Insight. Foresight.

Proxy Voting Policy

Introduction

It is VFMC’s policy to vote in a manner that maximizes shareholder value while observing the principles of good corporate governance (primarily as interpreted by IFSA).  

As the board of directors and management of each publicly held company have accepted joint responsibility to protect shareholder rights and enhance shareholder value and as the board of directors and management have a far greater understanding of their company and the environment in which it operates, than either VFMC or its advisors, VFMC, will generally vote with Director’s.

However, VFMC will consider voting against Director’s, abstaining or refraining from voting where there are potential misalignments of interest between management, the directors and shareholders, such as:

  1. Appointment of Directors
  2. Employee and or Director share plans/benefit packages
  3. Changes to capital structure & other contentious issues

To aid VFMC in assessing potential conflicts, VFMC receives advice from two corporate governance consultants, ISS Governance Services provided by RiskMetrics Group and CGI Glass Lewis. VFMC may also consult with external fund managers to assess the potential shareholder value impact of the vote. 

In addition, each client is able to nominate Special Policy Matters (such as OH&S for VWA) which will be referred back to the client prior to any vote being lodged.  Where VFMC refers a resolution, or resolutions, back to the client, VFMC will provide an analysis of the resolution and a voting recommendation. The client then either accepts VFMC’s recommendation, or instructs VFMC of its voting intentions through Proper Instruction.

All votes are lodged electronically, and reported quarterly to clients with the result of the vote. 

Application of the policy

The VFMC stock voting process provides a consistent and objective method for determining the appropriate vote for all resolutions put to a proxy vote by S&P/ASX 300 companies and those in the MSCI World Index. The process incorporates special policy matter screens for each client and incorporates separate methodologies for each category of resolution.

To aid VFMC in assessing potential conflicts, VFMC receives advice from two corporate governance advisors for Australian Shares, ISS Governance Services provided by RiskMetrics Group and CGI Glass Lewis.

For International Shares VFMC employs CGI Glass Lewis as a consultant to vote our shares. This applies to all shares in the MSCI World Index (with one exception where an external manager has reserved the ability to vote according to their policy. VFMC has reviewed the managers’ proxy voting policy and has opted to allow the manager to vote directly).

The application of this overall process is detailed below.

Specific Resolutions

1.   Appointment of Directors: The board is the representative of shareholders and acts as a check against management and ensures that the company is accountable to shareholders.  VFMC will vote against an appointment where it would result in an impediment to the Board from acting in the best interests of the shareholders;

Issues considered include:

  • Has the Board an effective composition, size and commitment to adequately discharge its responsibilities and duties?
  • Can the Board effectively review and challenge the performance of management and exercise independent judgement?
  • Does the Board regularly assess the independence of each Director in light of interests disclosed by them and does the Board disclose this information in the governance section of the annual report?
  • Is the Chairperson an Independent Director?
  • Has the Board established an independent audit committee and remuneration committee, each chaired by a Director who is not the Chairperson?

Implementation:

Advisors review the company’s current board composition and the proposed appointees and interpret their compliance with the IFSA guidelines regarding good corporate governance.

  • Where both advisors support the appointment as consistent with IFSA best practices, VFMC approves the appointment
  • When either advisor recommends voting against Director’s recommendations the appointment will be assessed on a case by case basis.
    • Where VFMC judges that the board has taken significant steps towards best practice, VFMC will vote with Director’s
    • Where VFMC judges that the board has made no or insufficient initiatives to correct the composition or structure of the Board, VFMC will vote against the appointment.

2.   Employee and/or Director share plans/benefit packages: should be no more than what is needed to attract, motivate and retain the right people.  When assessing performance criteria, established for the award of shares, options and remuneration packages, these are to be consistent with the company’s objective for maximizing shareholder value.

Issues considered may include:

  • Has the Board of the company fully disclosed material information in connection with the proposed award of shares, options or other equity securities to key executives?
  • Does the company encourage recipients of such benefits to retain and grow their shareholdings and contain limits on dilution of public shareholders?
  • Does the company include in the value of remuneration of Directors, executives and employees, the amount of awards as a cost for the reporting period?
  • Does the company tailor remuneration for Non-Executive Directors (NED) of a listed company to the role and work the NED performs during the year and fully disclose the remuneration package in the annual remuneration report?
  • Remuneration for any NED should not include options to acquire shares in the company on terms materially different from the terms of any executive or employee incentives.

Implementation:

VFMC’s advisors review the company’s remuneration policy and the proposed resolution.  Advisor deconstructs the remuneration package and evaluates how each aspect of the package complies with IFSA guidelines regarding remuneration.

  • Where VFMC’s advisors unanimously support the remuneration package, VFMC votes with Director’s.
  • Where either advisor recommends voting against management regarding remuneration packages, VFMC initiates further analysis:
    • If the remuneration package fails to meet minimum standards, VFMC will vote against the package.
    • If the remuneration package meets minimum standards it will be evaluated on a case-by-case basis balancing each of the components of the policy:
      • Where VFMC considers the deviation from best practice immaterial, VFMC will vote with Director’s.
      • Where VFMC considers the deviation from best practice material, VFMC will vote against Director’s.