2022 Stewardship and Voting Guidelines published

The Guidelines cover the following changes to the 2021 edition:

• Virtual AGMs: The PLSA no longer specifically advises voting against any motion that would make virtual AGMs permanent; rather, it notes that to date, the move online has not impacted voter turnout. Whilst it continues to support the use of virtual AGMs to ensure participation during these unprecedented times, the PLSA cautions that permanent virtual-only AGMs may reduce opportunities for shareholder engagement with the board and urges companies to look at how they can increase investor engagement opportunities.
• Board leadership and company purpose: Companies are advised to be proactive in responding to challenges on their workforces posed by Covid-19, and to disclose to investors the steps taken or provisions made in addressing them.
• Board composition and diversity: The PLSA has shifted its emphasis from boards having a policy on diversity, to their having a policy on diversity and inclusion (with respect to professional, international and protected characteristics). It encourages matching the gender target set by the Hampton Alexandar Review of at least 33% female representation on FTSE 350 boards, and the Parker Review target of at least one board member of colour (by 2021 for FTSE 100 and 2024 for FTSE 250). Investors are discouraged from voting for the re-election of the Chair if the board has not established a diversity and inclusion policy and strategy.
• Remuneration: The Guidelines note that 2021 saw remuneration-related resolutions overtake board resolutions in terms of highest dissent. Given the continued impact of Covid-19 as well as the substantial increase in the cost of living, the PLSA believes that companies should demonstrate restraint in their 2022 remuneration packages, particularly those that have in the previous two years received, or still receive, Government support. There is support for an increased consideration of remuneration through the lens of ESG factors, and a desire for more packages benchmarking performance against the achievement of a company’s ambitions to meet clear climate targets.
• Climate change & sustainability: The pension sector is now within the scope of requirements to produce an annual Taskforce for Climate Related Financial Disclosure (TCFD) report. Therefore, the PLSA now expects companies to reference TCFD in their reports, in order to enable investors to fully assess the extent of climate risks to the business.