Voting, shareholders have the right to vote at annual and extraordinary general meetings of companies. Voting is usually proportionate the percentage shareholding in the company and resolutions are usually passed when more than half of those voting support a vote. Institutions typically choose how to vote for or against and in some markets you can also abstain from the vote. The results are announced publicly by the company and the meetings themselves are often open to the media. Voting decisions are therefore often the most visible element of stewardship. Voting gains media attention and major votes against resolutions proposed by the management and significant media coverage. Fund managers individual voting decisions, especially on controversial matters, are often scrutinized. Voting is often referred to as proxy voting. Now this is because the investor usually does not physically attend the voting. Instead, the investor appoints an individual to act as proxy to cast their votes on their behalf. Usually, the appointed individual is the chair of the company who is required to cast the vote in line with the instructions provided by the shareholder or the asset manager. The most common resolutions that shareholders vote on at general meetings fall into several categories. So let's have a look at those. Firstly, those that relate to company management and administration. Secondly, there's those that relate to the appointment and reappointment of directors and auditors. There's also resolutions to approve transactions between the company and the directors. And finally, senior management may propose their own resolutions and often these are non-controversial. However, from time to time, the votes relate to more controversial matters, actions or scenarios. The resolutions proposed by shareholders are so-called, shareholder resolutions. A common issue where shareholders vote against the company relates to remuneration policies. For example, when the shareholders consider that proposed management remuneration and incentives are excessive. However, more recent resolutions proposed by shareholders have focused on matters relating to climate change. These include resolutions that ask the company to reconsider their position on lobbying, or have asked for increased disclosure on climate change policy, or even increase disclosure on human rights risk. Fund managers often manage portfolios holding dozens or even hundreds of companies, and AGMs usually occur over very short periods of time. Resourcing is therefore a particular issue in the hour of voting, therefore, institutional investors often rely on so-called proxy voting firms. These firms such as ISS and Glass Lewis, assist in processing votes and in providing advice on how to vote. Before general meetings, the fund managers will receive a list of the proposed resolutions and advice from the proxy voting firm on how to vote. The fund manager will then decide whether to vote in line with the advice of the proxy voting firm or not. Good stewardship would see the fund manager make himself or herself familiar with and understand the key issues at stake and then exercise their own judgment. So not relying purely on the proxy advisors. Where the investor has a settled view on these concerns, the fund manager should reflect these views in their voting. Where the view is not settled, but where the investor does not wish to limit himself or herself in a future engagement discussion, some will choose to actively abstain from a resolution. Asset management institutions usually have active programs to communicate why they have voted in particular ways. They do so in writing or in dialogue and many seek to have active discussions with companies as they work towards their voting decisions and use that as an opportunity to explain the decisions that were reached. This dialogue is a form of low level engagement with a chance for limited impact. Physically attending general meetings can offer investors an insight into board dynamics and offer opportunities for formal questioning of many board members, providing scope for both insight and influence.
