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The exercise of the voting rights of investors plays a pivotal role in the forthcoming EU Shareholders’ Rights Directive (SRD II). The exercise of investors’ voting rights is also an integral part of the Committee on Corporate Governance’s Stewardship Code. |
Investors can fulfil these obligations in different ways, for example by attending general meetings or through proxy voting, where the entire voting process is handled by a third party. |
ALL ATP’S VOTING DECISIONS ARE MADE IN-HOUSE. |
Exercising its voting rights at general meetings is a natural part of ATP’s ownership of listed equities. ATP makes use of both physical attendance and proxy voting, but has chosen an extended and hand-held proxy voting model where ATP actively considers each voting item based on its voting policy. |
ATP often attends general meetings in Danish companies in person and also regularly gives speeches at the meetings. These speeches are available at atp.dk (in Danish only). ATP rarely and only on special occasions attends general meetings in foreign companies in person. |
ATP uses the technical infrastructure of proxy voting to vote at most general meetings. Proxy voting simply means that votes are cast through a third party (proxy). The concept of proxy voting is wide-ranging and may cover everything from full outsourcing of the voting process, including concrete voting decisions, to t... |
ATP does not outsource its decision-making authority to a third party. Instead, ATP considers all votes cast based on a voting policy, focusing on the company’s individual situation, challenges and risks. By making voting decisions in-house, ATP facilitates high-quality decision-making and synergies between investment ... |
Handling voting decisions in-house also ensures consistency in ATP’s active ownership and its many ESG activities. |
ATP puts pay on the agenda. |
Executive pay is one of the areas in which ATP’s voting practice has resulted in new and supporting ESG activities. ATP has focused on problematic pay packages in its voting policy, voting practice and by engaging in in-depth dialogues with a number of foreign companies on pay and problematic pay packages. |
The dialogues took place through meetings, conference calls and by email, and were carried out in close collaboration with a number of major European investors. The investor group has agreed to enter into a dialogue with a number of European and US companies about the problematic composition of pay packages. The dialog... |
48. |
Responsibility 2018 0 20 40 60 80 100 84 pct. Ja 16 pct. Nej. |
Follows ISS’s recommendations. |
This means that voting decisions can be backed by knowledge and information gained from our dialogues with companies, including from fact-findings and thematic engagements. Read more about these processes on page 53. ATP may also choose to organise special ESG activities on the basis of the insight gained by following ... |
ATP’s physical voting process is managed by ISS which is one of the leading providers of proxy voting services. |
ATP does not always vote in accordance with ISS’s voting recommendations. The figure below shows that ATP, after an independent assessment, agreed with ISS’s recommendations on 84 per cent of the voting items. |
This is because ATP has particular views on issues such as pay where ATP actively considers the fairness and context of each individual pay package. Another reason for the divergence between the recommendations of ISS and ATP’s voting practice is that ATP has a principles-based voting policy, which does not give specia... |
ATP CONSIDERS EACH INDIVIDUAL PROPOSAL. |
ATP’s views often differ from those of other attendees at general meetings. Such views concern decisions that cannot be put to a formula, but require continuous and specific consideration – for example decisions on executive pay. |
Among other things, the voting policy requires that the pay is reasonable, that the pay is adapted to the special circumstances of the company, that the commonality of interests between the Executive Board and shareholders is strengthened, and that the company is able to attract qualified talent. In sum, it means that ... |
Depending on the specific circumstances of a given pay package, ATP may vote in favour of a pay package in one company, while at the same time voting against a similar pay package in another company under a different set of circumstances. For example, ATP may vote against a pay package in a European company, but vote i... |
However, as can be seen from the two figures below , ATP tends to vote against US pay packages more often than pay packages in general. |
The same is true for many other areas. |
ATP’S VOTING POLICY IS GLOBAL AND PRINCIPLES-BASED. |
ATP’s Policy of Active Ownership is based on a set of principles. This means that ATP’s voting policy does not give special consideration to local conditions, but is based on the belief that ATP’s approach to corporate governance creates value, no matter where in the world ATP choses to invest. |
Specific attention is given to voting on the election of board members. Generally, ATP is of the opinion that efficient Supervisory Boards should be independent. The policy does not take account of local markets with corporate structures that differ from for instance Danish corporate struc- 0 20 40 60 80 100 71 pct. fo... |
Votes on pay packages 0 20 40 60 80 100 47 pct. for 53 pct. imod. |
Votes on pay packages, USA |
49. |
Responsibility 2018 tures, where the majority of board members are usually independent. This is for example the case in the Japanese market, where boards with a majority of independent members are rare. This means that ATP votes against a relatively large number of board members in Japan. |
