Minerva Analytics (Manifest) has been a voluntary signatory of the FRC’s Stewardship Code since its launch in 2010.
Our Stewardship Code reporting follows the key Principles of the Code. As a service provider to asset owners and managers, we have answered where we feel our role directly impacts the operation of the Code.
As a service provider which supports investor stewardship, Minerva is also a signatory of the Best Practice Principles for Shareholder Voting Research. Our BPP statement contains more detail about the practical operations of our service.
The Role of Proxy Advisors and Research Analysts
Minerva very much welcomes the inclusion of guidance on the use of voting advisory services in the Stewardship Code. We hope that these disclosures will bring much needed transparency and understanding of how voting decisions are made and the proper of analysts in the stewardship process.
In some markets there has been a move towards prescribing mandatory voting. We recognise that some investors have therefore felt pressured to vote at all costs in order to meet compliance requirements.
Minerva believes in the need for “quality of voting” and we hope that the Stewardship Code will act as a positive catalyst for dialogue which prioritises informed engagement over high volume box-ticking.
Principle 1: Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities.
Minerva supports and informs the voting and engagement decisions of asset owners and investment managers with professional research, data and vote processing tools. These services include:
- Shareholder meeting analysis
- Governance risk profiles
- Sustainability reporting ratings
- Governance and sustainability data models
- AGM voting results
- Director biographies and remuneration data
- Electronic voting software and administration
Minerva does not publish “cookie cutter voting recommendations“. Our clients each have their own bespoke governance and voting policies. Minerva provides customised guidance and analysis which complements investors own policies and procedures.
Minerva’s electronic voting system enables professional investors to manage the significant workload of the AGM season. Our technology helps navigate the complexities of vote plumbing and ensures timely and accurate information processing, together with straight through processing including, where possible, legal vote confirmations.
Minerva has no discretionary voting powers and acts purely in an agency capacity processing our clients’ instructions.
Our scope is global, covering 90% of the world’s free-float adjusted market capitalisation quoted companies.
The Minerva Stewardship Code Research Policy
Minerva analyses companies in the context of local stock exchange listing standards, company law and best practice guidelines set by either investors or standards bodies. In the United Kingdom we take account of inter-alia:
- UK Companies Act
- UK Listing Rules
- The Pre-emption Principles
- The UK Governance Code
- QCA Guidelines
- PLSA Guidelines
- Investment Association Guidelines
The UK Corporate Governance Code is one of the key threads of our UK research policy. We consider company explanations very carefully. What constitutes a good explanation is obviously not an issue that can be defined easily and clearly as there are elements of subjectivity, however we use the Financial Reporting Council’s 2012 guidance “What constitutes a good explanation” as our base-line for assessments.
We believe that Comply or explain only works if there is engagement between a company and its investors. As such, because Minerva is not the owner of the companies we analyse we do not seek to intervene in the governance structures or any changes that investor may wish to discuss. We will, however, request clarification of public disclosures wherever practicable to ensure that our analysis takes account of all pertinent information. We will also support those customers requiring assistance with intervention.
- We strongly encourage our customers to look beyond the AGM season and integrate our research into their wider stock selection and monitoring processes.
- We will always seek clarification from companies where we think a disclosure is ambiguous. Our research is based on the information made available to all shareholders at the time of the AGM notice.
- We are concerned about partial disclosures/consultations which might be given to some advisors and not to others. If information is considered sufficiently important to be selectively disclosed we believe that it should be disclosed to all interested parties at the same time so that they can make an equally informed judgement.
- We understand the importance of consultation by companies, as these service to provide insights and inform engagement. However, we would add a note of caution in respect of selective briefing as the views of one group does not automatically endow universal acceptance by all shareholders. In that regard, we believe that governance research is no different to sell side research where a diversity of views is encouraged and accepted.
- Minerva’s voting guidelines and research policies are reviewed and updated annually as required.
Analyst Training & Qualifications
The nature of the AGM season requires that we use temporary staff for 4-6 months each year. All staff receive comprehensive training and induction in our standards and client requirements. All our interns are paid in compliance with UK living wage legislation.
Our research team actively monitors global corporate governance and proxy voting trends, regulatory changes and market developments. In addition, we meet with major shareholder proponents and issuers to discuss new proposals and initiatives – and obtain outside expertise where needed, including from academia, corporations, institutional investors, and law firms.
Principle 2: Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly disclosed.
Minerva is committed to the concept of voting and stewardship activities as a “Fiduciary Act” and all that entails. The integrity of the voting decision is therefore of considerable importance. We particularly believe that trustworthy research should be independent, objective and as far as possible, conflict-free. Minerva is therefore governed by a robust conflicts of interest policy and quality management process which are specific to the potential risks and hazards which could arise in the operation of our services. These risks include:
- Giving undue preference to selected clients
- Interference in the research review process by either clients or research subjects
- Analyst remuneration arrangements
- Breaches of vote confidentiality
Board Responsibility for Conflicts & Quality
The Minerva board of directors has reviewed and approved the conflict of policy and reviews its operation as a standing item at board meetings. The chief executive is responsible for the operation of the policy in conjunction with departmental managers. In addition to the requirements of the UK Bribery Act Minerva’s research team is required to conduct their research in accordance with the CFA’s Research Objectivity Standards©
Managing Potential Conflicts
We address potential conflicts through:
- a quality management system which focuses on a number of key performance indicators in relation to timely, accurate and comprehensive analysis
- Separation of activities between key departments to ensure confidentiality
- A dedicated stewardship support team which acts as buffer between departments and is a clearing house for questions from either companies or clients.
