Corporate Governance Framework - top1000funds.com€¦ · Approach to voting p. 4 3. Engagement p....
Transcript of Corporate Governance Framework - top1000funds.com€¦ · Approach to voting p. 4 3. Engagement p....
Table of content
Introduction p.31.Guidelines p.42.Approachtovoting p.43.Engagement p.64.Shareholderlitigation p.65.Cooperation p.66.Engagementwiththepolicy-makingprocess p.67.Transparency&disclosure Annex1:APGResponsibleInvestmentPolicy p.7 Annex2:APGVotingPolicy p.8 A. Introduction p.9 B. Agendaitemswhicharevotedupon p.10 B1.Board-relatedagendaitems p.11 B2.Audit-relatedagendaitems p.15 B3.Capital-relatedagendaitems p.16 B4.AgendaitemsrelatedtotheStatutesorlegalstructure p.17 B5.Implementingdefencemechanisms p.17 B6.Shareholderproposals p.18 C. Limitationsconcerningtheexerciseofvotingrights p.18 D. Disclosure p.19
APG Corporate Governance Framework 3
Introduction
APGisactiveinthefieldofcorporategovernancebecauseitrecognisesitsrightsandresponsibilitiesasashareholderand(co-)ownerofcompaniesandtheconnectionbetweengoodgovernanceandrisk-adjustedreturns.
APG’sstatementofInvestmentPrinciplesdefineshowitinvests.Ouraimistoenablethepensionfunds,onwhosebehalfweinvest,toprovideaninflation-proofpensionatanaffordablepremium.Ourvisionisexpressedinsixinvestmentprinciplesoneofwhichstates:Weachieveourreturnsinaresponsiblemannerthroughafocusonenvironment,socialpolicyandgoodgovernance.Moreover,byincludingnon-financialfactorsintotheinvestmentprocess,theriskandreturnprofileofourportfoliocanbeimproved.
InthisdocumentwesetoutAPG’sapproachtocorporategovernance.Westartbysettingouttheframeworkforresponsibleownership(Guidelines)andhowthistranslatesintoourownpolicyanditsimplementation(ApproachtoVoting).Fromthisfollowsabriefdiscussionofouractivedialoguewithcompanies(Engagement)andhowweincorporatecorporategovernancewithindamagerecovery(ShareholderLitigation).
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Therighttovoteisanessentialpartofawell-functioningcorporategovernancesystemandAPGthereforeexercisesthisright,whereverpossible,atallcompaniesinwhichitinvests.Votingdecisionsareprimarilybasedoninvestmentconsiderations.
APG’sportfolioisglobalanddiversified.Weinvestinca4000companiesworldwide.Whendecidinghowtovote,APGtakesintoaccountthespecificcontextandmarketinwhichthecompanyisdomiciled.
Theunderlyingprinciplesofthevotingpolicyare:1. Optimisereturnsforshareholders–Themostimportantgoalofacompany,andthereforeofitsdirectors,shouldbetooptimisereturnsforshareholdersinthelongterm,whiletakingdueaccountoftheinterestsofotherstakeholders.2. Accountability–Thedirectorsofacompanymustbeaccountabletoitsshareholders,andalsomakethemselvesavailablefordialoguewithshareholders.3. Transparency–Shareholdersdemandfullandtransparentdisclosurefromcompaniestoenablethemtomakewell-informedinvestmentdecisions,andtoeffectivelyexercisetheirrightsandresponsibilitiesaspartofthecompany’ssystemofchecksandbalances.Companiesmustdiscloseoperational,financialandgovernanceinformationinatimely,completeandcomprehensiblemanner,andinaccordancewithInternationalFinancialReportingStandards(IFRS).Thisalsoappliestoimportantinformationregardingenvironmental,socialandethicalissuesthatareofstrategicrelevancetothecompanybecausetheycouldhaveamaterialimpactonthecompany’slong-termperformance.4. Oneshare,onevote–APGsupportstheprincipleof‘oneshare,onevote’,whichaccordsequalrightstoallshareholders.Whereacompany,forfinancialorlegalreasons,issuesshareswithdifferingrights,thecompanymustdefinetheserightstransparentlyandclearlyexplainwhyrightsarenotequal.5. Informedvotes–Weexpectcompaniestomakeavailabletoshareholderscompletematerialsforgeneral
APG’sresponsibleinvestmentpolicy(seeAnnex1)isbasedontheOECDGuidelinesforMultinationalcompaniesandtheGlobalCorporateGovernancePrinciples(Revised2009)oftheInternationalCorporateGovernanceNetwork(ICGN).WeexpectcompaniestocomplywiththetenPrinciplesoftheUNGlobalCompact.
ThemaingoalsofAPG’sresponsibleinvestmentpolicyare:• tocontributetorisk-adjustedfinancialreturn;• todemonstratesocialresponsibility;• tocontributetotheintegrityoffinancialmarkets
ThroughitscorporategovernanceactivitiesAPGseekstocontributetothesethreegoals,andtoachievethishasdevelopedadedicatedvotingpolicy.
APG’sdedicatedGovernance&SustainabilityTeamcentrallycontrolstheexerciseofallvotingrights.
1. Guidelines 2. Approach to voting
APG Corporate Governance Framework 5
meetingssufficientlyinadvanceofthemeeting.Thisenablesshareholderstomakewell-informedvotingdecisions.Companiesshouldenableelectronicvoting,andtakeaccountofallvotes,whethercastelectronicallyorinperson,intheirformalvotingresults.Suchrecordsshouldbepublishedindetailonthecompanywebsite.APG’sdetailedvotingpolicy(Annex2)willbereviewedregularlytotakeaccountofchangesinlawsandregulations,marketdevelopmentsandexperiencesgainedduringtheshareholderseason.