One could also choose an alternative approach with adjusted regional policies which take account of local best practice. However, ATP has decided against this solution as ATP believes that Supervisory Boards create the most value when they are independent – also on markets where this is not yet standard practice. |
Although ATP has a principles-based approach, it is important to point out that ATP is not bound by its rules. ATP considers all proposals and voting items individually. This allows ATP to take account of the specific context and any special circumstances of a voting item. It also means that ATP may vote differently on... |
An example of this can be found by exploring ATP’s past voting at the general meetings of the two Australian companies Qantas Airways and Woolworths Group. The shareholders of both companies put forward proposals which in different ways concerned the issue of human rights. A shareholder proposal to ‘Approve Human Right... |
In ATP’s judgment, the proposal at Qantas’ general meeting was to be seen in a domestic political context. The authors of the proposal believed that Qantas’ involvement in the repatriation of unsuccessful asylum seekers from Australia is a violation of human rights, and that Qantas should there- |
ATP continues to develop its approach to corporate governance through knowledge of best practice and academic insights. |
As part of its day-to-day active ownership, ATP constantly seeks to improve its approach to the subject. ATP is therefore committed to back up our approach to active ownership by theoretical knowledge and practical experience. |
One of the areas where ATP changed its practice in 2018 was its view on shareholder proposals relating to improved or more detailed company reporting. But whereas ATP previously focused more on whether it was information we would actively use ourselves, we now also focus on whether it would be of meaningful use to othe... |
0 20 40 60 80 100 73 pct. for 27 pct. imod. |
Votes on election of board members 0 20 40 60 80 100 37 pct. for 63 pct. imod. |
Votes on election of board members, Japan |
50. |
Responsibility 2018 fore immediately cease its cooperation with Australian authorities. However, Qantas argued that it is the Australian government, not Qantas, which has the ability to assess the legal status of individuals and to make the decision on their potential repatriation. The Australian system is based on dem... |
In the case of Woolworths, the proposal concerned human rights in the supply chain, specifically workers in the agricultural sector. ATP recognises that Woolworths year after year delivers progress in terms of improving worker conditions in their supply chains. However, ATP’s investigations indicated that agricultural ... |
ATP SENDS VOTING INTENTIONS TO COMPANIES. |
In 2018, ATP decided to publish the names of the companies to whom ATP sent voting intentions in order to ensure a greater level of transparency. The overview can be found in Appendix 5. |
When ATP issues a voting intention, it basically means that ATP wants to explain to the companies how our vote should be interpreted. If, on one or more voting items, ATP intends. |
CASE: ATP puts pressure on Shell to advance on the climate agenda. |
In December 2018, following pressure from a number of investors, including ATP, Royal Dutch Shell announced a significant change of direction on the climate agenda. Starting next year, Shell will commit to setting specific targets for its greenhouse gas emissions, among other things. |
In 2018, Shell faced pressure from ATP and other investors. A shareholder proposal at Shell’s general meeting in May 2018 demanded that, going forward, Shell set specific targets for its greenhouse gas emissions. Shell had already announced ambitions for its emissions, but no firm targets. |
Following a concrete assessment of the proposal and Shell’s reporting, ATP decided to back the proposal. ATP also took the opportunity to enter into a dialogue with Shell to specify why we had backed the proposal. The proposal was only backed by 5.5 per cent of the votes and hence was not adopted at the general meeting... |
In December, Shell announced a change of direction, committing themselves to setting specific emission targets in line with the proposal at the general meeting. This change of direction was brought about by pressure from investors exercising active ownership, as well as general pressure from Shell’s stakeholders. |
51. |
Responsibility 2018 to vote against the Supervisory Board and the company’s own recommendations, ATP will seek to inform the company of ATP’s intentions and motivation ahead of the general meeting. |
ATP also seeks to inform the company if we support the Supervisory Board in the concrete proposal, but find certain elements of the proposal to be of value. Such proposals may for example be those relating to discrimination. ATP may not necessarily support all proposals concerning the topic of discrimination, as they m... |
An example of such an enquiry to a company sent by ATP ahead of the vote is shown on the following page. |
CASE: Dialogue with Danske Bank. |
In 2018, the Danske Bank money laundering case attracted a lot of attention – both in the media and among investors – and quite rightly so. Improper behaviour was revealed to have taken place in Danske Bank’s Estonian branch in 2007-2015, and regulators from several countries are investigating whether the Bank violated... |
Money laundering is a clear violation of ATP’s Policy of Responsibility in Investments, and from early on in the process, ATP exercised active ownership through dialogue. ATP’s believes that ATP’s interests are best served by putting pressure on Danske Bank to make improvements through dialogue rather than resorting to... |
