Business practices and voting information
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 GuidelinesGuidelines for portfolios managed within the UK Guidelines for portfolios managed outside the UK
Proxy voting: UK and Europe Q4 2018
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
Meetings voted (UK):
Meetings voted (EUR):
Votes with management:
Votes against management:
*a further 6 meetings were not voted due to share blocking and/or conflicts of interest (voting in relation to JPM Funds)
The fourth quarter is traditionally the quietest of the year in terms of proxy voting volumes, with relatively little AGM activity in the UK and Europe after the peaks in the second quarter.
- Unilever announced in October that it was abandoning controversial plans to unify their dual-listed PLC/NV share structure, following opposition from asset managers (including J.P. Morgan Asset Management). Unilever was founded in 1930, following a merger between Unie Margarine of the Netherlands and soap manufacturer Lever Brothers in the UK. Since then, Unilever NV and Unilever PLC have co-existed as separate legal identities, but operating as a single entity, thanks to a complex Equalisation Agreement. Last year, Unilever announced plans to consolidate this structure into a single share class, which would result in it moving its HQ to Rotterdam and delisting from the UK FTSE100 index. Portfolio managers with FTSE benchmarks and UK clients in particular were concerned that they would effectively be forced sellers of Unilever PLC at a time and price not of their choosing, which we felt was not in the best interests of clients. The proposal required approval from both sets of shareholders, needing 75% support from PLC shareholders and 50% support from NV shareholders. Following extensive engagement with the company, J.P. Morgan Asset Management was considering a rare split vote, depending on the differing needs of our respective UK and Global clients. However, it soon became apparent that the company did not have enough votes for the plan to be approved, and the proposals were withdrawn. Analysts noted that the plan was proposed less than a year after a USD143bn hostile takeover bid from Kraft Heinz, noting also that delisting from the UK and relocating to the Netherlands would allow the company to benefit from a far more protectionist anti-takeover regime there.
- J.P. Morgan Asset Management voted against two directors at Renishaw, due to concerns over independence. Although during the year under review the Chair and CEO positions were separated, with Will Lee being promoted to CEO, Chairman Sir David McMurtry is the largest shareholder and, together with Deputy Chair John Deer, controls 53% of the company. This controlling interest is cemented by a voting arrangement which binds Mr. Deer to vote for any ordinary resolution if requested to do so by Sir David, and Sir David to vote against any special or extraordinary resolution if requested to do so by Mr. Deer. Both directors continue to refuse to enter into a formal relationship agreement, as required under the UK Listing Rules. This refusal to comply with the Listing Rules is a matter of concern given that relationship agreements are designed to offer additional protection for minority shareholders.
- In Europe, J.P. Morgan Asset Management voted against the Chairman and three directors at Ryanair, due to ongoing concerns over corporate governance and sustainability issues (see previous reports). Despite some progress in the composition of the board through recent refreshment, Chairman David Bonderman, Senior Independent Director Kyran McLauglin, and the Chairs of two of its key subcommittees Michael Cawley and Howard Millar each have deep-rooted links with CEO Michael O'Leary. Ryanair has been hit with a series of pilot and cabin crew strikes across Europe, resulting in flight cancellations and straining relationships with employees and customers. While the airline has recognised some unions in its larger markets, negotiations have stalled in others. In a recent announcement, the Company stated that over 65% of its cabin crew is now covered by union recognition agreements. In September, the company announced that its Irish pilots had voted in favour of accepting the proposed collective labour agreement, and that the board would reconsider the decision to rebase six aircraft away from Dublin in the winter of 2018.
- J.P. Morgan Asset Management also voted against remuneration at Eutelsat Communications, due to concerns over alignment. The level of information relating to performance conditions was insufficient, in our view, and the vesting period of 12 months was not sufficiently long-term in nature. At the last AGM, the remuneration policies applicable to the CEO and vice-CEOs received significant dissent from shareholders, and we do note that broader remuneration policy at the company has improved, in particular in relation to post-mandate vesting of the Long Term Incentive Plan.
- J.P. Morgan Asset Management voted against 3 non-independent directors at Pernod Ricard, as well as two further proposals aimed at reducing shareholder rights in the event of a takeover. Pernod Ricard is controlled by descendants of the Ricard family, as well as Belgian holding company Groupe Bruxelles Lambert (GBL), who between them control 22.5% of the share capital, but some 32.5% of the votes, thanks to preferential voting rights. The company has recently been approached by shareholder activist Elliott Advisors, who have taken a 2.5% stake with the aim of addressing “underperformance”, citing lower operating margins compared to peers. Elliott also stated that “an environment of inadequate corporate governance and a lack of outside perspectives have contributed to this underperformance”.
- J.P. Morgan Asset Management held an engagement call with Lundin Petroleum, following the announcement in October that the Swedish Prosecutor was about to charge executives in relation to Block 5A, an oil concession in South Sudan which was the scene of extensive fighting during the Second Sudanese Civil War. The alleged crimes, which carry a maximum sentence of life imprisonment, date back to between 1997 and 2003, when the company headed a group (with Petronas and OMV) formed to search for and extract oil in southern Sudan. NGOs have claimed that Lundin’s entry stoked turmoil in the area around Block 5A, leading to the deaths of thousands of civilians and the displacement of almost 200,000 people. The company asserts that none of its representatives have been party to any violations of international humanitarian law. The criminal case against CEO Alex Schneiter and Chairman Ian Lundin has now been widened to include the company itself as a corporate entity. Written confirmation of the intention to prosecute was subsequently issued in November, and indicated that the Prosecutor may seek a corporate fine of SEK 3 million (USD 330,000) and/or forfeiture of economic benefits from the alleged offence in the amount of SEK 3.3 billion (USD 370m), based on the profit of the sale of Block 5A in 2003 of SEK 729 million (USD81m).
- Year-to-date, J.P. Morgan Asset Management has engaged with 259 companies in the UK and Europe on ESG issues (not counting scheduled one-to-one meetings). Of these, 71 were in-person meetings to discuss corporate governance issues at portfolio companies, 47 were consultations over remuneration arrangements, and 33 were in relation to social or environmental issues.
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