APGmakesuseoftheelectronicvotingplatformofaproxyvotingserviceprovider,andalsoprocuresproxyresearchfromdifferentresearchfirmstoinformourownanalysesandvotingdecisions.
APGtakesafocussedapproachtovoting.Themajorityofagendaitemsareroutineanddonotrequirespecialattention.ThereforeweareworkingwithourproxyresearchprovidertoimplementAPG’sdetailedvotingpolicyforthemajorityofcompanymeetings.ThispolicyisbasedonAPG’sgeneralvotingpolicyandtailor-madesothatthevotesarealwaysinlinewithAPG’sownpolicy.Wecanalwaysvotemanuallyandoverrideavoterecommendation.
Forthosecompanieswhichareontheso-calledFullVotingListeachvoteismanuallysubmittedandtheGovernance&Sustainabilityteamconsultswithportfoliomanagers,thecompanyandotherinvestorswhereappropriate.
APGfocusesonaselectnumberofcompanies:
• AllDutchcompanies,and• thosewhereweholdasignificantstake,and/or• haveasignificanteconomicexposure,and/or• requirespecialattentionforotherreasons.
Manycompaniesareheldinmorethanonefundwithinourportfolio.Wehavecentralisedvotingactivitiesin-housetoensurethatvotesareconsistent
acrossallfundsinordertosendonesinglemessagetocompanies.APGactivelyseeksinputfromexternalmanagerswhenvotinginmarketswheretheyhavespecialistexpertise.
Itisunrealistictoattendallshareholdermeetingsworldwide,butelectronicvotingallowsustoexerciseourvotingrightswhereverweinvest.Inmarketswhereelectronicvotingisnotproperlyfacilitatedweactivelyencouragecompaniesandpolicymakerstorectifythis.IntheNetherlandsAPGmayattendgeneralmeetingsofcompanieseitherinpersonorbyproxyinco-operationwithEumedion,theDutchCorporateGovernanceOrganisation,anditsinvestormembers.
Impediments to voting Thereareimpedimentstoexercisingourvotingrightswhichweactivelyseektoaddress.Thisincludesthepracticeofshareblockingincertainmarketswherebyonecannottradeincompanyshareswhenvoting,orcumbersomesharere-registrationprocedures.APGhasbeenengagingwithcompanies,investorsandpolicymakersaliketochangethisandasaresultwefacethisissuelessfrequently.
Theproxyvotingchaincanbeoptimisedfurther.Todatewecannotalwaysbesurethatourvotereachesthecompanycorrectlyorindeedatall.APGisactivelyworkingwithcustodians,companiesandinvestors,aswellaspolicymakers,toaddresstheseshortcomings.
Stocklending Stocklendingcanbeimportanttoensuresufficientmarketliquidity.ForthecompaniesonourFullVotingListwewillalwaysvoteallsharesthatweownandrecallanythathavebeenlentout.Forallothercompanieswewillhaveatleast20%ofthesharesheldavailableforvoting.WewillalsorecallsharesformeetingsnotcoveredbytheFullVotingListifcircumstancessorequire.APGsupportsthepolicyoftheICGNregardingsharelending.
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concerne.g.fraud,deceit,misrepresentation,disregardofdisclosureobligationsandbreachoffiduciaryduties.IncaseswhereAPGhassufferedandhasaclaimthatrepresentsacertainvalue,andifwithinitspowers,APGwilltakereasonablestepstopursueandrealizesuchaclaimandthusrecoverdamagessuffered.
Wherepossibleandappropriate,APGwillseektointroducecorporategovernancereforms,andundercertaincircumstancesmaytakeanactiveroleinasecuritiescaseasameanstoimprovecorporategovernanceatacompanyinvolvedinlitigation.Corporategovernancereformscanthusbemadepartofasettlement.
5. Cooperation
APGispartofvariousinvestornetworkssuchastheInternationalCorporateGovernanceNetwork(ICGN),theGlobalInternationalGovernanceNetwork(GIGN),EumedionandtheUNPrinciplesforResponsibleInvestment(UNPRI).Wetakeanactiveroleinthesenetworks,forexamplebyservingonvariouscommittees.Whereappropriatewecooperatewithotherinvestorsindialogueswithcompaniesandregulators.
6. Engagement with the policy-making process
Throughourmembershiporganisationsandalsoinourowncapacity,APGcontributestothedevelopmentofthepolicyandregulatoryframework.Improvingtheintegrityoffinancialmarketsisoneofthestatedgoalsofourresponsibleinvestmentpolicy,becausebroadmarketorregulatoryfailurescanhaveasignificantimpactonourassetallocationandinvestments.
APGbelievesinthevaluethatanactivedialoguewithinvesteecompaniescanbringtotheinvestmentprocess.Ourengagementwithcompaniesencompassesenvironmental,socialandgovernance(ESG)issues.Companiesneedtobeabletodemonstratethattheyhaveappropriatecorporategovernancepoliciesandsystemsinplacethatalsocapturestrategicallyrelevantsustainabilityrisksandopportunities.Engagementwithcompaniescanbetriggeredbyvotingdecisionsandrelatedmatters,oritcanbepartofanongoingdialogueinordertocloselymonitorourinvestments.InlinewithourresponsibleinvestmentpolicywemaydecidetoexcludecompaniesthatareinbreachoftheUNGlobalCompactprinciplesanddonotimprovefollowingengagement.
