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 2017

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 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.

Meetings voted (UK):
313 (99.1%)
Meetings voted (EUR):
702 (92.6%)*
Votes with management:
12,636 (88.5%)
Votes against management:
1,626 (11.4%)
14 (0.1%)

*a further 56 meetings were not voted due to share-blocking and/or Power of Attorney requirements

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.

Summary of key activity
  • 39% of shareholders (including J.P. Morgan Asset Management) voted against remuneration at Astrazeneca, due to concerns over amendments to the Astrazeneca Investment Plan (AZIP). The AZIP was designed to reward maintaining the dividend, as well as 1.5x dividend cover, for the 2014-17 period, and was put in place in the wake of the abortive bid from Pfizer. It has since become clear that the company will not be able to maintain the dividend cover, and the Remuneration Committee proposed to alter the performance conditions so that only 25% of an award would lapse for each year in which neither or only one target is achieved (instead of 100% currently).
  • J.P. Morgan Asset Management voted against remuneration at Inmarsat, where bonus share award (BSA) payments were made, despite the targets not being fully met. Previous disclosures by the company appeared to indicate that the targets were quantitative, as with all similar plans at other companies, but the remuneration committee has now informed shareholders that the final outcome is based on a “blend of achievement against each measure”, and that overachievement against one measure can in fact compensate for lack of achievement against another. We did not consider this appropriate.
  • In Europe, J.P. Morgan Asset Management voted against two related-party transactions at Alten, due to concerns over transparency and the potential for conflicts of interest. The company entered into sale and leaseback arrangements with two private companies, SEV56 and SIMALEP, controlled, respectively, by chairman & CEO Simon Azoulay and another executive, Bruno Benoliel; and Azoulay and his sister, who is also an Alten board member. In our view, the company had failed to disclose sufficient information in relation to either the price-setting arrangements or the rationale and shareholder benefits of the transactions.
  • In the Netherlands, J.P. Morgan Asset Management voted against remuneration at Altice NV, where the company was proposing to allocate an annual cash bonus to executives, but did not disclose award levels or how those levels were determined. We also noted the introduction of a “brand licensing fee” of 0.2% of group revenues, amounting to EUR 41.3 million last year, payable to the private company of Altice’s controlling founder Patrick Drahi.
  • J.P. Morgan Asset Management held a call with Vestas Wind Systems to discuss social concerns relating to indigenous peoples. Vestas Wind Systems is a 12.5% partner in the Lake Turkana Wind Power (LTWP) consortium, which is facing allegations by local stakeholders and NGOs that it failed to consult with indigenous people when it acquired land in relation to the project in Marsabit County, Kenya. The project was initiated in 2006 in the remote Lake Turkana area, to install 360 x 850kw wind turbines, which could eventually supply up to 20% of Kenya’s national grid requirement with renewable electricity. The company has already built or upgraded 200km of roads to provide access to the site and, to date, 60 turbines are in place. Separately, the Kenyan government is clearing land to install 400km of power transmission lines linking the project to the grid.
  • J.P. Morgan Asset Management’s auto sector specialists from New York, London and Tokyo arranged a specialist internal offsite day to focus on electric vehicles (EVs) in June, with presentations from Iberdrola, Renault, BMW and Nissan, as well as specialist consultants LMC Automotive and battery expert Dr Billy Wu of the Dyson School of Design Engineering, Imperial College London. Iberdrola estimates that, by 2040, demand for EVs will require 1,900TWh of generation, or 5.5% of worldwide capacity, noting that charging infrastructure will need to evolve from the national grids we see today to integrated “smart” grids, where individual homes contribute via solar panels, wind turbines or hydrogen powercells (the so-called home-to-grid model, or H2G). According to the World Health Organization (WHO), air pollution from vehicles is the fourth largest cause of deaths worldwide, responsible for 36% of lung cancers, 34% of strokes and 27% of heart disease.
  • J.P. Morgan Asset Management met Members of the ESG Team met 55 companies specifically to discuss governance issues, including Man Group, Burberry, Bowleven, Polymetal, LafargeHolcim and Vodafone, bringing the total number of engagements for the year (not counting scheduled one-to-one meetings) to 151, of which 55 were meetings to discuss corporate governance issues at investee companies, 48 were remuneration consultations and 25 were to discuss social and environmental matters issues at portfolio companies.

About J.P. Morgan Asset Management