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IMPORTANT INFORMATION
All data as at 31 December 2024, unless specified otherwise. This document is issued for information purposes only. It does not constitute the provision of financial, investment or other professional advice. We strongly recommend you seek independent professional advice prior to investing. The value of investments and the income derived from them may fall as well as rise. Investors may not get back the amount originally invested and may lose money. Any forward-looking statements are based on CCLA’s current opinions, expectations and projections. CCLA undertakes no obligations to update or revise these. Actual results could differ materially from those anticipated. All names, logos and brands shown in this document are the property of their respective owners and do not imply endorsement. These have been used for the purposes of this document only. CCLA Investment Management Limited (a company registered in England and Wales with company number 2183088), whose registered address is One Angel Lane, London EC4R 3AB, is authorised and regulated by the Financial Conduct Authority.
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Voting
We believe that it is in our clients’ best interests to vote on all company resolutions, both domestic and overseas, and we aim to do so whenever possible.1
Kaleidoscope, HM Prison Ashfield | Courtesy of Koestler Arts
We have a bespoke voting template, administered by proxy voting provider ISS, through which we aim to promote exemplary corporate governance and to reflect the underlying values of our clients.
Our full voting record is published quarterly on our website and a summary of our voting activity is included in our clients’ quarterly reports.
Vote escalation principles
Vote escalation principles
When used well, voting can be a powerful driver of change. To maximise our positive impact, we observe the following escalation principles:
1
We vote as a house and seek to exercise our clients’ voting rights at all investee companies, irrespective of their country of listing. Our voting position is applied to all portfolios under our management. Clients with discretionary mandates can select alternative policies, though this is rarely done.
2
We aim to write to all companies, ideally prior to a company’s annual general meeting (AGM), to explain our voting position. In our experience anonymous, unsubstantiated voting has little effect. We use our voting position to complement our wider stewardship work. Environmental and social considerations are woven into our vote guidelines.
3
We hold responsible parties to account for areas within their control and not for areas that they cannot control. For example, voting against the re-election of an auditor where we have concerns about its independence penalises the wrong party. The audit committee chair is ultimately responsible for selecting an auditor and should be held to account.
4
Where progress is found wanting, we are not afraid to escalate. Where we identify a concern – for example, inappropriate executive remuneration – we will first vote against the remuneration policy (or report), then against the chair of the remuneration committee, and finally against the entire remuneration committee (in extreme cases, we do so in year one).
5
We expect directors to respond to shareholders. We vote against a director’s re-election where we have had an unsatisfactory outcome to sustained engagement and voting activity.
2024 proxy voting record
2024 proxy voting record
During 2024, we voted on 2,688 resolutions at 164 company meetings across 159 companies. We took the decision not to vote at the Tritax Eurobox Special and Court meetings as we had already sold our holding prior to the record date.
We take a strong position on excessive and poorly aligned executive remuneration proposals and continue to hold directors accountable for their actions, including where there is a lack of gender diversity in company leadership. The table below sets out our three-year voting record.
Note: ‘Withheld’2 votes are included within votes ‘Against’. Some of the groups do not sum to 100% due to rounding.
†The executive remuneration figures do not include votes at companies where the board is wholly composed of non-executive directors.
Policy on diversity
A company’s nomination committee is responsible for ensuring a diverse board of directors. For gender, this is defined in the UK by the Hampton-Alexander Review as minimum 33% female.
We believe that larger companies should have more progressive governance structures. Accordingly, for companies in the main developed market indices, we require 40% female directors. Outside this group, we look at the number of female directors on the board. For details, please refer to the CCLA proxy voting guidelines.
On ethnic diversity, we follow the recommendations of the Parker Review and require one director from an ethnic minority background for main developed market indices.
We also consider the composition of a company’s senior management team, requiring at least 40% female directors for large UK companies and at least two female directors for overseas companies.
Where any of these criteria are not met, we begin by voting against the chair of the nomination committee, escalating to vote against every nomination committee member where progress is not made.
Director elections
Director elections
When we vote, we aim to target relevant directors by withholding support for their election. For example, where we have concerns about executive pay plans, we vote against the chair of the remuneration committee. If the company has a poor approach to gender diversity at board and sub-board level, we vote against the chair of the nomination committee.
In 2024, we did not support the re‑election of 251 directors, some for multiple reasons. The table below shows where we withheld support for directors during the year, and our reasons for doing so.
www.CartoonStock.com
Executive remuneration and pay inequality
Executive remuneration and pay inequality
While pay should be sufficient to attract, motivate and retain accomplished executives, excessive remuneration can deplete shareholder value.
An executive director’s remuneration package should be structured such that their interests are aligned with the long-term interests of the company (and those of its shareholders). To prevent interest misalignment, pay structures should be simple and explicitly linked to the long‑term objectives of the company. Including an element of share ownership within a pay package is one tool for aligning executives’ interests with those of shareholders. To be effective, those shares should represent a significant proportion of the executive’s reward and be held at least until retirement.
