Voting guidelines 2020

As investors, we vote at company AGMs. It’s a responsibility we take seriously. Voting is a chance to tell directors what we think about their oversight of the business. To make sure we vote consistently across all the companies that we hold shares in, we have a voting policy. We update it annually to ensure we’re taking account of emerging issues. This year, we’ve added in a number of new clauses to reflect the new Stewardship Code that has been issued by the Financial Reporting Authority.

Here’s a summary of our changes:

Gender Diversity: We’ve had many conversations with companies over the past few years about gender diversity and we’ve now formally set out our expectations in our voting policy: we expect 30% of board level directors to be female and that senior leadership teams (i.e. one rung below board level) have a good gender balance.

Ethnic Diversity: In our voting policy, we’ve adopted the recommendations of the Government’s Parker review on ethnic diversity. Companies should demonstrate commitment to addressing the findings of the Parker review, which includes a target of having one BAME (black, Asian or minority ethnic) director on FTSE100 boards by 2021 and on FTSE250 boards by 2024.

Post-cessation Shareholding Requirements: most CEOs receive part of their pay in shares. It’s a way of encouraging executive directors to think about the long-term performance of the company, just as we do as investors. The problem is that executive directors don’t tend to stay long (5.5 years on average for a FTSE 100 CEO[1]) and have been able to sell their shares upon leaving the business. This could incentivise decision-making that boosts the share price in the short term, without considering the longer-term impact on the business. To counter this, we’re now including a clause in our voting policy which says that we want to see directors being required to hold onto a significant amount of shares for two years after leaving the company.

Tenure of non-executive directors: The role of non-executive directors (NEDs) is, in part, to question and challenge senior managers such as the CEO. If NEDs stay on the board for too long, there’s a risk they might stop asking those difficult, but necessary, questions. They might become complacent or start accepting the “quirks” of a company rather than continuing to challenge them. That’s why, in the UK, after nine years a NED is no longer considered independent. In other European markets, a director can be viewed as independent for 12 years. We wanted to have one consistent policy on tenure to cover all our UK and European holdings and we now state that any director in post for over nine years will no longer be considered independent, irrespective of geography.


The full guidelines are available here.