APGprocuresgovernanceresearchthatisnotrelatedtogeneralmeetingsbutprovidesinsightonthegeneralgovernanceofacompany.Thiscanbeusefulforinvestment-relatedresearchandengagement.Corporategovernanceengagementwithcompaniesfocusesprimarilyonminorityshareholderrights,boardcompositionandremuneration,aswellasriskmanagement.
Inmarketswherelegalprovisionsareinplaceforinvestorstoproposeaslateofboardcandidates(e.g.Italy)ortakeaseatontheboardnominationcommittee(e.g.Sweden),wemakeactiveuseofthisrightwhereappropriate.
Insider knowledge APGtriestopreventreceivinginsiderinformationbyallmeans,unlessinrarecaseswhereonehasspecificallyagreedtobeingmadeaninsider.OurCodeofConductclearlystatethatemployeesmustnotmakeuseofinsiderknowledgeordisseminatethisinformationfurther,andmustreportanypotentialcaseofinsiderinformationimmediatelytocompliance.Employeesarenotallowedtotradebasedoninsiderinformation.
Globally,lawsuitsmaybefiledagainstcompaniesforallegedviolationsofsecuritieslaws.Theselawsuitsmay
3. Engagement 4. Shareholder litigation
APG Corporate Governance Framework 7
APGiscommittedtobeingtransparentandaccountable.Wepublishthisvotingpolicyandhowwehavevotedatallcompaniesonourwebsiteassoonaspossibleafterthegeneralmeeting.OnanannualbasiswereportaboutourdetailedcorporategovernanceandsustainabilityactivitiesinourResponsibleInvestmentReport.
Annex 1
APG Responsible Investment Policy
1. ResponsibleinvestmentisintegratedintoAPG’s investmentprocess.
Wetakeaccountofshareholderrightsandenvironmentalandsocialissuesinourinvestmentdecisions.Ourresearchonsustainabilityorcorporategovernancecanformthebasisfordecisionsnottomakeaninvestment,tosellaninvestment,ortoreduceorincreasethesizeofaninvestment.
2. APGengageswithcompaniestopromotesustainabilityandgoodcorporategovernance.
Inourdialoguewithcompanieswemakeclearwhatstandardsweexpectinrelationtosustainabilityandshareholderrights.Toincreaseourinfluenceweoftenworkwithotherinvestors.
3. APGexpectscompaniestooperateinaccordancewiththeUNGlobalCompactandwilldivestfromcompaniesifengagementdoesnotleadtoimprovement.APGdoesnotinvestinproductsthatareprohibitedunderDutchorinternationallaw.
Thismeanswedonotinvestincompaniesthataredirectlyinvolvedintheproductionoflandmines,clustermunitionsorlaunchsystemsfortheseweapons,orofchemicalorbiologicalweapons.WealsoexcludecompaniesinvolvedinproductsorservicesthataregenerallyconsideredintheNetherlandstobeobjectionable.TheUNGlobalCompactsetsout
aminimumframeworkofstandardsforcorporatepracticeonhumanrights,labourrights,theenvironmentandthepreventionofcorruption.
4. APGdoesnotinvestinsovereignbondsissuedbycountriesthataresubjecttoanarmsembargobytheUNSecurityCouncil.
Theseembargoesareenforcementmeasurestocondemnviolationsofinternationallaworhumanrights.
5.APGmakesactiveuseofitsrightsasashareholder.
Wevoteatthemeetingsofcompaniesinwhichweinvest.Wepublishourvotingrecordandexplainourvotingdecisions.
6.APGworksintheNetherlandsandinternationallytoadvocatepolicyandlegislationthatsupportsustainabilityandgoodcorporategovernance.
Weregularlydiscusssustainabilityandshareholderrightswithpolicy-makers.Wealsocontributetothedevelopmentofstandardstopromotethelong-termintegrityoffinancialmarkets.
7.APGseeksoutattractiveinvestmentsthatpromotesustainability.
APGinvestsinrenewableenergy,cleantechnologyandmicrofinanceandisconstantlyalerttonewopportunitiestomakeinvestmentsthatcontributetosustainability.
8.APGpromotesitsresponsibleinvestmentapproachactivelyinordertoencouragesustainabilityandgoodcorporategovernance.
Weworkwithotherinvestmentmanagersandpensionfundsthroughouttheworldinordertoincreasetheimpactofourresponsibleinvestmentpolicyonbehalfofourclients.WeplayanactivepartinnumerousinvestornetworksintheNetherlandsandinternationally.Wecommunicateextensivelyaboutourwork.
7. Transparency & disclosure
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Theobjectiveofcompaniesistogeneratesustainableshareholdervalueoverthelongterm.Sustainabilityimpliesthatthecompanymustmanageeffectivelythegovernance,socialandenvironmentalaspectsofitsactivitiesaswellasthefinancial.Eachcompanyneedsovertimetogenerateareturnonthecapitalinvestedinitoverandabovethecostofthatcapital.[...]
Shareholdersshouldactinaresponsiblewayalignedwiththecompany’sobjectiveoflong-termvaluecreation.Institutionalshareholdersmustrecognisetheirresponsibilitytogeneratelongtermvalueonbehalfoftheirbeneficiaries,thesaversandpensionersforwhomtheyareultimatelyworking.
