Corporate governance - J.P. Morgan Asset Management

Corporate governance

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 Guidelines
Guidelines for portfolios managed within the UK Guidelines for portfolios managed outside the UK
Proxy voting: UK and Europe Q2 2019

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):
227 (97.4%)
Meetings voted (EUR):
654 (93.6%)*
Votes with management:
11,692 (89.4%)
Votes against management:
1,376 (10.5%)
10 (0.1%)

*a further 45 meetings were not voted due to share blocking and/or conflicts of interest

The second quarter is traditionally the busiest of the year in terms of proxy voting volumes, with AGM activity peaking in the UK and Europe in April and May.

  • J.P. Morgan Asset Management opposed the binding Remuneration Policy vote at Standard Chartered, due to the Remuneration Committee’s decision to reserve the right to disapply pro-rating for time on awards to the CEO “in certain circumstances”, which were not defined to shareholders. There were additional concerns in relation to pension arrangements, which appear generous compared to peers. The resolution was narrowly passed, with 36% of shareholders voting against at the AGM in May.
  • J.P. Morgan Asset Management also voted against remuneration at Barclays. In 2018, regulatory investigations into CEO Jes Staley’s attempt to identify a whistleblower in 2016 were concluded. The PRA and FCA fined the CEO GBP642,000 and the NYDFS fined the company USD15 million. On account of these outcomes, malus was applied to Staley’s 2016 bonus, which was reduced by GBP500,000, which we considered to be inadequate, given the loss to shareholders’ funds, as well as the broader reputational damage and additional regulatory oversight incurred. In all, 29% of shareholders voted against the remuneration report. Separately, a shareholder proposal from activist Sherborne to appoint Edward Bramson to the board was voted down by 87.2%.
  • J.P. Morgan Asset Management supported two shareholder proposals at Special General Meeting of Firstgroup. Coast Capital LLC, a 10% shareholder, sought to remove six directors and elect seven new nominees to the board. Although we are generally supportive of the board and its new strategy, we felt that the perspective of an outside nominee, particularly a candidate with relevant industry expertise, would be additive to the board. We therefore supported the nomination of former Arriva CEO David Martin, and the removal of James Winestock, the longest-serving of the incumbents, who was part of the board that approved and oversaw the failed restructuring efforts under the former CEO. In the event, Winestock narrowly survived the vote, with 45.6% of shareholders supporting his removal, and Martin decided to withdraw his candidacy. However, chairman Wolfhart Hauser bowed to pressure after significant shareholder opposition to his own re-appointment and announced that he would not be standing for re-election at the company’s AGM on 25 July.
  • J.P. Morgan Asset Management supported a shareholder proposal by Climate Action 100+ at BP plc, calling for further disclosures as to how the company’s strategy is consistent with the 2015 Paris Climate Agreement. The proposal, which was endorsed by BP management, received majority support from shareholders. J.P. Morgan Asset Management opposed a similar proposal at Royal Dutch Shell, as we felt that the company was already making sufficient progress on climate-related disclosures. In the event, the RDS proposal was withdrawn by the proponent.
  • Shareholders at ING Groep (including J.P. Morgan Asset Management) voted against a similar motion in the Netherlands, following the USD900 million fine the company incurred in September for failing to prevent money laundering. Dutch prosecutors began their investigation in 2016 after identifying a pattern of violations, which they said were a signal of deeper underlying structural issues relating to how ING vetted new clients. They cited four examples where ING accounts were used for criminal purposes, most notably for bribes paid by telecommunications company VEON (formerly VimpelCom), in Uzbekistan. VEON settled charges in the US and the Netherlands in 2016, paying fines totaling USD835 million.
  • J.P. Morgan Asset Management supported shareholder proposals at EssilorLuxottica, which merged in 2017, to add independent board representation, after reports in the media that board relations had completely broken down. The board of the merged group comprises eight French and eight Italians from the legacy firms, with each side accusing the other of trying to exert undue influence over the merged group. Because they have been unable to agree on a CEO, decision-making appears to be deadlocked. In the event, nominees proposed by Comgest received 44% and 34% support respectively from shareholders. This means that, taking into account the controlling stake of the Del Vecchio family, which owns 32%, the candidates received significant support from minority shareholders seeking progress. The company has since committed to redouble its efforts to integrate the two companies.
  • J.P. Morgan Asset Management voted against two Supervisory board members at Flow Traders in the Netherlands. Flow is one of the few remaining Dutch companies still to have an all-male board. J.P. Morgan Asset Management is committed to encouraging boards with unique skills, experiences and diverse backgrounds, and we expect boards to have a strategy to improve female representation in particular. To this end, we are members of the UK 30% Club, which aims to promote gender diversity at listed companies. We voted against the two members of the Appointments Committee standing for re-election (the Chair of the Committee not being up for re-election this year).
  • In France, J.P. Morgan Asset Management voted in favour of a shareholder resolution at SCOR to separate the Chairman and CEO roles. Denis Kessler has headed the group for 17 years, and the company to date has refused to engage on the issue of succession, or disclose a succession plan. We also note that eight out of the twelve directors (excluding the employee representative) have been in place for four years or less, and question whether they have sufficient experience to counterbalance, and provide effective challenge to, the Chair/CEO.
  • Year-to-date, J.P. Morgan Asset Management has engaged with 105 companies in the UK and Europe on ESG issues (not counting scheduled one-to-one meetings). Of these, 30 were in-person meetings to discuss corporate governance issues at portfolio companies, 26 were consultations over remuneration arrangements, and 24 were in relation to social or environmental issues.

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