Thoughts on Corporate Governance - Video discussing Royal Bank of Scotland Share Consolidation
View Insight Out Magazine's Force for Change video at the RBoS AGM in Edinburgh where shareholders express their views about the proposed Royal Bank share consolidation. See opinions expressed by Philip Graves of Fundamental Tracker Investment Management Limited's Munro Fund on this and corporate governance in general.
How Fundamental Tracker Investment Management will implement the UK Stewardship Code
At the Institute of Chartered Secretaries and Administrators Corporate Governance Conference on 18 March 2009, the former Chairman of the Financial Reporting Council, Sir Christopher Hogg, stated that the financial crisis was a result of “a massive failure of governance at every level involved, going way beyond, though not excusing the failures of corporate governance in publicly-quoted UK banks.”
The UK Stewardship Code 2010 (the Code) was introduced by the Financial Reporting Council (FRC) in an attempt to encourage a longer-term and more enthusiastic involvement in company ownership. The Code aims to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and the efficient exercise of governance responsibilities.
The Stewardship Code is published and overseen by the FRC which is the independent regulator overseeing financial reporting, accounting and auditing and corporate governance. Although it is not mandatory the FRC encourages those service providers to disclose how they carry out the wishes of their clients by applying the principles of the Code that are relevant to their activities.
This document explains Fundamental Tracker Investment Management Ltd.’s approach to the Stewardship Code.
Stewardship policy
Principle 1 - Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities
- This document represents our public response to voting policy and outlines how FTIM meets the Stewardship Code.
- Due to the costs involved, the voting system in place will only be used on the most important issues.
Principle 2 - Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed
- We recognise the importance of managing conflicts of interest on behalf of our clients when voting. At present, and for the foreseeable future, we see little scope for conflicts of interest to arise because we use a tightly defined investment process that is not subjective.
Principle 3 - Institutional investors should monitor their investee companies
- Our investment process is driven by our model which selects stocks in a purely objective fashion. Weights and holdings are checked daily against the model which itself is adjusted on a monthly basis.
- Corporate events are monitored by us and captured in a Daily Market Commentary which is published on the website. This keeps us abreast of the activities of our invested companies.
- Our custodians, through ProxyEdge®, will notify us of forthcoming voting issues such as EGMs and AGMs. We will note any significant issues of stewardship that require our attention and vote accordingly.
Principle 4 -Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
- Unlike other fund managers we do not have the ultimate option of selling shares in a company where we believe corporate governance issues are undermining the value of the company.
- Because of this we are unlikely to be offered the chance to have confidential discussions with companies where we intend to vote against the board. For that reason we would not expect to be ever invited to be taken “inside” and given price sensitive information. Instead we will inform the company chairman by letter and publish all such correspondence on our website.
- Issues where we would expect to make our views known are likely to focus on executive remuneration but we will remain open to suggestions from our shareholders on this and other issues. Contact us at enquiries@themunrofund.com]
Principle 5 - Institutional investors should be willing to act collectively with other investors where appropriate
- FTIM is open to working with other institutions and shareholders where appropriate. Presently we are not part of any institutional lobbying networks but we will endeavour to use our contacts in the industry to act in the best interests of shareholders but ensuring that we are not deemed to be part of a concert party.
Principle 6 - Institutional investors should have a clear policy on voting and disclosure of voting activity.
- Our policy is to pay particular interest to important matters within investee companies that we feel need to be addressed through voting and by communicating with the company’s chairman.
- FTIM uses a third party voting platform provided by our custodians called ProxyEdge®. There is a charge for every vote cast and hence our voting will be targeted.
Principle 7 - Institutional investors should report periodically on their stewardship and voting activities.
- Any voting or action taken with regard to an issue will be reported on our website (www.themunrofund.com).
Fundamental Tracker Investment Management’s Response to the Financial Reporting Council’s Consultation Report on the Revised Stewardship Code (April 2012)
Click here to see Fundamental Tracker Investment Management Linited's response to the consultation.
Voting Record
Barclays PLC - FSA’s Final Notice Report 27/6/12 – Reinforces Fundamental Tracker Investment Management’s views on remuneration and corporate governance.
(For FTIM's views on non-executive representation on company boards see also July 2012 blog)
The Munro Fund to vote against the board at the BSkyB AGM on 1st November 2012
The S&W Munro UK Fund to vote against the remuneration report at the WPP AGM.
The S&W Munro UK Fund to vote against the share consolidation at the RBoS AGM on 21st May 2012
The Munro Fund will vote against the remuneration report at the Cookson AGM on Thursday May 17th
The S&W Munro UK Fund to vote against the remuneration report at the Barclays AGM on 27th April 2012
The S&W Munro UK Fund to vote against the board at the BSkyB AGM on 29th November 2011
The Munro Fund will vote against the G4S acquisition of ISS