ICGN Global Corporate Governance Principles: Revised (2009)
Annex 2
APG Voting Policy
APG Corporate Governance Framework 9
A. Introduction
ThisvotingpolicyshouldbereadinconjunctionwiththeAPGCorporateGovernanceFrameworkandtheAPGResponsibleInvestmentPolicywhichsettheframeworkforthisvotingpolicy.Thispolicyappliestolistedequities.APGalsovotesrelevantnoteholdermeetings.Corporategovernancepertainstothewayacompanyisrun.APGregardsgoodcorporategovernanceasbeneficialtothecompanyingeneratingvalueforitsshareholdersinasustainableway,alsotakingdueaccountoftheinterestsofotherstakeholders.Therighttovoteisanessentialpartofawell-functioningcorporategovernancesystemandAPGthereforeexercisesthisright,wherepossible,atcompaniesinwhichitinvests.ThisdocumentdescribestheframeworkthatAPGuseswhenexercisingitsvotingrightsatshareholdermeetingsworldwide.WhendecidinghowtovoteAPGtakesintoaccountthespecificcontextandmarketinwhichthecompanyoperates,suchastheprovisionsassetoutinnationalcorporategovernancecodesaswellaslocallawsandregulations.APGexpectscompaniestooperateinaccordancewiththebestpracticeprovisionsandrecommendationsoftheOrganisationforEconomicCooperationandDevelopment(OECD)formultinationalcompanies,theGlobalCorporateGovernancePrinciplesRevised(2009)oftheInternationalCorporateGovernanceNetwork(ICGN)andthetenprinciplesoftheUnitedNationsGlobalCompact.Votingdecisionsareprimarilybasedoninvestmentconsiderations,inconsultationwithcompanies,internalandexternalportfoliomanagersandotherinstitutionalinvestorstoinformourvotingdecisions.Wealsousetheservicesofspecialistproxyvotingfirmstosupportthevotingprocess.APG’svotingpolicywillbereviewedregularlyonthebasisofchangesinlawsandregulations,marketdevelopmentsandexperiencegainedduringtheshareholderseason.
Underlying principles of the voting policy
1. Optimisingreturnsforshareholders–Themostimportantgoalofacompanyandthereforeofitsdirectorsshouldbetooptimisereturnsforshareholdersinthelongterm,whiletakingdueaccountoftheinterestsofotherstakeholders.2. Accountability–Thedirectorsofacompanymustbeaccountabletoitsshareholders,andalsomakethemselvesavailablefordialoguewithshareholders.3. Transparency–Shareholdersdemandfullandtransparentdisclosurefromcompaniestoenablethemtomakewell-informedinvestmentdecisions,andtoexerciseeffectivelytheirrightsandresponsibilitiesaspartofthecompany’ssystemofchecksandbalances.Companiesmustdiscloseoperational,financialandgovernanceinformationinatimely,completeandcomprehensiblemanner,andinaccordancewithInternationalFinancialReportingStandards(IFRS).Thisalsoappliestoimportantinformationregardingenvironmental,socialandethicalissuesthatareofstrategicrelevancetothecompanybecausetheycouldhaveamaterialimpactonthecompany’slong-termperformance.4. Oneshare,onevote–APGsupportstheprincipleof‘oneshare,onevote’,whichaccordsequalrightstoallshareholders.Whereacompanyforfinancialorlegalreasonsissuesshareswithdifferingrights,thecompanymustdefinetheserightstransparentlyandclearlyexplainwhyrightsarenotequal.5. Informedvotes–Weexpectcompaniestomakeavailabletoshareholderscompletematerialsforgeneralmeetingssufficientlyinadvanceofthemeeting.Thisenablesshareholderstomakewell-informedvotingdecisions.Companiesshouldenableelectronicvoting,andtakeaccountofallvotes,whethercastelectronicallyorinperson,intheirformalvotingresults.Suchrecordsshouldbepublishedindetailonthecompanywebsite.
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Thevotingpolicysetoutinthisdocumentservesasaframeworkforexercisingvotingrightsatshareholdermeetings.Theproposalsonthemeetingagendaareassessedonacase-by-casebasis,takingtheprincipleslaidoutaboveasastartingpoint.WhereAPGhasseriousconcernsoverthesustainabilityperformanceofacompanyitmayexpressitsdiscontentbynotsupportingroutineagendaitems,suchastheAnnualReport&Accountsortheelectionofdirectors.
ThisdocumentdescribestheAPGvotingpolicyregardingthemostcommonlyoccurringagendaitems,asfollows:
1. Board-relatedagendaitems2. Audit-relatedagendaitems3. Capital-relatedagendaitems4. Agendaitemsrelatingtothestatutesandlegal structureofthecompany5. Anti-takeoverdefencemechanisms6. Proposalsbyshareholders
B. Agenda items which are voted upon
APG Corporate Governance Framework 11
Director Election Weexpectdirectorstoreceiveregulartrainingandtostandforre-electionatregularintervalsandatleasteveryfouryears.Independentdirectorswhohaveservedformorethan12yearsshouldpreferablystandforannualre-election.
Cumulativevotingallowsshareholderstocastalltheirvotesforonedirector.Wemaymakeuseofthispracticeinordertoaddminority,dissidentornewindependentvoicestotheboardwherewebelievethistobeintheinterestofthecompanyanditsshareholders.Inprinciplewefavourmajorityvoting.
Independence of directorsThepositionsofchairmanandchiefexecutiveshouldbeseparatetoavoidaconcentrationofpowerandbecausetherolesrequiredifferentskills.
Thechairmanshouldbeindependentatthetimeofappointment.
