Corporate Governance
and Voting Policy
Jupiter’s approach to corporate governance,
corporate responsibility and voting
May 2015
Corporate Governance and Voting Policy
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Introduction
Conflicts of Interest
Jupiter’s Approach to Voting
The Board and its Committees
Executive Remuneration
Capital
Audit and Internal Control
Other Items
01
Introduction
General
Shareholders have a vital role in acting as responsible stewards and encouraging a higher level of performance from the companies they own by engaging with them on governance and sustainability issues. Jupiter seeks to invest in companies that are well managed and demonstrate a high standard of corporate conduct, responsibility and governance, thereby creating an appropriate culture in which to enhance long-term shareholder value. Jupiter may also seek investment opportunities in companies where improvement is sought in their management and governance structures. In both
circumstances, Jupiter regards the combination of constructive dialogue with companies and the considered use of voting rights to be the cornerstones of its stewardship responsibilities.
Jupiter has a formal Stewardship Committee. The aim of the Committee is to develop and deliver a co-ordinated approach to engagement with chairmen, directors and independent non-executive directors for Jupiter’s fund management department, and through this process, to enable fund managers to gain investment insight, inform decision making and influence investee companies where relevant, on behalf of our clients. The Committee is also responsible for reviewing Jupiter’s policies on stewardship and engagement and ensuring our adherence to the company’s stewardship obligations. The Committee is chaired by the Head of Investments and comprises fund managers and members of the governance research and environmental and sustainability teams. The Committee may also from time to time invite external consultants to provide insight into the topics discussed.
Our Sustainability Review Committee, also chaired by the Head of Investments, comprises fund managers and dedicated sustainability and governance specialists. This Committee reviews Jupiter’s engagement activity with companies on social and environmental issues and monitors these risks and opportunities across Jupiter’s funds. It also provides oversight of the process by which companies are approved for investment in ethically screened, socially responsible or environmental solutions funds. Common membership of both Committees by governance and sustainability analysts ensures co-ordination and consistency across our stewardship and sustainability work.
For further information on Jupiter’s stewardship policy, see
UK Stewardship Code: Jupiter’s Approach which is available
at www.jupiteram.com.
Our Policy
Jupiter’s policy sets out key governance principles and provides guidance in assessing investee companies and determining voting decisions.
The option to vote is a fundamental right for shareholders and represents an integral part of Jupiter’s stewardship of the investments it manages on behalf of its clients. We believe the execution of informed voting can enhance and protect shareholders’ rights, improve the governance of companies and promote transparency to the benefit of all stakeholders.
The approach to governance differs across jurisdictions according to broader cultural and legal frameworks, as well as varying in terms of specific regulation, levels of disclosure and transparency, and management accountability.
With that in mind, Jupiter seeks to assess companies against the prevailing good market practice in their own jurisdictions and considers proposals in the context of specific circumstances. However, we endeavour to adopt a consistent approach to the issues that occur in all markets.
We expect good governance structures to be in place to protect and facilitate the exercise of shareholders’ rights.
We expect:
■ companies to comply with established local market good practice
■ all shareholders, including minority and foreign, to be
treated equitably
■ companies to have suitable board structures and directors
to have relevant skills and expertise to ensure appropriate strategic guidance
■ a sufficient number of independent non-executive directors
to monitor effectively the management of the company and to represent shareholders’ interests
■ a suitable framework for transparency and timely disclosure
of company information
■ an appropriate performance-based remuneration which does
not reward failure or poor performance.
Shareholder’s Rights
Jupiter considers the rights of shareholders to be of paramount importance. Protecting these rights is fundamental to good governance. We believe it is essential for shareholders (as beneficial owners of companies) to be able to:
■ hold the board of directors to account through the election and
regular re-election of directors
■ implement majority voting for the election of directors
■ ensure the financial position of shareholders is commensurate
with their voting rights, e.g. ‘one share, one vote’
■ vote in person or in absentia with equal weight given to votes
in both cases
■ protect their shareholding from unwarranted dilution
■ receive comprehensive and timely information regarding general
meetings and the issues to be voted on.
Further information on these rights is provided in relevant sections later in this document.
Conflicts of Interest
We recognise the importance of managing potential conflicts of interest on behalf of our clients when voting their shares and engaging with investee companies.