“…and now best performance
by a chairman at an AGM, defending
a massive salary increase.”
www.CartoonStock.com
Executive remuneration should also be linked to long- as well as short-term performance targets. These targets should be easy to understand, straightforward to measure and disclosed in the remuneration report. Under-performance against the targets should not be rewarded.
We assess and vote on all executive remuneration proposals according to the following principles:
- Remuneration schemes should not breach good local practice.
- Bonuses should be proportionate and not excessive.
- Long-term incentives should outweigh any short-term bonuses.
- Remuneration schemes should incentivise good conduct.
- Non-financial (as well as financial) performance metrics should be incorporated.
- Executive remuneration should not exacerbate inequality within the company.
Under the category of ‘other’, we consider several areas, some of which are as follows:
- Climate-specific environmental, social and governance (ESG) indicators. For example, at Rio Tinto, while ESG metrics, including climate change, accounted for an increasing proportion of the metrics attached to the CEO’s annual bonus, there was no climate-specific metric that would have resulted in zero performance-related pay were it not met.
- Company performance. For example, following discussions with CCLA’s Investment Team, we did not support the remuneration report of Assura due to questions over the company’s performance during the year. Our main concern was the 12% increase in the CFO’s salary and the payment of significant bonuses at a time when shareholders were experiencing falls in the company share price and when Assura was underperforming its peers.
- Remuneration package structure. For example, once again, the remuneration committee at Novo Nordisk failed to include detail on how bonuses (both short- and long- term) were calculated. This concern was compounded by the fact that a third of the long-term incentive plan award was linked to the same strategic objectives as the short-term bonus, thus rewarding recipients twice for the same outcomes, albeit over different timeframes.
- Equality of opportunity. For example:
- Kerry Group sought approval for material increases to its maximum bonus and long-term incentive plan (LTIP) opportunities, following similarly large increases in previous years. There was no indication that staff would receive corresponding increases in bonus payments.
- While the structure of Informa’s remuneration policy conformed with our guidelines, the company has raised the maximum LTIP opportunity for executives and does not similarly suggest how the wider workforce will benefit from company outperformance.
- The CEO of Sage Group received a 9.9% salary increase, in conjunction with an LTIP grant increase for 2024 (full year), resulting in a material uplift in his overall pay quantum. Additionally, while overall award levels remain within those set by the policy, this was the second year of increases in intended maximum awards for an executive. This raised concerns over increasing inequality within the remuneration package.
ISS recommendations and CCLA votes compared
Our voting guidelines are administered by proxy voting provider ISS, which works to a bespoke CCLA template.
The application of our template led us to oppose over four times as many management proposals as the standard ISS recommendations. We did not support management proposals on 17.9% of occasions. If we had applied the vote recommendations in ISS’s standard template, this would have reduced to 3.6%.
Our record on addressing issues with executive remuneration best illustrates our template’s impact. While ISS recommended support for 85.1% of remuneration report or policy votes, we supported just 17.9% in 2024, as shown in the table below.
How our voting position supports our engagement work
Our voting guidelines are reviewed and updated every year. We aim to be nimble in our approach and seek to step in where we believe corporate practice may be unjust or detrimental to shareholder value.
Our voting template incorporates our position on ESG issues, complements our main engagement themes, and is designed to reflect our clients’ values. It does so both for resolutions proposed by management, such as director elections and remuneration proposals, and for shareholder proposals, which are often more explicitly focused on ESG issues.
Management proposals
Management proposals
Executive remuneration and Living Wage
Executive remuneration and Living Wage
Our remuneration-related guidelines include voting against remuneration reports of large and mid-cap UK companies where the company is not an accredited Living Wage employer.
During 2024 this was either the sole factor or one of several factors resulting in a vote against remuneration proposals at the following companies: Berkeley Group Holdings, Bunzl, Compass Group, CVS Group, discoverIE Group, Genuit Group, Genus, Greggs, Halma, InterContinental Hotels Group, Judges Scientific, Kainos Group, Prudential, Rio Tinto, Spirax Group and Volution Group.
Climate change
Climate change
Where a company is in the scope of Climate Action 100+, and where we have concerns about its progress on addressing climate change, we will vote against the re-election of the CEO.
In 2024, we withheld support for two directors:
- Jakob Stausholm, CEO at Rio Tinto. We continue to have constructive engagement with Rio Tinto on climate change. However, while there has been progress, there is still more to do. In recognition of the evidenced improvement, we abstained.
- Jon Moeller, CEO/chair at Procter & Gamble. We voted against Mr Moeller’s re-election for three reasons:
- The company is part of Climate Action 100+ but has not reflected climate risk in its accounting assumptions.
- There is a lack of clarity about the company’s position on lobbying/trade association membership and its stated climate goals.