Aformerexecutivedirectorshouldnot,intheopinionofAPG,beallowedtobecomechairmanofthesupervisoryboard,exceptinexceptionalcircumstances.
TheunitaryBoardshouldbemainlycomposedofnon-executivedirectors,andamajorityofthenon-executivedirectorsshouldbeindependent.Thesupervisoryboardofacompanywithtwogoverningbodiesshouldbecomposedofnon-executivedirectorsonly,ofwhichthemajorityshouldbeindependent.
Ifthecompanyhasamajorityshareholder,themajorityofnon-executivedirectorsshouldbeindependentofthemajorityshareholder(s)inordertoprotecttheinterestsofminorityshareholders.
APGusestheguidelinessetoutinarticle2.4.3.oftheICGNGlobalCorporateGovernancePrinciplesRevised(2009)asastartingpointtoassesstheindependenceofanon-executivedirector.
1.1 Appointment of executive and non-executive directors
Indifferentjurisdictionsdifferentboardstructuresareprevalent.Theprincipalonesaretheunitaryboardcomposedofbothexecutiveandnon-executivedirectors,andthetwo-tierboardstructurecomprisinganon-executivesupervisoryboardandanexecutivemanagementboard.Thefollowingprinciplesapplyregardlessofthestructureinplace:welookforawell-balancedboardthatcanrunthecompanyeffectivelyinthelong-terminterestofitsshareholdersandtakedueaccountoftheinterestsofotherstakeholders.Weexpecttheboardtohaveanappropriatebalancebetweenexecutivesandnon-executives,andwhileweexpectthatamajorityofnon-executivesbeindependent,werecognisethatconnectedexecutivescanbringvaluetotheboard.However,weexpectacompanytoprovideappropriatejustificationswherenon-independentdirectorsconstituteamajority.
The(supervisory)boardisresponsibleforsettingcompanystrategy,withinputfromtheexecutives,andtheCEOisresponsibleforimplementingitwithhis/herexecutiveteam.Thenon-executivedirectorsshouldexerciseoversightovertheexecutivesandbringafreshexternalperspectivetotheboard’sdiscussiononcompanystrategy.
Composition of the boardItisessentialthatindividualdirectorsandtheboardasawholehavetheskills,expertiseandcompetenciesthatareneededtocreatevalueforthecompanyandshareholdersinasustainableway,i.e.alsoaddressingstrategicenvironmentalandsocialissues.Theboardshouldrecruitfromthegreatestpooloftalentandstrivefordiversityinordertobeabletofulfilitsrolestrategically.Theboardshouldregularlyevaluateitsownperformancetoidentifyareasforpotentialimprovement.Somecompaniesfinditusefultoinvolveexternaladvisorsinthisprocessatregularintervals.
B1. Board-related agenda items
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• Isthereafamilyrelationshipbetweenthenon- executivedirectorandoneormoremembersofthe seniormanagementofthecompany?• Isthereanexistingbusinessand/orfinancial relationshipbetweenthecompanyandthenon- executivedirectorwhichcouldinfluencethelatter’s independence?• Doesthetermofofficeofanindependentnon- executivedirectorexceedthemaximumtermsetout intherespectivecorporategovernancecodeor12 years?• Aretheredirectbusinesstiesbetweenacompany anditsdirectors?Ifthereisasubstantialbusiness relationshipbetweenacompanyandoneofitsnon- executivedirectors,wedonotregardthisdirectoras independent;• Isthenon-executiveentitledtoperformance-related pay?• Arethereanypotentialconflictsofinterestthrough cross-directorshipsordirectorshipsincloselyrelated industries?• Isaproposedsupervisoryboardmemberaformer employeeofthesamecompany?Wewould normallyexpectthatacertainperiodoftimehas elapsedbetweenapersonresigningfroman executiveroleandjoiningthesupervisoryboardof thesamecompany.
Board committeesWeexpecttheunitaryboard,orthesupervisoryboardinthetwo-tierstructure,tosetupremuneration,nominationandauditcommitteescomposedideallyofindependentdirectorsonly.Thesecommitteesshouldaidthefullboardbymakingrecommendationsonissueswithintheirremit.Whencomposingtheauditcommittee,careshouldbetakenthatatleastoneormorememberspossessrecentandrelevantfinancialexpertiseandknowledgeregardingriskmanagement.
Atlargercompaniesandthoseinhighimpactsectorsinparticular,weexpectthatresponsibilitybeallocatedatboardlevelforrelevantsustainabilityissues.Thiscould
forexamplebeintheformofadedicatedboardmemberoraboardcommittee.