Jupiter Asset Management Limited (Jupiter) is an investment management company whose parent company is Jupiter Fund Management plc (JFM). Jupiter’s investment management business is conducted at arm’s length from its parent company. Conflicts of interest are therefore likely to be rare. However, our objective is always to act in the best interests of our clients when considering such matters as engagement and voting.
Conflicts may arise when our clients are also companies in which Jupiter invests. In these circumstances, contentious issues are discussed with the relevant fund managers and the Chief Investment Officer. In addition, there will be a close engagement with the company, including where the issue may relate to a voting matter. In this instance, Jupiter will vote in the best interests of the funds/ clients who hold shares in the company, using the principles of TCF (Treating Customers Fairly). Where applicable, Jupiter will obtain prior approval from the client prior to voting.
In accordance with Financial Conduct Authority requirements, Jupiter is required to establish, implement and maintain an effective Conflicts of Interest Policy that is appropriate to Jupiter’s size and organisation and the nature, scale and complexity of its business.
Our Group Conflicts of Interest Policy is available publicly at www.jupiteram.com.
Jupiter’s Approach to Voting
Jupiter’s Governance Research team is responsible for implementing Jupiter’s Corporate Governance and Voting Policy, working closely with our fund managers and sustainability analysts on stewardship matters. This involves engaging with companies as set out in the Introduction and in the UK Stewardship Code: Jupiter’s Approach, and the timely and judicious voting of proxies at company meetings. Working with our governance and sustainability analysts, fund managers with responsibility for an investment in a company are actively involved in formulating responses to controversial issues, reviewing resolutions and making voting decisions. Resolutions are assessed against Jupiter’s Corporate Governance and Voting Policy and any non-compliance with good market practice or controversial issues (including investment decisions) are discussed with the fund managers prior to voting.
Jupiter’s policy is to support management provided we are satisfied with the company’s general business conduct and governance structure. We will support proposals that:
■ enhance value
■ protect shareholder rights
■ ensure high standards of stewardship, disclosure, transparency
and accountability.
Jupiter supports the UK Corporate Governance Code (‘UK Code’) and its UK voting policies are consistent with this Code. Overseas companies are assessed against the prevailing local regulatory and good practice guidelines applicable to their jurisdiction.
Companies should endeavour to meet these standards wherever possible and appropriate for the company. However, Jupiter recognises that compliance with good market practice, particularly in less mature markets, may not be achieved in the short term. Where there is a genuine commitment from companies to change as a result of our engagement with them, we will support management. Non-compliance with good market practice should be explained fully, i.e. setting out the background and providing a clear rationale for any mitigating action that is being taken, including, where relevant, when the company expects to comply with the provision. This will enable shareholders to understand the relevant circumstances prior to reaching a voting decision.
Our pragmatic and flexible approach allows Jupiter to apply its policy on a case by case basis, taking into consideration the company specific circumstances.
In certain cases, we may abstain to register our reservations about an issue rather than casting a vote against. Where Jupiter has participated in a consultation or a dialogue with a company or has a significant holding, we will communicate our voting decision to the company.
Jupiter Asset Management |
Corporate Governance and Voting Policy
Process
In order to assist in the assessment of governance and sustainability issues, Jupiter subscribes to external corporate governance and sustainability research providers – but does not routinely follow their voting recommendations. Our current research providers are Institutional Shareholder Services and the Investment Association’s Institutional Voting Information Service.
Jupiter processes its voting instructions electronically via a third party proxy voting agent. It is not standard practice for Jupiter to attend AGMs as most of our engagement with companies is conducted on a one to one basis, or collectively with other investors. However, Jupiter will attend an AGM where we consider this to be the most effective means of communicating with the company. We will also appoint representatives to attend and vote at overseas meetings. Jupiter endeavours to vote wherever possible and practicable, taking into consideration local market and third party requirements, such as Powers of Attorney and share blocking. As the practice of share blocking inhibits trading in securities, Jupiter considers this to be potentially restrictive to our investment activities and therefore we are selective when voting in certain overseas jurisdictions where share blocking occurs.
