ITEM PF12 - ANNEX 1PENSION FUND COMMITTEE – 26 AUGUST 2005CORPORATE GOVERNANCE – VOTING AUDIT REPORTSummary of
Alliance Bernstein’s voting discrepancies with RREV, which came to light
during the voting audit. Computacenter AGM held on 28 April 2005. Alliance Bernstein voted in favour but should have opposed resolutions 4c and 4d. Resolution 4c was to re-elect Philip Hulme as Director and resolution 4d was to re-elect Peter Ogden as Director. RREV’s comments on these resolutions:- The Company fails to meet the recommendation of the Combined Code that, excluding the Chairman, at least half the Board should be independent NEDs. The Company states that the appointment of a further independent NED will remain under review during 2005. At the last AGM, the two non-independent NEDs stood for re-election and we recommended their re-election then on the understanding that the Company was actively progressing towards achieving the 'balance of the board' recommendation. We are therefore disappointed that the Company has not already appointed an additional independent NED to address this shortcoming. We consider this to be a more important issue at a company like Computacenter, due the presence of an Executive Chairman and two major shareholders on the Board. We have discussed this issue with the Company and been informed that the appointment of a further independent NED will remain under review during 2005, as disclosed in the annual report.. However, we are expressing concern that keeping 'under review’ the appointment of an additional independent NED does not indicate that high priority is being given to addressing the ‘balance of the board’ issue, especially as a year has already passed. It is for this reason that we are recommending that shareholders do not re-elect the two non-independent NEDs, as this would achieve the recommended board balance. George Wimpey AGM held on 14 April 2005. Alliance Bernstein voted in favour but should have opposed resolution 11, to approve the Remuneration Report. RREV’s comment on this resolution The most relevant issue of concern relates to increases to award levels under the Morrison Homes Long Term Incentive Plan. We are not convinced by the explanation for these increases and also believe that, as a matter of best practice, such changes should have required formal shareholder approval. As a result we are recommending that shareholders vote against the remuneration report resolution.
Persimmon AGM held on 21 April 2005. Alliance Bernstein voted in favour but should have opposed resolution 6, to re-elect Sir Chips Keswick as Director. RREV’s comment on this resolution The main points that we are highlighting concern the closely related issues of the balance of the Board at Persimmon and the independence of two of its Non-executive Directors (NEDs). The Combined Code states that the independence of NEDs can be conflicted if they have served on the Board for more than nine years. Sir Chips Keswick and Hamish Melville have been Board members for periods of twenty-one and nine years, respectively. In its annual report, the Company affirms that it considers both these directors to remain independent because their long-standing appointments have in no way affected their objectivity and their ability to advise and question the Executive Directors (EDs), particularly in respect of strategy and the Company’s financial affairs. It further states that their long association with the Company has given them a detailed knowledge of the Company’s business, which has enabled them to evaluate information and responses from the EDs quickly and concisely, and that their wise counsel has contributed significantly to the Company’s success. In relation to Sir Chips Keswick, we do not feel that this explanation offsets the fact that Sir Chips Keswick's tenure on the Board is more than double the nine-year watershed. We have consistently highlighted this issue in our reports, and, in 2004, we based our support for his re-election on the condition of his remaining on the Board for one year only. The composition of the Board does not satisfy the recommendations of the new Code and we feel that compliance on this point is not facilitated by the continuing presence of non-independent NEDs. For these reasons we are recommending a vote against Sir Chips Keswick’s re-election. This is the first year when the independence of Hamish Melville could potentially be impacted by his length of service. In our assessment of his independence, we have engaged with Persimmon and have taken into account its explanation on the subject. Upon contact, the Company re-iterated the points made in their annual report and added that Hamish Melville's financial knowledge, especially in the realm of corporate takeovers, renders him a very valuable Board member. As Hamish Melville chairs the Remuneration Committee, we have also considered whether the Company’s remuneration policy clearly evidences the independence of the Remuneration Committee. As several features of the Company’s remuneration practices have caused us concern, specifically the size of the maximum potential annual bonus and the recently introduced provision whereby the cash element has increased and the share component has decreased, we do not feel that this is the case. Consequently, we do not deem Hamish Melville to be independent but feel that a vote against his re-election is not warranted at this time. However, we encourage the Company to review his membership of the Audit and Remuneration Committees and will revisit this issue in 2006. We accept that the Company has provided an explanation relating to the independence of Hamish Melville and Sir Chips Keswick, in keeping the 'comply or explain' principle of the Code, but have reached different conclusions from the Company on the independence of these directors. Xstrata AGM held on 9 May 2005. Alliance Bernstein voted in favour but should have opposed resolutions 3 and 4. Resolution 3 was to approve the Remuneration Report and resolution 4 to re-elect Willy Strothotte as Director. RREV’s comments on these resolutions Willy Strothotte is Chairman of Glencore International AG (Glencore owns 40% of Xstrata) and he is not considered to be independent by the Company or by RREV. He chairs Xstrata's Remuneration Committee. We recognise that he has significant experience of the global mining sector. However, under the Combined Code, membership on this committee is reserved for independent NEDs. For that reason we recommend that shareholders vote against his re-election to the Board.
We
note that the CEO and CFO received a discretionary bonus. The bonus was
paid in recognition of the successful integration of MIM on to the Group.
The Company further explains that the EDs have made an outstanding contribution
in the development and execution of strategy. Although we recognise the
success of the Company, we do not support discretionary payments of this
type and recommend that shareholders vote against the approval of the
remuneration report (Item 3). |