Voting policyAPGwillusuallyvoteinfavouroftheappointmentofcandidateswhoareproposedbythecompanytakingintoaccountthefollowingconsiderations:• Ontheunitaryboard,amajorityofthenon- executivedirectorsshouldbeindependent.Where thisisnotthecase,wemayvoteagainstthere-/ appointmentofanon-independentdirector.• Wherethepositionsofchairmanandchief executivearecombined,wemayvoteagainst there-/appointmentofthechairofthenomination committee,orwheres/heisnotupforelection, againstanothernon-independentdirector.We recognisethatforatransitionperiodtheremaybe goodreasonswhytherolesarecombined,butexpect aclearjustificationwhythisisthecase.• Directorsareexpectedtoattendallboardmeetings inordertoensuretheboardfunctionseffectively. Ifadirectorattendsfewerthan75%ofrelevant meetingsandnoexplanationisgivenforthis absenceintheannualreport,APGwillnotsupport there-/appointment.• Companiesshouldpublishthenamesand curriculavitaeofcandidatesinatimelyfashionso thatshareholderscanmakeaconsidered andinformedvotingdecision,alsowhenvoting electronically.Ifinsufficientornoinformationis availableatthetimeofvoting,APGwillnotsupport theproposedcandidates.• Ifanomineehasbeenconvictedofacrime,APG willvoteagainsthis/herre-/appointment.Iflegal proceedingsaretakenagainstadirectorof acompany,wemaynotsupporthis/herre-/ appointmentasadirectoratthisand/oranother company.• Inprinciple,wetakeintoaccounthis/her performanceatthisand/orothercompanieswhen decidingonthere-/electionofadirector.• Companiesmustaimforcompletetransparency
APG Corporate Governance Framework 13
regardingthesponsorshipoftheirdirectors’ extracurricularactivities,forexamplethrough charitableorpoliticaldonations.Whereacompany regularlysponsorstheactivitiesofadirector,and/ ordoesnotpublishtheamountsinvolved,APGis concernedthattheindependenceofthedirectorin questionmaybeaffected.Onthesegrounds,APG couldconsidernotsupportingthere-/appointment ofthedirector.• Restatementsoftheannualreportandaccounts raisedoubtsaboutsupervisionandrisk management.Ifamaterialrestatementofthefigures occursthatsuggestsafailureofinternal controls,APGwillvoteagainsttheappointment orre-appointmentofthedirectorsontheaudit committee.Inaddition,weexpectthecompanyto explainthereasonsfortherestatementand,incase ofmajorarestatement,whytheindividualdirectors andthesupervisoryboardasawholedidnotfulfil theiroversightdutiesproperly.• Incountrieswhereshareholdersdonothavethe opportunitytovoteontheremunerationreport andAPGisdissatisfiedwiththeremuneration policy,wemayconsidervotingagainstthe appointmentorre-appointmentofthechairmanof theremunerationcommittee.Ifconcernsregarding thecompany’sremunerationpolicypersistfor severalyears,APGmayalsoconsidervotingagainst theappointmentorre-appointmentoftheother membersoftheremunerationcommittee.
1.2 Granting discharge to directors
Grantingdischargedoesnotnecessarilymeanthatshareholdersapprovethestrategydevisedandimplementedbydirectors.ThelegalimplicationsofgrantingdischargetodirectorsvarybyjurisdictionthroughoutEurope.Ifgrantingdischargewouldhavefar-reachingimplicationsforthelegalpositionofAPGandtherearedoubtsaboutthecompany’sstrategy,APGwillrefrainfromvoting.
Related Party TransactionsTheexistenceofafullyindependentauditcommitteeisofparticularimportancewherecompaniesareinvolvedinrelatedpartytransactionsthatrepresentsignificantriskstominorityshareholders.Suchtransactionsshouldalwaysbecarriedoutatarm’slength,preferablyaftershareholdershavehadtheopportunitytoapprovethem,andbefullydisclosed.
Voting PolicyIftheannualaccountsarenotyetfinal,itisunlikelythatdischargewillbegrantedtothesupervisoryboardmembersandotherdirectors.Wemayalsorefrainfromgrantingdischargeinordertoexpressourdissatisfactionwithaspectsofthecompany’sstrategy.Thisdoesnotnecessarilymeanwedonothavefaithinthemanagementorthesupervisoryboard.
Whendecidingongrantingdischargetosupervisoryboardmembersandotherdirectors,APGalsotakesthefollowingcriteriaintoaccount:• Arethereanylegalproceedingsagainstthecompany oranyofitsdirectors?• Hastheboardadequatelycommunicatedand executedthestrategyforthepreviousfinancialyear, andsetfuturestrategy?• Hastheboardbeenresponsivetoshareholder dialogue?• Hasthecompanybeeninvolvedinrelatedparty transactionstothe(significant)detrimentof minorityshareholders?
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1.3 Remuneration of directors
Remunerationisoneofthetoolstoensurethatmanagementdeliversagainstcompanystrategybydefiningspecifictargets.Theremunerationpolicyshouldbestructuredinawaythatitalignsmanagementandshareholderinterests,reflectstherisksacompanyistakingandstimulatessuperiorperformance.Itshouldcontainfixedandvariableelements,andthelattershouldbebasedonclearperformancetargets.Whenvariableremunerationisawarded,wepreferdirectorstoreceivesharesratherthanoptions.Weexpectthattheboardconsiderswhetheritisappropriatetoincludeotherfactorsthatcanhaveanimpactonlong-termcompanyvalue,suchassustainabilitymatters,andexplainstheconclusionthatithasreached.Allcriteriathatarepartoftheremunerationpolicymustbemeasurable,relevanttothecompanyandtransparent.APGdoesnotsupporttargetslinkedtorankingsinsustainabilityindexes.Weexpectcompaniestohaveclawbackprovisionsinplace.
Theexecutiveremunerationpolicymustbeinlinewiththegeneralremunerationpolicyforallemployeesofthecompany.Thismeans,amongstotherthings,thatifacompanyisforcedbyeconomiccircumstancestofreezeemployeesalaries,thedevelopmentofseniormanagementremunerationshouldshowasimilartrend.
Thecompanyshouldsetoutclearlyinitsannualreportitsapproachtoremuneration,coveringthepolicyanditsstructure,detailsoftargetsandperformanceagainstthosewhenmakingawards.
