Socially distant corporate governance


Lotte Beck

As COVID-19 continues to sweep through the world, affecting not only our health but our communities, economies, and investments, the pandemic has brought into focus issues such as economic inequality, labour rights, digitalisation, and public health.

These types of systemic issues can also touch investments, particularly those committed to environmental, social, and governance (ESG) principles. The safeguarding of investment values to help protect investors’ capital and their ownership rights – part of the “G” for governance in the ESG principles – is highlighted by the continued importance of the tools of stewardship, which includes voting at annual general meetings. The continued application of these principles is only underscored by the current environment.

Voting at a company’s annual general meeting (AGM) is one of the most significant ways to exert influence on a company, as it provides a means of communicating effectively with management. However, AGMs have not been immune to the pandemic.

In 2020, meetings have been delayed, held behind closed doors, or conducted virtually. According to Glass Lewis, a provider of global governance services, approximately 1,000 meetings globally were rescheduled in 2020. Normally, one-fifth of all AGMs are held in April. This year, the number of meetings in April decreased by 20% while increasing by 20% in June and July. (Source: Glass Lewis, Proxy Voting Service.) Regulation changes allowed companies to hold virtual AGMs but also to hold meetings behind closed doors, change debate structures, and alter how shareholders stay engaged and informed. The pandemic circumstances have drawn attention to the value of the AGM and the importance of debate and engagement, as well as the need in the future to focus on the timing and format of alternate types of meetings such as virtual meetings.

Integrating ESG

On the Global Equity team, integrating ESG research and risk management, active ownership, and cooperation on and promotion of responsible investment principles, including engagements, forms the basis of our work in responsible investing for the long term.

In the following sections, we focus on company engagement and proxy voting, reviewing key trends of the 2020 AGM season and discussing our team’s recent engagement with companies and the impact on the portfolios.

Voting and engagement in 2020

For meetings occurring during the pandemic, the traditional AGM structure has often been adjusted for the new circumstances, while proposals have tended to differ from earlier years. Shorter agendas, a limited variety of proposals, and shareholder resolutions have been the key difference resulting from the change. Some shareholders have seen meetings conducted in as little as five minutes and with limited discussion.

From January through September 2020, the Global Equity team voted at 48 meetings. At most meetings, the agenda had been shortened to cover only the most pressing issues, such as the election of board members, compensation, and dividend management. Meanwhile, for the 2020 AGM season, our team has identified gender diversity and board independence as key issues to focus on as shareholder engagement activities.

Focus on board diversity

Our team believes that companies perform better when led by a group of diverse board members who complement one another. Hence, we believe in leadership that is varied across, but not limited to, gender, race, economic background, and ideology.

Board diversity includes:

  • gender diversity, with studies reflecting its positive impact, including support of the premise that a minimum of three women on a board or at least 30% representation reflects positively on financial performance1
  • board independence and separation of the roles of company CEO and board chair.

One of the proposals that went to vote and was submitted by a major shareholder articulated clearly the second key point: board independence and CEO and chair separation.

After analysing the respective perspectives of the proponent and the board, our team voted in favour of the shareholder proposal. Overall, the proposal received 26.67% of the votes in favour and 72.72% against, and consequently did not pass.

Board independence, however, continues to be a key subject when it comes to corporate governance. Importantly, the team will not necessarily vote against a director filling both the CEO and chair roles of a company but rather prefers to engage with the company on the subject, to share our point of view and voting decision. In the 2021 AGM season, we will, as long-term investors, continue to urge our portfolio companies to separate the two roles and request that a two-thirds majority of board members remains independent.

How voting and shareholder engagement influence the portfolio

Along with our engagement with management, explaining voting rationale, and addressing issues of importance, the use of shareholder voting power is one of the most effective and valuable ways in which to engage with and influence companies.

Our observation confirms that most of the companies in the Global Equity portfolio seem to be making strides in diversity. For instance, the nomination of additional female directors to their boards gives us an opportunity to approach these companies to reinforce positive behaviour. It also provides a useful entry point to engage with the company later on financial performance, controversies, and incidents, as well as any challenges it may be facing, thereby creating opportunity for a positive dialogue.

With our investment process that focuses on the long term, we will continue to monitor the issues addressed this year. We plan to approach each company prior to the 2021 AGMs, follow up on improvements and vote accordingly in the next proxy season. The team’s philosophy and investment process include motivating companies to implement fundamental changes and improve company practices. Engagement requires time and patience and a strong conviction that the portfolios represent high-quality companies that are able and willing to adapt and improve.

Why do we vote?

As responsible investors, we are obliged to ensure that corporate management teams are monitored and held accountable for their actions. Our team assesses, engages, and monitors its investments to understand how management teams acknowledge, manage, and reduce ESG-related risks.

By voting, shareholders can influence and control their investment. On behalf of shareholders, our team exercises its rights through proxy voting and aims to vote at all AGMs. In the spirit of socially responsible investing, we take account of long-term value creation, sustainable business practices, board accountability, and transparent corporate communication. We look to identify board and decision-making practices that are in the best interest of the company and demonstrate alignment with shareholder interests.

1Based on studies including “Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance,” Vicki W. Kramer, Alison M. Kondrad, and Sumru Erkhut (2006); “The Tipping Point: Women on Boards and Financial Performance,” MSCI (2016); “Corporate performance and women’s representation on boards,” the Catalyst Bottom Line Report (2007); and “Delivering through Diversity,” McKinsey & Company (2018).


The views expressed represent the investment team’s assessment of the market environment as of October 2020, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.


Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.