- Mr Moeller occupies a combined CEO/chair position. This is problematic because executive pay is decided by the board, meaning that a CEO who is also chair votes on their own compensation: a clear conflict of interest.
Shareholder proposals
Shareholder proposals
Shareholder proposals are a meaningful way for shareholders to encourage improved corporate responsibility and often reflect our clients’ aims and priorities.
We are committed to supporting shareholder resolutions that positively address ESG concerns, and we disclose our voting position and rationale quarterly on our website. See Appendix 3 for a full list of our ‘for’ votes during 2024.
Where escalation is necessary, we sometimes coordinate with other investors to co-file our own resolutions. During 2024, we co‑filed five proposals at investee companies, summarised below.
Better environment
Better environment
NextEra Energy (climate)
In 2024, we led the filing of a climate-related shareholder proposal at NextEra Energy. NextEra has a target to reach net-zero carbon emissions by 2045 although some of the trade associations to which it belongs can present forceful obstacles to addressing climate change. Our proposal asked the board to report to shareholders on its approach to identifying and addressing misalignments between NextEra’s lobbying and policy influence activities, and its ‘Real Zero’ goal. The proposal received an encouraging 33% support at the AGM in May. A further resolution has been filed for the 2025 AGM season.
McDonald’s (biodiversity)
We initiated engagement with McDonald’s as part of our membership of Nature Action 100 in 2024. While the company responded to the initial outreach, we have been unable to secure a meeting. Accordingly, we escalated the engagement by co-filing a shareholder proposal for the company’s 2025 AGM asking for McDonald’s to prepare a public report assessing the extent to which its supply chains and operations impact biodiversity and are vulnerable to biodiversity loss.
Better work
Better work
Amazon (collective bargaining)
We co-filed a shareholder proposal for Amazon’s 2024 AGM, requesting publication of an independent report into the alignment of the company’s practices on freedom of association and collective bargaining with its own policies and human rights standards. This followed ongoing media reports that Amazon has deployed tactics to discourage its workers from joining unions. The proposal received 31.8% the of shareholder vote, or 37.0% excluding insider votes (CEO Jeff Bezos alone owns 10.8% of the voting power). This was down 3% compared to votes for a similar resolution in 2023.
As part of this engagement we wrote to Amazon in June 2024 with the backing of 48 investors with shares totalling $1 trillion, in support of workers trying to form a union in the Coventry fulfilment centre.
We asked Amazon to:
- implement its stated commitment to the International Labour Organization (ILO) ‘fundamental’ conventions, the ILO Declaration on Fundamental Principles and Rights at Work, and the United Nations’ Universal Declaration of Human Rights
- cease all anti-union communications at Coventry and at all other facilities globally
- commit to negotiating in good faith with the Coventry branch of the GMB union and with other unions at national and global levels.
Nike* (labour standards)
In 2024, we co-filed and voted on a shareholder proposal at Nike on labour standards within the company’s supply chain. The industry practice of relying on social auditing to ensure compliance with supply chain labour policies is easily abused and often fails workers, particularly those in high-risk countries. In the resolution we asked Nike to adopt a worker-centric approach, which would involve binding agreements between the company and the workers in its supply chain. In total, 12.3% of the shareholders supported this resolution and we continue to press this topic with the company (see this page for further details).
Better health
Better health
Coca-Cola Co (nutrition)
We have been engaging with Coca-Cola for several years on its approach to nutrition. Facing a continued lack of any meaningful progress, we co-filed a shareholder proposal at the company for its 2024 AGM, asking it to adopt an enterprise-wide policy to move towards healthier products, beyond only sugar reduction. Unfortunately, the proposal was challenged by the company’s lawyers and rejected by the US Securities and Exchange Commission (SEC) before going to a shareholder vote. The SEC justified its rejection by arguing that the proposal related to ordinary business matters. We are coordinating with ShareAction and other investors collaborating on this topic to establish how to move the engagement forward with Coca-Cola Co in 2025.
*Not held in CCLA portfolio(s) as at 31 December 2024.
1We aim to vote at all company meetings. In certain circumstances, however, for example in markets that adopt the practice of share blocking (banning the sale of shares from the date that the vote is filed until the shareholder meeting), or where power of attorney requirements result in prohibitively expensive associated costs, it may be impractical to vote. In such instances, we may choose not to do so.
2There are two main ways in which to elect a director: by plurality vote or majority vote. A ‘plurality vote’ means that the winning candidate only needs to get more votes than a competing candidate. If a director runs unopposed, he or she only needs one vote to be elected, so any ‘against’ votes are meaningless. Because of this, shareholders have the option to express dissatisfaction with a candidate by indicating that they wish to ‘withhold’ authority to vote their shares in favour of the candidate. A substantial number of ‘withhold’ votes will not prevent a candidate from getting elected, but it can sometimes influence future decisions by the board of directors concerning director nominees.