Revera Asset Management Ltd (‘Revera’) or (‘the Company’) or (‘we’) recognises/recognise the impact that engagement with investee companies can have in delivering improved outcomes for its clients and promoting actions and culture within these companies to promote social and environmental good.
This policy statement sets out the guidelines that we will use to engage with investee companies, and direct how we vote at company meetings. Readers should be aware, however, that proxy voting in company meetings is not regarded as an end point in company engagement; rather it may be used as a demonstration of our concern over a particular issue. However, these concerns are likely to have been raised with the company through other communication channels – typically in face-to-face meetings, written communications, or feedback presented to a corporate broker – either before or after the meeting. Further, this policy is based on guidelines and best practice, not principles. Revera’s fiduciary duty to its clients is based on achieving the best outcome over the stated investment horizon. An investee company’s breach of these guidelines is not an automatic reason to sell the investment. However, repeated or multiple breaches of our policy will lead to a review of the investment position to consider whether this departure from our view of best practice fundamentally undermines the investment proposition.
Revera’s approach to engagement is also proportionate to its size. As a focused UK equity investor, whose competitive advantage is partially based on the speed and agility of its decision-making process, it is not in our clients’ interests to “gold-plate” the Stewardship process. We have no concept of “underweight holdings.” Each investment is made because we believe that it will generate a positive outcome for our clients. This means that we are happy with the overall shape and direction of that company, and we will concentrate our energies in voting on the areas most likely to detract from attractive future returns.
Revera is a multi-cap investor, which can mean that it may take stakes in smaller quoted companies. This means that our influence on the voting profile of the investee company’s shareholder base may be more pronounced, which should in turn lead to higher levels of engagement. It also means that these guidelines may also be more proportionate, recognising a smaller company’s potential needs to act in a more flexible fashion.
In line with regulatory requirements, Revera will report on its engagement and voting activities annually and will present details of its voting record – and associated commentary – as part of that report.
Application of this Policy
This policy is designed to inform readers of Revera’s approach to many common corporate governance areas. It is not a diktat. We recognise that no policy can presume to cover every eventuality in corporate life. This policy acts as a guide to our most likely response to questions posed at investee company meetings, but there will be exceptions. We will report on these exceptions in the annual report on engagement.
Voting Guidance on Key Matters
Accept Annual Report and Accounts
We will almost always vote to accept the AR&A. A fundamental issue with this report will almost certainly undermine the investment case for the company concerned and will lead to the investment being sold.
Amendments to Articles of Association
This can only be judged on a case-by-case basis.
Approve Final Dividend
Almost always voted for. If we believe the company is over distributing, it undermines the investment case, and the investment will be sold.
Appointment of Auditors
Generally, we will vote for, but we would encourage some form of review or tender between 7 and 10 years of consecutive appointment.
Authorise the Board to fix the Remuneration of the Auditors
We will generally vote for.
In general, we do not agree that time limits on Directors’ tenure, nor hard and fast diversity targets necessarily represent best practice.
With specific respect to diversity, we see the work being done elsewhere to support gender and racial balance on boards. We support these aims. However, we do see the risk that this does not equate to diversity of thought at the Board table. Boards are dominated by middle-class, university-educated professionals; irrespective of the balance of gender, race or sexuality. Revera engages with companies to promote diversity of thought and perspective on corporate boards beyond the usual pool of professional qualifications.
We are concerned over the extent to which executive Directors may be over-burdened with other non-Executive posts. A Chief Executive Officer should have no more than one outside public Directorship. The same should hold for a Chief Financial Officer.
We do not hold any rigid views on the involvement of past Executive Directors acting as Non-Executive Directors, or Chief Executives moving to the position of Chairman. We can recount many examples over the years where we believe companies have benefitted from the continuity of experience and knowledge as managerial batons have been handed over.
Beyond this, we will generally vote for the re-election of Directors. However, in line with the over-arching principle of the policy, decisions will be made on a case-by-case basis. Any vote against the election of a Director will be recorded and presented in the annual report with an explanation as to why that decision was made.
We believe that it is difficult to be prescriptive about what is and is not acceptable in setting Directors’ remuneration. However, several principles should guide the assessment of how we vote in meetings.
Companies should have the flexibility to compete for the best talent in their industries.
Director remuneration should be linked to shareholder returns.
Contracts should not incorporate any payment for failure on the part of a Director.
Executive Directors should make a material long-term investment in the equity of the company they manage.
Non-Executive Directors should not be remunerated beyond a threshold that may impede their willingness to act independently because of the fear of losing that remuneration.
In a similar fashion to our approach to the accounts, concerns over the structure of remuneration in a company potentially lead to concerns over the attractiveness of the investment case outright. If we believe that a management team does not justify its remuneration package, or that the incentives contained within the remuneration package are likely to distort management behaviour, then we are unlikely to remain invested in that company.