Stock Lending
Jupiter does not engage directly in stock lending. However, our clients are free to enter into such agreements in accordance with their own policies, including the decision to recall stock. These decisions are taken independently of Jupiter. On occasion, where our clients engage in stock lending we may, at our discretion, discuss with them the option of recalling their stock in order to vote on significant investment-related matters.
Voting Disclosure
Jupiter publishes its UK voting record on a monthly basis and Voting and Engagement Report on a biannual basis. Jupiter also provides regular bespoke voting reports to clients. For further information, see the UK Stewardship Code: Jupiter’s Approach, Principle 6.
The Board and its Committees
Board
Jupiter believes that every company should be headed by an effective board which is collectively accountable to shareholders and responsible for creating and sustaining long-term value for them and all other stakeholders.
The boardroom is characterised by the nature and personality of its directors and certain key relationships such as that between the chairman and the chief executive. It is important that those personalities and relationships foster a supportive decision-making environment and, where necessary, allow the robust challenge of unreasonable or inappropriate policies. The healthy functioning and make-up of the boardroom is an essential and invaluable component of good governance.
Jupiter recognises that board structures and the level of
independence on boards differ across jurisdictions and we will support boards that comply with local regulatory requirements.
Jupiter supports the principle of independent directors and considers it equally important that non-executive board members possess the relevant diversity of perspectives, skills and experience to add value to the business, and enable them to constructively challenge the executive directors.
Chairman
Jupiter believes the leadership role of the chairman is fundamental to creating an effective board. The chairman is crucial when it comes to setting the culture, values and behaviour of the board inside and outside the boardroom. We therefore encourage chairmen to report personally in their annual statements on how the principles relating to the role and effectiveness of the board have been applied. Jupiter favours the separation of the roles of chairman and chief executive to ensure a balance of power and authority in the company and to differentiate the two key tasks at the top of the company: the running of the board and the executive responsibility for the running of the business. If, in exceptional circumstances, the roles are combined, the board must have a strong independent element and heed the guidance of a designated senior independent non-executive or lead director.
Jupiter will normally vote against the election of a director holding both positions unless a convincing explanation as to why these roles are combined and a timeframe for their separation is provided. In market jurisdictions where roles typically are combined, such as the US, Jupiter will generally support shareholder proposals seeking to separate the roles. However each proposal is assessed on a case by case basis. We look at the performance and strengths of the director and board, and whether there is a designated senior independent director before a voting decision is reached.
The promotion of a chief executive or other executive director to the role of chairman is assessed on a case by case basis. As the chairman would not be deemed to be independent upon appointment in this instance, we expect the company to consult with its shareholders and provide a detailed explanation as to why this appointment is desirable.
Non-Executive Directors
Non-executive directors should constructively challenge and provide strategic input. They are responsible for scrutinising the performance of management, determining appropriate remuneration for executive directors and have a prime role in appointing and removing executive directors and succession planning. They also need to be satisfied as to the integrity of the financial information published by the company. Non-executive directors should devote sufficient time to their roles and be given the appropriate training where needed to ensure that they are adequately equipped to undertake the role. We examine the issue of overboarding on a case by case basis.
In determining the independence of non-executive directors, Jupiter is guided by the criteria set by local market regulatory or listing rules. Factors that may be assessed in determining the independence of directors include:
■ being a previous employee of the company, being
directly connected with, or having a material relationship with the company
■ having close family ties with any of the company’s advisers,
directors or senior employees
■ representing a significant shareholder or having cross
directorships with other directors
■ currently receiving (or having received) additional remuneration
from the company apart from a director’s fee
■ participating in the company’s share option scheme or a
performance-related pay scheme, or being a member of the company’s pension scheme
■ serving on the board for more than the maximum number of years
defined by local good market practice and concurrent long-term tenure with other directors.
Board Committees
Jupiter believes effective board committees make a valuable contribution to the governance of companies. Typically, the board establishes a nomination, remuneration, audit committee (or risk/other committees where required) to provide an independent oversight and monitoring role of the company’s business on behalf of shareholders. Board committees should endeavour to meet local market
requirements in terms of their size and independence. Of these committees, Jupiter prefers the audit and remuneration committees to consist entirely of independent non-executive directors but recognises that entirely independent committees may not be an option for smaller-sized companies or in all market jurisdictions. Non-compliance is assessed taking into consideration the specific circumstances of the company and prevailing good market practice.