Voting policyAPGwillgenerallyvoteinfavourofacompany’sremunerationpolicy.Reasonsfornotsupportingtheremunerationpolicyinclude,butarenotlimitedto:• Thecompanydoesnotdiscloseitsremuneration policyinatimelyfashion.• Thepolicydoesnotcontainagoodbalancebetween fixedandvariablecomponents,andbetweenshort
andlong-termincentives;• Thecompanyhasnotsetoutcleartargetsfor determiningthevariablecomponents;• Inmanycases,theremunerationcommitteehas discretionarypowerindeterminingshortand long-termbonuses.Wherediscretionaryjudgment isapplied,thismustbejustifiedinthecompany’s annualreport.Ifwefindthejustification insufficientand/orunconvincing,wemaynot supporttheremunerationpolicy;• Bonuspaymentsappearnottobeinlinewith companyperformance;• Thecompanyrepricesshareoptions;• Severancepayexceedsonetimeannualpay.
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2.1. Annual accounts and the auditor’s report
Theannualreportandaccountsarethemostimportantsourceofinformationforinvestorstogainaclearpictureofacompany’sfinancialperformance.Investorsandshareholdersmustbeabletorelyontheauditor’sreportregardingtheaccuracyandcompletenessofthesereports.
Itisvitalthatinvestorsbeinformedaboutallfactorswhichmaypotentiallyaffectthemanagement,riskprofileandriskmanagementofthecompany.Companiesmustinteraliaprovideclearinsightintocurrentandfuturestrategy;howstrategic,operational,financialandcompliancerisksaremanaged;andhowcompaniesaddresskeysocial,environmentalandethicalissues.Westronglyencouragecompaniestoprovideaninterlinkedaccountofacompany’sfinancial,social,environmentalandgovernanceperformancetargetedatinvestorsandregulators.Inadditionweexpectcompaniestopublishfurtherinformationtosatisfytheneedsofcivilsocietystakeholders.
Companiesshouldavoidmakingdonationstopoliticalpartiesororganisationscloselyassociatedwithpoliticalparties.Inmarketswherethisiscommonpracticeweexpectcompaniestodisclosetheirpolicyandtheamountsinvolved.Charitabledonationscanhelpbuildstakeholderrelationships,butacompanyshouldhaveaclearpolicyinplacetoavoidpotentialconflictsofinterestsandpublishitsdonationrecord.
Voting policyAPGwillusuallyvoteinfavouroftheannualreportandaccountsunless:• Theannualreportandaccountsandtheauditor’s reportarenotavailableatthetimeofvoting;• Theexternalauditordoesnotissueanunqualified auditopinionontheannualresultsortherelevant auditprocedures;• Thereisamaterialrestatementofaccounts.
2.2. Appointment of the auditors
Theauditorsplayanimportantroleinguaranteeingtheintegrityandtransparencyofthefinancialinformationacompanyprovides.Theappointmentoftheauditorsandtheproposalbytheboardtoapprovetheirremunerationarestandarditemsontheagenda.
Voting policyAPGwillgenerallyvoteinfavouroftheappointmentofauditorsandtheproposalthattheboard/supervisoryboarddeterminetheirremunerationunless:
• Thereisseriousdoubtastotheindependence andqualityoftheauditorselectionprocedurebythe supervisoryboard;• Thereis,inthetwo-tierstructure,astrong impressionthatthesupervisoryboardhasleftthe actualselectionofandagreementswiththeauditors tothemanagementboardanditsmembers;• Thereisreasontobelievethattheexplicitwishesof theshareholdersasexpressedtotheaudit committeeregardingtheselectionprocessandthe contentsoftheengagementletterhavebeenignored withoutgoodreason;• Thereisseriousdoubtabouttheveracityofthe financialdatapresentedand/orthequalityofthe auditworkthathasbeenorwillbeperformed;• Thenon-auditrelatedworkbythesameauditfirm costsmorethantheauditfees,whichraises questionsabouttheindependenceoftheauditors andpossibleconflictsofinterests;• Therearedoubtsastothequalityandintegrityof theauditorwhohasbeenengaged(forexampledue toconcernsexpressedbytheregulator);• Theappointmentcarriesexcessiverestrictions regardingthelegalliabilityoftheauditor.
B2. Audit-related agenda items
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3.1 Issuing new shares
Companiesissuenewsharesinordertoraisefreshcapitalfrominvestors.Thismaybeinordertofinancepossibleacquisitionsortoreduceitsdebtposition.Acompanycanissueshareswithorwithoutpreemptionrights.Pre-emptionrightsensurethatthestakesofexistingshareholdersarenotdiluted.
Voting PolicyAPGwillconsiderthefollowingcriteriawhendecidingwhethertoapproveashareissue:
• Authorityanddelegation–APGexpectsanexplanationoftherequesttoissuenewshares.Inaddition,thecompanyshouldexplaintheconditionsandcircumstancesunderwhichthisdelegatedauthoritywillbeexercised.Thisexplanationmustatleastincludethemaximumnumberofsharestobeissued,thedurationoftheauthority,andhowtheexercisepricewillbedetermined.Companiesmustrequestseparateauthoritiesfortheissuanceofdifferentshareclasses.
• Themaximumnumberofsharestobeissuedandthedurationoftheauthority–Permissiontoissueshareswithpre-emptionrightsmayonlybegrantedforupto20%oftheplacedsharecapital.Iftherequestedissueexceeds20%,thecompanymustgiveajustification.Althoughweareawarethatlocallawsandregulationsmaypermitalargerissuance,weexpectcompaniestolimittheirrequests.Thisalsoappliestothetimeperiodforwhichauthorityisrequested.Preferablythisauthorityshouldnotexceed18months,andasamaximum24months.