Protecting our customers’ interests in their share of the economic value of a business is one of our key priorities. We will not vote for resolutions that authorise the expansion of the capital base by more than 5% without a clear and specific reason for that increase. We recognise that a company needs flexibility to issue shares in certain circumstances and will vote in favour of resolutions where up to 5% of the issued share capital of the company can be allotted in a single year without any pre-emption rights.
We will generally vote against any resolution that empowers a Board to allot shares equating to more than 15% of a company’s issued share capital without shareholder approval, even if pre-emption rights are maintained. We believe that 15% dilution without the specific consideration of its merits by shareholders strikes the correct balance between offering flexibility
We will generally vote in favour of all resolutions that authorise the repurchase of ordinary shares in the market for the purpose of cancelling them.
Mergers, Acquisitions & Disposals
These activities can only be dealt with on a case-by-case basis, and we will not hesitate to vote against a proposed transaction where we believe that it is not in the interests of the company over the long term.
Related Party Transactions
These will be judged on a case-by-case basis.
Mandatory Takeover Bid Waivers
These will be judged on a case-by-case basis, but the threshold of perceived benefit may have to be higher than in other corporate activity.
Authorise EU Political Donations and Expenditure
In general, we do not wish to see our investee companies engaged in funding political activities. However, we recognise that the definition of “political” under the Companies Act is broad and companies may wish to safeguard against inadvertent breaches. We will generally vote in favour of these resolutions provided that the maximum limit on such expenditure is relatively minor, and the requirement to disclose all political donations in the Annual Report and Accounts is maintained.
Other Elements of Stewardship & Engagement
As a fundamental investor, Revera believes in the mutual interdependency between financial success and socio-environmental success. Successful businesses work in harmony with their prevailing environments. Ethically dubious actions and activities eventually lead to adverse outcomes for the business as a whole.
Prior to investment, and over the period of investment, investee companies are reviewed for factors that may affect both the long-term success of the company and that of its underlying market. These factors may, inter alia, include the following:
Board or management structure that lacks breadth of experience and perspective
Aggressive relocation of profits to low tax jurisdictions, or other non-commercial structures to lower tax liabilities
Financial gearing that endangers the company’s survival or creates systemic risks in an industry
Potentially unfair practices when dealing with customers
Cavalier approach to regulation and company law
Insufficient regard for environmental impact of activities
Revera engages constructively with potential and actual investee companies, typically through the media of face-to-face meetings, video meetings or telephone calls. Follow-up information requests and feedback may be submitted via email, or in some cases through the relevant company’s corporate broker.
Specific Items Relating to the Shareholder Rights Directive II
Portfolio turnover, and the costs of such turnover are disclosed to clients on a regular basis and are disclosed in the periodic statutory reports of all regulated collective investment schemes.
Revera does not use proxy advisors for making decisions on its stewardship responsibilities.
Revera does not undertake securities lending activities on behalf of its clients.
In general, we believe that the energies of our investment management team are best used by working positively with investee companies where we are almost wholly aligned with the management teams of those companies on all corporate governance issues. Where we have fundamental concerns over any issue, we will normally sell the investment. However, there may be times where a sale cannot be achieved either timely, or at a price that reflects the value of the investment to our clients. In these circumstances, Revera will use all statutory options, including working with other investors to vote against the proposals or the management team, to reverse the decision.
Conflicts of Interest
The Board of Revera regularly reviews conflicts of interest across its business. Possible conflicts of interest could emerge between Revera and its clients when investing in businesses that may also act for clients who can invest in Revera’s suite of regulated funds.
These potential conflicts of interest are regularly reviewed at Board level.
Stewardship Code and other Stewardship Models
Revera is not currently a signatory to the Financial Reporting Council’s Stewardship Code. The Board of Revera fully support the aims of, and principles behind, the Stewardship Code.
As part of its membership of the Independent Investment Management Initiative, the Company is contributing to engagement with the Financial Reporting Council to improve the proportionality of implementing the Code for smaller fund management houses.
Update on Voting Record for the calendar year 2021
During the course of 2021, Revera changed its default position in voting at investee company meetings. Prior to 30 June 2021, Revera had – on the grounds of proportionality – typically declined to vote at investee company meetings unless it wished to send a particularly strong message to the management team of an investee company that could not be done effectively through other channels.
From 1 July 2021, Revera adopted a policy of typically choosing to vote at investee company meetings. The voting in these meetings was guided by the policy statement attached.
In the period covering 1 July to 31 December 2021, there were eight company meetings where client funds could have voted. Revera voted in seven of these meetings. All votes were cast in favour of the resolutions proposed in all meetings.
Voting at one meeting was missed due to administrative error.