The Nomination Committee is responsible for:
■ instituting and maintaining a formal, rigorous and transparent
procedure for the nomination and the appointment of directors to the board
■ anticipating refreshment of the board by ensuring proper
succession planning
■ ensuring boards are equipped with diversity of perspectives, skills
and experience.
We support the guidance within the UK Code that nomination committees should report on the board’s policy on diversity, including gender, and comment on progress towards achieving their objectives.
The Remuneration Committee is responsible for:
■ ensuring that executive directors and senior management are
appropriately rewarded and incentivised
■ appointing external advisers where required
■ producing a clear and transparent remuneration policy which is
subject to separate shareholder approval at the annual general meeting in applicable jurisdictions.
Directors should not be involved in deciding their own remuneration.
The Audit Committee’s main responsibilities include:
■ monitoring the integrity of the financial statements
■ reviewing significant financial reporting judgements
and the company’s internal financial control and risk management systems
■ monitoring and reviewing the effectiveness of the company’s
internal audit function
■ making recommendations to the board in relation to the
appointment, remuneration and terms of engagement of the external auditor. This may include commenting on how auditor independence and objectivity is safeguarded if the same firm provides non-audit services
■ reporting to the board on how it has discharged its responsibilities
and, as required in the UK, reporting to shareholders in the annual report on key matters they considered during the year and conclusions drawn.
At least one member of the committee should have recent and relevant financial experience.
Directors’ Elections
We believe that board appointments should be made on merit and the search should be set against objective criteria which include the benefits of diversity. All directors should be subject to election by shareholders and to re-election thereafter at regular intervals to comply with local requirements and subject to continued satisfactory performance. Furthermore, the re-election of directors at regular intervals should ensure planned and progressive refreshing of the board.
Jupiter believes that the majority voting standard for the election and re-election of directors is the best structure to hold the board of directors to account. Jupiter will generally vote in favour of resolutions proposing this.
Board Evaluation
Jupiter believes regular evaluation can help enhance a board’s effectiveness.
For the UK, we consider it appropriate that the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. The board should examine how it works effectively as a unit and this may involve assessing factors such as experience, the balance of skills and diversity. We agree with the UK Code’s guidance that the evaluation of FTSE 350 boards should be externally facilitated every three years. The external facilitator should disclose whether they have any connection with the company.
The annual report should disclose whether board evaluations are taking place, how they are conducted, the outcome, as well as objectives set and any progress made.
Executive Remuneration
Executive directors’ remuneration should be designed to promote the long-term success of the company.
Remuneration is not considered in isolation but is assessed within the context of alignment with strategy and shareholder interests, management competence, corporate behaviour, succession, long-term performance, wider governance issues and the equitable distribution of rewards between management and owners.
Remuneration should be sufficient to attract, retain and motivate quality directors to run the company and companies should avoid paying more than is necessary for this purpose. Jupiter is aware that companies require flexibility to set packages that incentivise
management to deliver for shareholders. We seek to judge matters on a case by case basis. The following information outlines our
expectations of pay policies and structures that in our view help to strengthen alignment between management and shareholders.
Remuneration Committee
The remuneration committee is responsible for establishing the remuneration policy and is accountable for its outcomes. The policy should ensure that executive directors and senior management are appropriately rewarded and incentivised, and the framework is aligned to shareholder interests. We also look to remuneration committees to uphold shareholder interests and we will vote against members if we consider their actions to be contrary to this position.
Jupiter Asset Management |
Corporate Governance and Voting Policy
Base Pay
Base pay should be set at a level which reflects the role and responsibility of the individual. We expect committees to explain fully their rationale for implementing significant increases. We are cautious when companies solely attribute this decision to a benchmarking exercise. We expect committees to clarify significant increases within the context of issues such as performance attainment, additional responsibilities and promotion. Committees should be aware of the resonant impact of salary increases on total pay and be mindful of group-wide increases when judging executive salaries.
Bonuses
We understand that there may be commercial sensitivities attached to the disclosure of short-term bonus targets, although we encourage disclosure wherever possible. However, companies should
clearly define:
■ why the performance targets have been chosen, including
a comment on the robustness of the targets and information to establish the link to business strategy
■ how the executives have performed against the set targets.
