Transcript apps.warwickshire.gov.uk

Warwickshire CC Pension Fund
Annual Meeting
November 2013
Wawickshire CC’s Stewardship
• Warwickshre CC is an “active owner” of equities
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Oversight through voting shares
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Better-run
Better-run
Better-run
Better-run
companies manage their risks better
companies are attractive employers
companies attract capital
companies are more sustainable or “durable”
• WCC is a Stewardship Code Signatory
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Public demonstration of active ownership
Good fund governance builds trust amongst savers
(think of your 16 yr old apprentices!)
Savers may not understand all about “investment” but they
want to know what is being done with “their” money.
Why Stewardship Matters
• Active Monitoring by LGPS
– The “Observer Effect”
– The observer becomes part of the system being observed
– The governance of Stewardship ensures better Stewardship
• Regulation by itself cannot create the right culture
• UK is a blend of regulation and best practice principles
– Comply/Explain nudges the culture
– Comply/Explain encourages stakeholder involvement
– Comply/Explain keeps the debate moving
The issues that have been voted
Spread of Resolution Category
7.2%
0.7%
4.6% 1.9%
12.5%
Audit & Reporting
Board
0.3%
Capital
Corporate Actions
16.6%
Other
Remuneration
Shareholder Rights
Sustainability
56.1%
How engaged is the fund?
W ACC and General Shareholder Dissent by Resolution Category
89.7%
100%
74.8%
69.9%
66.7%
75%
50%
25%
14.2%
19.8%
3.5%
6.6%
8.6%
9.4%
14.8%
21.6%
2.7%
11.6%
2.7%
0.4%
2.2%
0%
Total
Sustainability Remuneration Shareholder
Other
Capital
Rights
WACC Dissent
Shareholder Dissent
Board
0%
Audit &
Corporate
Reporting
Actions
Top 350 Average Support
100%
98%
96%
94%
92%
90%
2009
2010
2011
2012
2013
Dissent
2.87%
2.94%
2.95%
3.07%
3.35%
Support
97.13%
97.06%
97.05%
96.93%
96.95%
UK Top 350 Events => 20% Dissent
200
166
150
121
147
2010
2011
196
178
2012
2013
100
50
0
2009
Typical Pay Concerns
• Excessive levels of annual bonus and/or total incentive pay;
• Concerns regarding provisions in directors’ service contracts and
potential rewards for failure;
• Company did not provide any evidence of clawback measures in
respect of the short-term or long-term incentives;
• Incentive pay was pensionable and/or the pension contributions
for the executive directors during the year was considered
excessive;
• Inadequate disclosures on performance conditions; and
• No consideration of sustainability factors when setting
performance targets.
Typical Board Governance Concerns
• Nominee independence and Board Committee
composition;
• Nominees with significant numbers of other
directorships;
• Board and Committee attendance;
• Excessive tenure; and
• Overall Board independence.
Regulatory Updates
The Kay Review
– Reasons for short-termism and how best to address
– Review of Fiduciary Duty by Law Commission
– Connecting shareholders to promote co-ordination
Davies Report
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Board diversity
Aspiration of 30% of boards to be female
Some improvements in NEDs but not EDs
Long-term pipeline problems
Germany = the quota route
Regulatory Updates
• Competition Commission & Audit Market
– High quality audit is shareholders first line defence
– Market is highly concentrated
– Companies not actively tendering (in some cases since
Victorian times!)
• Narrative Reporting – “The Strategic Report”
– More transparent and (hopefully) joined up accountability
– Strategy & Risk Management, Gender Diversity
– C02 , human rights, social & community issues (although
charitable donations no longer need to be disclosed)
Regulatory Developments
Directors Remuneration Report Regulations
• Options for voting on Pay:
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Forward looking policy vote (Binding)
LTIP vote (Binding)
Director-specific votes e.g. Chair of RemCom (Binding)
Implementation Report (Non-Binding)
• Directors now personally liable if payments are made
that were not sanctioned by shareholders
• Directors must engage where significant dissent
Even More Regulatory
Developments!
Best Practice Principles for Governance Research Providers
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Threat of regulation by securities markets regulators
Allegations by the companies of a variety of issues
ESMA found no market failure
ESMA recommended improved transparency
Principles codify Manifest’s current standard procedures which are
ISO9001 standard and externally audited
– Conflicts: Manifest does not serve the corporate markets
– Accurate, Objective Research: Manifest does not share research prior
to client publication and is committed to highest standards of
accuracy and relevance in analysis