Corporate governance
As part of our commitment to delivering superior investment performance to our clients, we expect and encourage the companies in which we invest to demonstrate the highest standards of corporate governance and best business practice.
We examine the share structure and voting structure of the companies in which we invest, as well as the board balance, oversight functions and remuneration policy. These analyses then form the basis of our proxy voting and engagement activity.
J.P. Morgan Asset Management Voting Policy and Corporate Guidelines
Guidelines for portfolios managed within the UK
Guideline for portfolios managed outside the UK
Proxy Voting: UK and Europe Q1 2012
JPMAM manages the voting rights of the shares entrusted to it as it would manage any other asset. It is the policy of JPMAM to vote in a prudent and diligent manner, based exclusively on our reasonable judgement of what will best serve the financial interests of our clients. So far as is practicable, we will vote at all of the meetings called by companies in which we are invested.
Summary of key voting statistics
The first quarter sees voting volumes in the UK and Europe start to increase as we head into the peak AGM season in April/May.
| Meetings voted (UK): |
79
|
(96.3%)
|
| Meetings voted (EUR): |
120
|
(97.6%)*
|
|
199
|
||
| Votes with management: |
1,876
|
(94.0%)
|
| Votes against management: |
109
|
(5.5%)
|
| Abstentions: |
9
|
(0.5%)
|
*a further 3 meetings were not voted due to share- blocking and/or Power of Attorney requirements
Summary of key activity
- J.P. Morgan Asset Management voted against a controversial share award to Sir Bill Gammell of Cairn Energy. Sir Bill had been due to receive a GBP 2.5m share bonus, plus a further GBP 1m donation to charities of his choice out of shareholders’ funds, as a reward for completing the GBP 3.5 billion sale of Cairn’s stake in the company's Indian assets to Vedanta Resources in 2011. The award was proposed without consulting shareholders and no performance conditions were attached. Sir Bill had already received a separate one-off payment of GBP 1.4m when he moved from CEO to chairman last summer. The company eventually dropped the new award and withdrew the resolution, in the face of pressure from shareholders.
- J.P. Morgan Asset Management opposed two directors at Mitchells & Butlers. The board currently has no independent directors, as all three non-executives have links either with Bahamas-based billionaire Joe Lewis, who owns 27% of the company, or Irish racing tycoons JP McManus and John Magnier, who own 24%, all of whom have been embroiled in a struggle for control of the company. Lewis launched an abortive 230p-per-share takeover bid for Mitchells & Butlers last year, which was rejected by shareholders, and executive chairman (and interim CEO) Bob Ivell is still trying to find a chief executive prepared to work with the controlling shareholders. The troubled company has lost two chairmen and three directors in the last 12 months, and no single board member has been in place for longer than two years.
- J.P. Morgan Asset Management also voted against three directors, as well as the remuneration report, at Tui Travel plc. Despite resigning in connection with the accounting errors that led to a write off of GBP 117m and the restatement of the 2009/10 accounts, the departing CFO received pro-rated vesting of his outstanding share awards, which we considered to be reward for failure. We additionally voted against three directors, due to independence and corporate governance concerns. The former First Choice plc has been identified as a governance outlier since its merger in 2007 with German-based Tui AG, itself caught up in a long-running probe into alleged fraud surrounding the prolonged insolvency of Babcock Borsig, currently pending appeal at the Federal Supreme Court in Germany.
- In Europe J.P. Morgan Asset Management supported the removal of Banca Monte dei Paschi vice chairman Francesco Gaetano Caltagirone after he was sentenced to three years and six months' imprisonment by the Court of Milan in 2011. The court also handed Caltagirone a EUR 900,000 fine and banned him from holding any public mandate for five years. Caltagirone was convicted of insider trading in the attempted takeover of Banca Nazionale del Lavoro (BNL) by BBVA of Spain in 2005. According to magistrates, Caltagirone conspired with former director of the Bank of Italy (Italy’s central bank) Antonio Fazio, in an attempt to foil the bid and keep BNL under the control of Italian shareholders. On 10 January 2006, the Bank of Italy blocked the bid and BNL was eventually acquired by BNP Paribas of France. Caltagirone is due to appeal.
- J.P. Morgan Asset Management also voted against a total of 19 proposals at two meetings of Eurofins Scientific. The company’s proposal to re-domicile from France to Luxembourg (and related amendments to company Articles) at a Special General Meeting in January were not viewed as being in shareholders’ interests, as they meant lower thresholds for disclosure, as well as diminished shareholder rights. Similarly, we opposed further resolutions at the company’s Annual General Meeting in March, due to concerns over board independence and excessive dilution.
- J.P. Morgan Asset Management opposed a shareholder proposal at Siemens in Germany, requiring quotas for female representation on the supervisory board. Although J.P. Morgan Asset Management is fully committed to supporting inclusive organisations where everyone can succeed on merit, and has recently included a statement on board diversity in our Corporate Governance Guidelines, we do not endorse quotas but expect boards to have a strategy to improve female representation in particular, as well as to consider diversity in its widest sense, both at board level and throughout the business.
- There were three meetings in the UK in which J.P. Morgan Asset Management did not vote during the period. Two were due to UK Takeover Panel restrictions, which state that funds containing more than 10% proprietary money or seed capital should not ‘carry out dealings with the purpose of assisting the offeror or offeree’ [Rule 38.1]. This is deemed by us to include voting at EGMs where JPMorgan Cazenove or JPMorgan Securities Limited are advisors to a transaction. A third meeting (JPM Institutional Continental Europe Fund) was not voted due to the conflict of interest.
- Members of the Corporate Governance team also met 14 companies specifically to discuss governance issues, including Rio Tinto, LVMH, Technip, ENRC and Xstrata, bringing the total number of engagements year-to-date (not counting scheduled one-to-one meetings) to 43, of which 20 were meetings to discuss corporate governance issues at investee companies, 16 were remuneration consultations and 1 was to discuss social and environmental matters.