Moreover, our dialogue with Danske Bank has convinced us that considerable efforts are being made to strengthen the Bank’s compliance function going forward, and we believe that this clearly reduces the risk of similar violations in the future. |
Our dialogue with Danske Bank has taken place at three levels. We have been in direct dialogue with the Bank’s Board of Directors, the Bank’s Executive Board and the Bank’s Chief Compliance Officer. Last, but not least, we have been in dialogue with a few other investors. In parallel with the dialogue, we have raised p... |
The aim of the dialogue was to assert ATP’s influence relative to the Bank in terms of making improvements in the handling of the actual case, but also to develop a better understanding of the specific case and the initiatives taken by Danske Bank to strengthen its compliance function going forward. |
The case escalated over the summer/autumn of 2018. Due to the scope and severity of the case, it was clear to ATP that a major management reshuffle was required to move the Bank forward after the serious accusations. Consequently, our dialogue escalated to include other investors such as AP Møller Holding. As a result ... |
52. |
Responsibility 2018. |
Dear Investor Relations, |
We wish to inform you on the reasoning behind our votes, at your upcoming annual general meeting. |
At ATP we believe that the roles of Chairman and CEO are best fulfilled separately. Because we believe this to be best practice, we have a voting policy of opposing setups where the roles are combined. Based on this policy we will be voting against the election of the CEO to the board of directors. |
At ATP we believe that the Chairman of the board should not receive performance dependent remuneration. This policy also applies to combined Chairman/CEO setups, as it underlines the inability of the Chairman to independently act as a control function above the executive management. Because your remuneration policy doe... |
It follows from the above policy that we will be voting in favor of the shareholder proposal requiring an independent board chairman. |
Additionally we will be voting in favor of item 8 on board oversight of product safety and quality. This vote is again linked to our policy of separating the roles of chairman and CEO, as part of the proposal concerns the merits of adopting independent chair leadership at Merck. |
While we will be supporting management regarding the shareholder proposal regarding “Holy Land Principles”, we want to stress that we still find it important that the company lives up to the highest ethical standards regarding equal employment opportunity in all areas of operation. However we have no desire for the com... |
We will also be supporting management regarding the shareholder proposal regarding reporting of risk of doing business in conflict-affected areas. Again we expect you to live up to best practice and act responsibly especially with regards to potential violations of human rights. We believe that the current responsibili... |
On the remaining points up for election, our votes are in line with the management recommendations. |
At ATP we believe it to be best practice to inform companies of our voting intentions before an AGM, when our voting differs from the management recommendations. We adhere to this practice regardless of the size of our holdings in a specific stock. |
We hope that you will take our policy into consideration at future elections. |
On behalf of ATP, |
53. |
Responsibility 2018. |
ATP has a consistent focus on ESG risks in its investment portfolio and as a result exercises active ownership through thematic engagements. In 2018, ATP conducted seven thematic engagements with more than 200 companies. |
Read more about the individual thematic engagements on page 54. |
Structured series of dialogues Thematic engagements are structured series of dialogues with groups of companies in the portfolio on responsibility-related topics, such as environment, human rights or corporate governance. The aim of the dialogues is to enable ATP to: • understand the challenges, risks and opportunities... |
The aim of the dialogues on responsibility, like other active ownership initiatives, is to improve ATP’s understanding of the challenges facing companies. Knowing the risks and challenges facing companies and increasing its level of knowledge enables ATP to make better investment decisions. |
The process also ensures that ATP proactively and systematically identifies ESG risks across its portfolio of listed equities. |
ATP may also seek to promote the companies’ long-term value creation by influencing them to focus on improving reporting, formulating policies or establishing more robust processes for responsibility and thereby minimising their financial risks. |
ATP selects topics based on analysis and trends The topics of the dialogue series are chosen by ATP’s Committee for Responsibility. The methods employed for selecting topics vary. ATP’s Committee for Responsibility may decide on a focus area which it believes to be relevant to its risk management or the companies’ long... |
Another method employed by ATP in the selection of topics is to look at some of the trends identified by ATP at general meetings, such as trends in shareholder proposals. If, for example, environment, climate, human rights or corporate governance is on the agenda at several of the season’s general meetings, it may be r... |
In other cases, ATP may choose a topic, because our screening processes show that several companies are exposed to the same ESG risks, but we are unable to ascertain a concrete breach of ATP’s Policy of Responsibility in Investments. In such situations, thematic engagements can give us more insight into the policies an... |
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