- Research analysts are not aware of which clients use which products or services or which way any client has voted or will vote.
- Minerva does not provide consulting services to quoted companies, however research subject companies may purchase research reports, governance and remuneration data in relation to their own company or their peer groups to support their understanding of governance matters. Minerva does not accept fee income for consultancy or advisory services from quoted companies.
- Clients who are themselves quoted companies are analysed in the same way as all other quoted companies.
Proxy Plumbing Integrity
In respect of vote integrity, since our launch in 1996, Minerva has sought to modernise the operational aspects of shareholder voting. Minerva remains highly concerned about the conflicts of interest present in the voting chain of intermediaries and the impact on best execution for investors. High quality engagement, dialogue and voting can be let down at the last minute by processes and systems which are opaque and lack robustness. Notwithstanding the introduction of the Shareholder Rights Directive we find that securities intermediaries are unwilling to facilitate proper exercise of shareholders’ property rights on a cross border basis.
Minerva continues to engage with a variety of stakeholders including the FRC, Department of Business, Energy & Industrial Strategy, the European Commission as well as wider industry groups, including the Principles of Responsible Investment, to address these concerns.
Voting is a fiduciary act and so Minerva offers services and support tools to enable investors to the fiduciary test including:
- Comprehensive governance profiles of companies
- Remuneration data and rating system
- Resolution analysis and bespoke vote policy guidance
- Sustainability reporting analysis
- Electronic vote agency platform
- Vote results analysis
- Bespoke research projects
- Disclosure and reporting services
All companies are subject to a detailed annual review; database records are updated and quality checks performed using standard statistical techniques. Data is sourced from public documents including annual reports and websites. Where disclosures appear to lack clarity or contain errors which would have a material bearing on our analysis we will verify with the company in question. Our reports contain peer group comparator data based on index, size by a variety of metrics and geography. Our data tools allow clients to perform their own detailed investigations of disclosures and use data in their in-house models. If errors are detected by clients these are logged and a root cause analysis is undertaken. Our target to respond is 48 hours, in 2015-16 the average response time was 7 hours.
Principle 4: Institutional investors should establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value.
Minerva invests considerable time and effort in promoting and enhancing shareholder rights at both the regulatory and operational level – for example by developing an open standards approach to straight through electronic voting. Our voting policies enable customers to choose when and how they escalate the use of their share voting rights in a transparent, methodical manner.
We actively support customers in any company level engagement that they wish to conduct and have developed a suite of integrated engagement tools to facilitate this. In addition, Minerva undertakes thematic reviews of emerging issues to assess their potential impact for shareholders.
Minerva only escalates company issues in extreme circumstances, for example, if a company declines to respond to a reasonable request for clarification. After three attempts to elicit feedback, we will pass the request to the relevant underlying clients for action and make a note in our research reports.
Principle 5: Institutional investors should be willing to act collectively with other investors where appropriate.
Minerva will work with its customers to facilitate their collective engagement requirements as required. We are happy to work with others in the investment field on collaborative regulatory consultations. Minerva is an active member of investor networks such as ICGN and UKSIF.
Principle 6: Institutional investors should have a clear policy on voting and disclosure of voting activity.
Minerva encourages investors to vote on an informed basis taking a balanced view of all relevant factors and policy issues. We are concerned that increased public expectations about levels of shareholder involvement may encourage some shareholders to “robo-vote”. By which we mean prioritising the dispatch of bulk voting instructions, sometimes to meet unrealistic deadlines imposed by intermediaries, over quality of decision-making. We believe that this can have a harmful dilution effect such that those shareholders taking an informed view may see their views, as expressed through the ballot, over-ridden by automatic “tick the box” votes.
Customised Stewardship Monitoring
Voting guidance is specific to each client based on their individual voting and stewardship policies. These policies create the framework for our analysts who answer a comprehensive series of voting and governance-related questions based on company disclosures – including explanations if any. One set of answers informs the various models without the need for repetition which may lead to inconsistency and inaccuracy. Not all clients are concerned by the same issues and so our application of technology and expert understanding gives clients answers on their terms. Clients can use this system to create Red/Amber/Green or For/Against/Abstain/Case-by-case guidance per resolution. In addition, Minerva operates a letter grade system for remuneration and sustainability governance which act as triggers.
We understand that boards are concerned about the correlation between voting recommendations and vote outcomes. There is no evidence in the UK market of a direct correlation between recommendations and final vote outcome, there is however a clear relationship between investors’ voting policies and the issues that we analyse.
Votes withheld from management through an against vote or an abstention should always be treated as a signal from investors that they wish to engage on a matter of concern.
To support investor engagement and dialogue, Minerva’s electronic voting platform offers an integration voting rationale function which allows investors to write to explain why they have voted a particular way and for that letter to be sent to the company when the votes are submitted.
Principle 7: Institutional investors should report periodically on their stewardship and voting activities.
The Minerva voting system allows shareholders to record their voting and stewardship decisions and the rationale for their final vote determination. This information allows investors to provide their own clients and public reporting with a highly detailed level of disclosure. Reports are customised to each client’s individual requirements and may be weekly, monthly and quarterly basis. Information may be provided in machine readable formats such as spreadsheet, CSV, HTML or standard document formats such as PDF or word processing.
Stewardship Code Contact Point
For further information please contact:
Telephone: +44 (0)1376 503500