We encourage bonus structures that require a portion of the award to be deferred in shares for a defined period as this supports greater alignment with shareholders.
Committees should be mindful of sanctioning bonus payments in the event of an exceptional negative event, even if the targets have been achieved.
Incentive Schemes
Long-term incentive schemes should be transparent and understandable to both executives and shareholders. Jupiter assesses incentive schemes on a case by case basis. However, as a general approach, we believe incentive schemes should:
■ reward high performance that adds significantly to
shareholder value
■ not permit re-testing of performance conditions
■ comparator groups used to measure relative performance
should be disclosed and consist of relevant and representative companies
■ have performance targets that are demanding and not rewarding
below median performance
■ not automatically vest on a change in control of a company but
prorated on time and performance achieved
■ have a minimum measurement period of three years and not
vest earlier than three years from the date of being granted. We support companies seeking to apply additional holding periods, post the minimum three year performance period. However, we are flexible on this matter and understand companies may take differing approaches on this issue.
■ not include awards of matching shares without these being
subject to additional performance conditions
■ not exceed dilution limits applicable to local market guidelines
except when approved by shareholders
■ we encourage committees to monitor their grant policy. We do
not expect committees to provide continuous maximum awards regardless of corporate and share price performance. Windfall gains may arise if top level grants are maintained during a
substantial share price decline. This would be unjustifiable and we expect grants to be amended in this scenario.
Shareholding Guidelines
We support committees that set meaningful shareholding guidelines for executives as it creates further alignment with shareholders. We also expect committees to outline the timeframe in which they expect the holding target to be achieved and maintained.
Severance Compensation
To minimise severance payments, Jupiter favours notice or contract periods not exceeding one year and will not support enhanced notice periods in the event of a change of control. In addition, Jupiter believes that remuneration committees should:
■ take a robust line on restricting severance compensation to avoid
rewarding poor performance while dealing fairly with situations where departure is not performance-related
■ take account of the circumstances of termination and of a
director’s duty to mitigate loss so as to reduce the cost to the company
■ carefully consider the compensation commitments (including
pension contributions and all other elements) that directors’ terms of appointment would entail in the event of early termination.
Dilution Limits
In the absence of shareholder consent, Jupiter is not supportive of incentive schemes that exceed local market dilution limits unless there is an indication of how the company intends to address the situation and return to acceptable dilution limits within a specified timeframe.
All-Employee Share Schemes
Jupiter supports all-employee share schemes because they serve to align the interests of both employees and companies. However, such schemes should operate within local market practice and dilution guidelines subject to shareholder consent.
Non-Executive Remuneration
The board, or the shareholders where required, should determine the remuneration of the non-executive directors (including the chairman) and this should reflect the time commitment and responsibilities of the role.
Jupiter does not encourage non-executive director participation in listed equity incentive plans on an ongoing basis. However, we are aware that non-executive directors may be granted incentives at listing or pre-listing stage. Jupiter generally supports awards made on a ‘one-off’ basis and these are assessed on a case by case basis. We are not averse to part of their remuneration being paid in shares which have to be retained while in office. The value of share options held or the receipt of disproportionately high fees could be relevant in the determination of a non-executive director’s independence.
Remuneration Reports
Jupiter believes that disclosure of directors’ remuneration (and senior management where required) improves transparency and accountability to shareholders and that a detailed directors’ remuneration report should be included in the company’s annual report. We consider it best practice for the remuneration report to be put to a separate shareholders’ vote at the annual general meeting, but recognise this is not regulatory requirement under all market jurisdictions. Companies should disclose all relevant information to enable shareholders to take an informed view of the remuneration
policy, arrangements and practices. This should include details of the appointment of remuneration consultants, where relevant, and whether they have any other connection with the company. Jupiter may not support the remuneration report if:
■ it is not transparent and has inadequate disclosure
■ the remuneration arrangements do not meet good market practice
■ the remuneration committee is considered to have applied its
discretion inappropriately
■ the composition of the remuneration committee does not meet the
independence requirements of its jurisdiction.
