was invaluable to be able to discuss such topics with representatives of company boards. Whilst, as is often the case when engaging, we didn’t agree on everything, we were reassured to see that most of our concerns were addressed and comforted by the open conversation we were able to have with the Chairman.

Such engagements are a vital part of our ongoing investment process and help build long-term and constructive relationships with companies on behalf of our investors.



Information is accurate as at 03.04.23. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.