The Governance Institute of Australia has launched Principles and Guidelines for the interaction between institutional investors and ASX listed companies.
At the launch yesterday, David Gonski, chair of ANZ and former chair of the Future Fund, endorsed the principles and the need for companies and their shareholders to have open and honest communication and interactions.
“I believe strongly that the days of boards operating in closed boardrooms are gone,” Gonski said. “It is imperative that our stakeholders have interests and that we talk to them. I have been doing this for a very long time and I have been to see lots of stakeholders, and I am all the richer when I leave those meetings.”
Gonski said there needed to be more focus from companies about being long term.
“The average director thinks that if they do something for the long term they will lose the shareholders in the short term. There are those shareholders that are trading in the short term but there is more ownership in the long term. Long-term investors need to come out and say ‘what about us?’”
Kelly Christodoulou, ESG investment manager at AustralianSuper, who was also at the launch, said AustralianSuper has been engaging with ASX listed companies for a number of years on a private basis.
“We do not disclose the outcomes of those meetings, and we think that is beneficial for the companies and for us.”
She said AustralianSuper acts in both engagement and proxy voting.
The need for principles and guidelines, in part, is due to the emergence of the “governance industry” and the expanded number of parties now involved in engagement.
There are now two streams of engagement – the traditional CEO/CFO and investment analyst engagement on results, and the engagement between the board of the company and asset managers and asset owners on long-term matters including ESG.
In launching the principles, Sandy Easterbrook, a governance stalwart and independent advisory, said while the International Corporate Governance Network has principles, and the UK has its stewardship code, these principles are the first hands-on-guide helping interaction between investors and companies in the world.
The guidelines (below) were developed by the Governance Institute of Australia with input from the chairs and company secretaries of ASX listed companies, institutional investors and consultants.
Principle 1: It is good practice for institutional investors to explain how they vote and engage with companies; for companies to explain how they engage with institutional investors; and for each of them to keep abreast of this information.
Principle 2: It is good practice for institutional investors and proxy advisers to explain their voting and other governance guidelines; how they apply them to voting; when they can engage; and for companies to keep abreast of this information.
Principle 3: It is good practice for companies to know their significant institutional investors; for institutional investors to know their significant investee companies; and for companies to know and engage with intermediaries.
Principle 4: It is good practice for companies and institutional investors to have a regular, efficient and meaningful engagement program.
Principle 5: It is good practice for companies and institutional investors to incorporate ESG (environmental, social and governance) issues in engagement.
Principle 6: It is good practice for companies and institutional investors to take advantage of technology to facilitate disclosure and engagement.