Governance

If companies are badly run, this affects their profitability, which can make them an investment risk.

For instance, organisations which fail to keep proper track of their accounts can get into financial difficulty or even go bust, causing a loss of jobs and services which damage the wider community. We also expect companies to respect the rights of investors by adhering to the highest market standards. This includes providing high-quality reporting disclosures and treating shareholders equally.

A lack of diversity on governing boards can lead to inward thinking that stifles innovation. Lack of robust oversight over senior posts can lead to unchallenged, poor, and sometimes costly, business decisions. Some of these poor business decisions can also result in events that may damage our environment such as huge oil spills.

We work with companies to help improve how they are run, from the strength of their corporate strategies to the independence of the auditors checking the numbers. As shareholders, we also use our voting rights to hold companies to account, and are seeing our engagements contributing to positive outcomes such as:

• In 2020 we opposed the election of more than 4,700 directors over governance concerns
• Voted against pay-related proposals for executive remuneration at International Consolidated Airlines Group
• Collaborated with Microsoft to drive appropriate pay alignment and improve ethnic diversity at senior management level
• Announced our decision to vote against all companies where the roles of Chair of the Board and CEO are combined