UK Remuneration Reporting and Voting Regime
The UK has introduced legislation that reforms pay disclosure and provides shareholders with additional voting responsibilities with regards to remuneration policy and any payments that fall outside the agreed guidelines. We believe the following points are important considerations to the remuneration policy vote:
■ policy vote frequency - Legislation requires shareholders to vote
on a company’s policy report at least every three years. Jupiter expects the policy to be voted on every three years and not on an annual basis. This is a practical timeframe for companies to plan their policies and also provides sufficient time for companies and shareholders to assess the success of the policy. Futhermore, this period will help to ensure that the company’s remuneration strategy is aligned with the long-term business strategy.
■ recruiting new directors - Companies have to disclose the
maximum variable remuneration which can be paid to a new director. This excludes any payments made in compensation for the loss awards from a previous employer. Jupiter understands that companies face numerous scenarios and may need to act within a competitive market. However, we expect companies to clearly outline their rationale for making significant compensatory payments.
■ reporting quality - We encourage remuneration committees to
not only fulfil their reporting obligations but to provide relevant explanations for their decisions or any discretion that has been exercised during the relevant period.
Capital
Jupiter believes that companies should be granted the flexibility to manage their capital structure effectively and, when necessary, to raise additional capital in a timely and cost-efficient manner.
Jupiter believes pre-emption rights (whereby companies issue shares for cash, with the first offer going to existing shareholders) are fundamental in providing protection for shareholders against their holding being diluted.
Management resolutions seeking capital authorities (with and without pre-emption rights) feature as a standard item at annual general meetings, although authorities will also be tabled at special general meetings where necessary. The size of the company will be taken into account when assessing share issuance requests and smaller companies may be afforded greater flexibility subject to sufficient justification. In assessing all capital requests, any potential dilutive impact on our clients’ shareholdings is carefully evaluated.
Jupiter will generally support increases to capital stock for legitimate financing requirements provided they are in the best interest of
shareholders. As a rule, we believe that capital requests should meet the standard pre-emption guidelines of their local market jurisdictions. We encourage prior consultation with shareholders if companies are seeking non-routine share issuance authorities, i.e. in excess of local market guidelines, and generally, Jupiter will not support these authorities where the company has not provided sufficient justification for the amount sought.
We expect companies to disclose how share issuances are utilised in the subsequent annual report to enable monitoring by shareholders.
Share Repurchase/Buybacks
Jupiter normally supports share repurchases provided local market regulations and relevant shareholder guidance are met. The board should demonstrate that the repurchase is an appropriate use of the company’s cash resources and that any capital spent is translated into an increase in shareholder value. Relevant details of shares repurchased from the market should be disclosed.
Jupiter assesses the allocation of income, e.g. dividends versus share buybacks on a case by case basis.
Dividend Policy and Distributing Capital to Shareholders
Companies should have clear dividend policies which set out the circumstances for distributing dividends and returning capital to shareholders.
Takeovers, Mergers, Acquisitions and Restructuring
Jupiter assesses each case individually and takes decisions as to whether the proposal is in the best interests of shareholders based primarily on the views of our analysts and fund managers. Where appropriate, governance issues are also considered. Jupiter supports proposals that create shareholder value.
Anti-Takeover Measures
We believe that anti-takeover provisions (e.g. poison pills) which can potentially damage shareholder value and/or entrench management should be avoided or, at a minimum, be put to shareholders for approval. In markets where poison pill mechanisms are not subject to shareholder approval, we expect companies to explain the rationale for introducing such a device and to introduce appropriate checks and balances in order to protect the interests of shareholders.
Jupiter generally opposes anti-takeover provisions and will generally support proposals that redeem poison pill clauses, remove classified board structures or eliminate provisions that can be viewed as anti-takeover devices.
Audit and internal control
The audit committee’s responsibilities include monitoring the integrity of the financial statements and significant financial reporting judgements, reviewing the effectiveness of the company’s internal audit function and its financial control and risk management systems. Duties also include recommending to the board the appointment of a suitable external auditor to undertake the company’s audit. An independent audit is essential for good governance and also provides a safeguard for the shareholder. We support the view that companies should put the external audit contract out to tender on a regular basis to comply, at a minimum, with local regulatory requirements.
