As part of the funds’ commitment to being an active and responsible shareowner, USS votes at investee company meetings. The implementation of USS voting policy is seen an important tool for engaging with companies to encourage better standards of corporate governance. Where we have voted against management or abstained on a resolution we will, where practical, write to the company providing them with the reasons for our decision.
Coverage
The fund votes at all UK company meetings on both the main listing and AIM and Plus markets. We vote shares for both our active and passive internal UK funds, as well as the UK stocks from our external fund manager(s). In order to pool governance expertise and resources we have convened a voting alliance with Railways Pension Trustee Ltd. (Railpen) for voting and engagement with companies in the FTSE All-Share.
USS also votes in its key overseas markets, currently USA, Australia, Japan and our key European markets (i.e. France, Germany, Netherlands, Spain and Switzerland). In other markets, we vote on an ad hoc basis in discussion with our internal portfolio managers. We are looking to expand our coverage into additional markets in future.
Policy
Voting is informed by USS's custom Voting and Engagement Policy (developed in-house and currently under review),the Railpen USS UK voting policy, internal guidance notes and independent proxy research. The policy is broadly based on the UK’s Combined Code. However, USS’ intention is to cast proxy votes in consideration of the facts and issues on an individual company basis. Outside the UK and for companies quoted off the main market (e.g. AIM), we seek to take into account local market standards and best practice.
The policy includes guidance on environmental and social issues to a moderate extent. However, USS has avoided a blanket policy on many extra-financial issues, particularly environmental and social matters, as they are often company specific. Resolutions covering such issues are reviewed on a case by case basis taking into account advice from sources other than the proxy advice agencies (e.g. the company, other shareholders and/or resolution filer, other investor bodies, unions, NGO’s) where appropriate.
Voting Research
The fund uses a variety of data sources to inform voting decisions including proxy research providers and RI networks. The fund uses locally informed research providers where possible and has joined regional corporate governance fora to work with other investors to facilitate and enhance proxy voting. For example USS is a member of the Asian Corporate Governance Association (ACGA) Australian Council of Superannuation Investors (ACSI) ,and US Council of Institutional Investors (CII), on the investment committees of the National Association of Pension Funds (NAPF) and Eumedion and a founder member of the Japan Engagement Consortium. The fund also works with other pension funds investing in the local market. Such groups allow USS to better engage with companies and market regulators, understand local market best practice and participate in initiatives with other shareholders to remove impediments and protect minority shareholder interests in overseas markets.
In the US for example, USS has helped establish an international roundtable on executive remuneration (IRER), with European and US investors, to address proxy voting impediments, raise global standards on remuneration and address the growing disconnect between pay and performance through company engagement and approached to national standard setters. Within this alliance, USS has approached the Securities and Exchange Commission to push for reforms on advisory votes on remuneration, majority vote standards and access to the proxy to better enable active share-ownership in the US. For further information regarding this and other governance and voting initiatives, see the Market Wide Initiatives & Public Policy section.
Stock Lending
USS has an active securities lending programme. To ensure that the fund is able to vote all its shares at important meetings or where USS is a significant shareholder, USS has worked with service providers to establish procedures to restrict lending for certain stocks and recall shares in advance of shareholder votes. Where we hold 3% or more, of the issued share capital of a company, stock is recalled. In other circumstances we monitor the meetings and proportion of stock on loan, and will restrict and/or recall lent stock in the event of a contentious vote, or in relation to engagement activities, on a case by case basis further to discussion with the portfolio manager.
Disclosure
In accordance with best practice, USS publishes a list of its global equity holdings across internal (LIO) and externally managed portfolios for each quarter. The fund is committed to disclosure of its voting record and provides regular reports of voting activity. Reports cover USS’ LIO activity and also USS’ external fund managers’ vote activity. LIO reporting highlights the votes against management /abstentions and provides commentary on the reasons behind this. See the Voting Disclosure section for details.