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The UK Stewardship Code has been introduced by the Financial Reporting Council (FRC) with the aim of enhancing the engagement between institutional investors and companies, thereby improving governance in those companies and enhancing shareholder value.
NFU Mutual is an institutional shareholder in respect of the Group’s insurance funds and an agent in respect of funds managed via NFU Mutual Investment Services Ltd. and NFU Mutual Unit Managers Ltd.
The underlying basis for reviewing the governance of a company will be compliance with the principles and provisions of the UK Corporate Governance Code (UK companies), local corporate governance principles (international companies) and the company’s approach to corporate social responsibility.
The Investment Department of NFU Mutual is responsible for continuously monitoring the companies and holdings to ensure that they remain appropriate and suitable for investment. It is however our belief that responsible management are appointed by the board whose responsibility it is to manage the business in the interests of shareholders.
Voting is carried out on our behalf by a company independent of NFU Mutual called RiskMetrics Group, who carry out extensive research on each company invested in and provide recommendations on how to vote on each resolution. For UK companies voting advice from the Institutional Voting Information Service (IVIS) provided by the ABI is also received. NFU Mutual generally vote in line with the recommendations made by RiskMetrics Group, any exceptions to this will be noted in the periodic report produced for NFU Mutual General Management on Shareholder Engagement & Voting Policy.
Issues addressed include the following;
1) Monitoring Financial Performance
2) Monitoring Non-financial Issues
3) Engagement Criteria
4) Conflicts of Interest
5) Voting Policy
As a general rule we will endeavour to deal privately with companies in expressing or addressing concerns. The overriding principle will be to act in the considered best interest of ‘ultimate shareholder’ clients.
In all cases where a potential conflict of interest arises with an external client the position will be referred to General Management of NFU Mutual and every effort will be made to resolve such issues in the client’s favour.
As stated under Principle 1, RiskMetrics Group carry out extensive research for NFU Mutual on each company invested in and provide recommendations on how to vote on each resolution. The voting records and recommendations are maintained by RiskMetrics.
NFU Mutual’s Investment Department also monitor corporate developments through media channels such as press releases and company announcements. They meet with management of those companies that NFU Mutual invests in, as well as with other independent third parties such as stockbrokers; in order to build a firm understanding of the current financial and governance positions of those companies.
Engagement criteria and process for protecting and enhancing shareholder value:
(i) Direct contact with board members and/or senior management will involve correspondence, updating meetings or meetings on specific issues of concern to either party and at the request of either party.
(ii) In practice unless the aggregate holding (via internal and external clients) is significant, intervention in an investee company with respect to issues of concern will initially be raised with the ABI thus obtaining a consensus view representing a larger holding. Typical issues would include, an unjustifiable failure to comply with the UK Corporate Governance Code; inappropriate remuneration levels/incentive packages/severance packages; the company’s approach to social, ethical and environmental issues.
(iii) As a last resort, after all previous dialogue has failed to elicit a constructive response, direct action could result. Depending on the circumstances, action could range from expressing concern through the company’s advisers either separately or jointly with other institutions, through additional meetings with management/Chairman/independent director(s), to submitting resolutions at shareholders meetings and/or requisitioning an extra-ordinary general meeting to adjust the make-up of the board. It is likely that such action would only be effective in most circumstances if carried out in conjunction with other concerned shareholders.
As a general rule we will endeavour to deal privately with companies initially, adopting other measures only if this method proves unsuccessful.
As stated under Principle 4 under the engagement criteria and process, there are situations and events where NFU Mutual would consider acting collectively for the purpose of protecting and enhancing shareholder value.
Voting Policy:
The overriding principle will be to act in the considered best interest of ‘ultimate shareholder’ clients.
(i) NFU Mutual votes on all eligible stock at all UK meetings and in all other countries where we own equities with the following exceptions; those countries operating share blocking policies and those requiring Power of Attorney. In these instances voting is not conducted in respect of the stock held.
(ii) Our default instruction gives implied consent for RiskMetrics to vote on our behalf in line with their recommendation, but we do retain the option of entering our own votes as we see fit.
(iii) When we do not vote in line with RiskMetrics recommendations, a note is kept regarding this and the underlying reasons.
(iv) The voting records and recommendations are maintained by RiskMetrics.
Detailed records on how NFU Mutual have voted are held by RiskMetrics, if you would like to be sent details of the current voting record for NFU Mutual, please contact the below email address with details of the specific ad hoc request.
A periodic report is produced for NFU Mutual General Management on Shareholder Engagement & Voting Policy. For a copy of the most recent version of this report or for further information regarding NFU Mutual and stewardship please contact George_Kendall@nfumutual.co.uk
Note* NFU Mutual Financial Consultants advise on
NFU Mutual products and services and in
special circumstances those of other
providers.
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