Jupiter Asset Management |
Corporate Governance and Voting Policy
The committee should report on the approach taken to the
appointment or reappointment of the external auditor, and information on the length of tenure of the current audit firm and when a tender was last conducted. We believe external auditors should be accountable to the shareholders with their appointment and remuneration ratified by shareholders at a general meeting. Any change of auditors should be fully explained to shareholders All non-audit work undertaken by the auditor and related fees should be disclosed in full in the annual report.
The board should:
■ follow local market regulatory and good practice guidance on
internal control, and financial and strategic reporting
■ maintain a sound system of internal control to safeguard
shareholders’ investments and the company’s assets
■ conduct an annual review of the company’s systems of internal
control which should be reported to shareholders in the annual report. The review should cover all material controls, including financial, operational and compliance controls and risk management systems.
We expect companies to comply with all disclosure requirements for annual reports to allow shareholders to assess directors’
performance. Please see section on Report and Accounts below.
Other Items
Memorandum and Articles of Association
Jupiter generally opposes any proposed changes where there is insufficient information to make a balanced decision. We will also oppose changes that erode shareholder rights.
Political and Charitable Donations
Jupiter does not support the funding of political parties or organisations by companies. In market jurisdictions that do not require shareholder approval to make political donations, we will support shareholder proposals which oblige companies to report to shareholders on their political donations and/or where the level of disclosure is poor. Jupiter supports charitable donations at an appropriate level, especially where an active donations policy supports the company’s engagement with its local or wider community.
Related-Party Transactions
Most markets have specific rules on related-party transactions governing disclosure and approval from shareholders. Since these proposals can present conflicts of interest, we consider them carefully and determine if they are a necessary part of the business operations and are in our clients’ interests.
Shareholder Resolutions
Jupiter will typically support proposals that will protect or further enhance shareholder rights and transparency. Where shareholder proposals relate to sustainability issues, these are reviewed by our sustainability analysts prior to referral to the fund managers as appropriate. When assessing the merits of a proposal, Jupiter considers the company’s approach to the issue along with its response. Thereafter, we take a decision as to whether the proposals are in the best interests of shareholders and other stakeholders where relevant.
Report and Accounts
Annual reports should be clear, balanced and understandable. Disclosure should contain all relevant information to allow shareholders to:
■ assess the company’s performance, business model and strategy
■ obtain a clear understanding of all principal risks and uncertainties
the company is facing
■ understand the main trends and factors likely to affect the future
development, performance and postion of the company’s business, including information about environmental matters (for example, the impact of the company’s business on the environment), the company’s employees, and social, community and human rights issues to the extent necessary, as well as information about any policies of the company in relation to those matters and the effectiveness of those policies.
■ make a considered voting decision on the proposals being put
to shareholders at the annual general meeting
Jupiter will generally approve financial statements except where there is a qualified audit statement, restatement of annual results or where there are other concerns that warrant a vote against.
Alternative Investment Market (AIM) Companies
Whilst AIM companies in the UK are not obliged to comply with the UK Code, Jupiter believes that compliance with the Code should continue to be an aspiration for them as they grow and that they should seek to apply them to their circumstances as appropriate. Jupiter adopts a pragmatic and flexible approach in assessing the corporate governance of AIM companies and in reaching voting decisions.
Investment Companies
In the UK, the Association of Investment Companies’ Code of Corporate Governance (AIC Code) provides boards of investment companies with a framework of best practice in respect of the governance of their companies. The AIC Code addresses the governance issues relevant to investment companies and enables boards to satisfy any requirements they may have under the UK Code and paragraph 9.8.6 of the Listing Rules.
Jupiter believes it is appropriate for investment companies to support the AIC Code or the UK Code.
Jupiter Asset Management Limited 1 Grosvenor Place London SW1X 7JJ. Authorised and regulated by the Financial Conduct Authority.
Visit our website where you can find more information on Jupiter’s corporate governance and engagement activities including our biannual
Voting and Engagement Report – Jupiter’s approach to responsible shareholding. www.jupiteram.com. The views expressed are those at the
time of writing (May 2015) and may be subject to change. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. No part of this document may be reproduced without prior written consent of Jupiter Asset Management.
Senior Governance Research Analyst Cynthia Pinniger Email: cynthia.pinniger@jupiteram.com Team Administrator Amie Reid Email: amie.reid@jupiteram.com Email: mark.evans@jupiteram.com