• Pre-emptionrights–Wherepre-emptionrightsaredisapplied,theauthoritytoissuesharesshouldbelimitedtoamaximumof10%oftheissuedsharecapitalofthecompany.
3.2 Share buybacks
AlthoughAPGisawarethatlocallegislationandregulationmayvary,APGwillnotnormallysupportbuybackprogrammesthatrequestauthoritytopurchasemorethan10%ofissuedshares.
Ifcompaniesrepurchaseshares,theymustensurethatallshareholdersreceiveequalfinancialtreatment.
B3. Capital-related agenda items
APG Corporate Governance Framework 17
Wewillnormallyvoteagainstamendmentsofthestatutesthataimtolimitexistingshareholders’rights.Asarule,weexpecteachamendmenttobesubmittedtoaseparatevote.Wewillinprinciplenotsupportcombinedproposalsifanyoftheindividualamendmentswouldnegativelyaffectourpositionasshareholder(minorityshareholderorotherwise).
Ingeneral,APGwillrejectacompany’srequesttoimplementdefencemechanismsaimedatblockingpossiblechangestothecontrolstructureofthecompany.APGacknowledgesthatadefencemechanismcanbebeneficialforacompanyanditsshareholderswhereitgivesmanagementsometimetoassessdifferentoptions.
Implementingdefencemechanismsmustnotcausetheboardtoneglectthewishesofthemajorityofshareholdersforanunlimitedperiodoftime.Wewillassesseverycaseindividuallyandwillnormallyonlysupportdefencemechanismswherethetimelimit(lessthansixmonths)andthecircumstancesunderwhichadefencemechanismcanbetriggeredareclearlydefined.
Voting PolicyAPGwillingeneralonlyconsenttotheissueofdefensivepreferencesharesiftheyareissued:• Asatemporary,necessaryandproportionate protectionagainstaconcretethreattothecontinuity ofthecompanyoritsstrategy,oraconcretethreat totheinterestsofthecompany,itsshareholders, employeesandotherstakeholdersofthecompany, andaftercarefulconsiderationoftheseinterests;• Toalegalentitywhosemanagementisindependent ofthecompany;• Uptoamaximumnotexceeding100%ofthe nominalamountofalreadyissuedshares;• Withtheaimofgivingtheboardthetimetoenter intoconstructivenegotiationswiththebidder, toexplorepossiblealternatives,toinformthe company’sshareholdersortoprotectthecontinuity ofthecompanyorcompanystrategyandthe interestsmentionedinthefirstpointabove.
B4. Agenda items related to the statutes or legal structure
B5. Implementing defence mechanisms
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APGactivelyvotesonshareholderproposals.Wecarefullyconsidereveryproposalandsupportproposalswebelieveareintheinterestofthecompanyanditsshareholders.
APGsupportsproposalsifwebelievethattheyhelpaddresssignificantsocialandenvironmentalissuesthatcanbematerialtoacompany.APG’sresponsibleinvestmentpolicystipulatesthatweexpectcompaniestoabidebytheprovisionsoftheUnitedNationsGlobalCompactandtheOECDGuidelinesforMultinationalEnterprises.Therefore,APGwillsupportshareholderproposalsaimedatensuringcompaniesoperateinaccordancewiththeseguidelines.Ingeneral,APGsupportsresolutionsthatseektogenerategreatertransparencyandaccountabilityabouthowcompaniesaddresskeyenvironmentalandsocialissues,and/orbringcorporategovernanceintolinewithbestpractices.
B6. Shareholder proposals C. Limitations concerning the exercise of voting rights
Investmentdecisionsandcorporategovernanceinvolveabalancebetweenliquidityandcontrol.
APGstrivestovoteatallgeneralshareholdermeetingsofcompaniesinwhichitownsshares.Thisdoesnotmeanthatwecanalwaysexercisethevotingrightsattachedtoallthesharesweowninacompany.
1. Blocking of sharesIngeneral,APGdoesnotvoteatshareholdermeetingsincountrieswheresharesareblockedduringaperiodoftimearoundthegeneralshareholdersmeeting,exceptforkeylargeholdings.Thisistoavoidliquidityconstraints.APGopposestheblockingofsharesandactivelyengageswithsupervisoryauthoritiesandotherinstitutionalinvestorsintheireffortstoendthepracticeofblockingshares.Webelieveblockingofsharesisdetrimentaltoaneffectiveandliquidmarket.
2. National barriersIncertaincountries,itisdifficultforforeigninvestorstovoteasaresultofproxyvotingrulesorrequirements(ofcompanies)thatsharesberegisteredinordertobeallowedtovote.Insomemarketsitisuncertainwhetherproxyvoteswillbecountedattheshareholdersmeeting.
3. Share lendingAspartofregularbusinessoperations,somesharesmaybelentout.Ifnecessary,wewillrecallthesesharestoexerciseourfullvotingrights.APGalwaysretainsatleast20%ofthetotalholdinginaspecificcompanyforvotingpurposes.APGsupportsthepolicyoftheICGNregardingsharelending.Isthisstilltrue?
APG Corporate Governance Framework 19
APGstrivestobeastransparentaspossibleinitsvotingbehaviour.APGdisclosesallitsholdingsworldwideonaquarterlybasis.AllAPGvotescastatshareholdermeetingsarepublishedonourwebsiteassoonaspossibleaftereachmeeting.InourannualResponsibleInvestmentReportwediscussourvotingandengagementactivitieswithcompaniesandregulatorsinmoredetail.
D. Disclosure