The Ethos Foundation publishes the 15th Edition of its proxy voting guidelines and corporate governance principles. In particular, this edition foresees new reasons for refusal of the discharge, namely in connection with the violation of local community rights or refusal of the company to recognize the negative impact of certain of its products on humans or the environment. Ethos will also recommend refusing share buy back programmes if they are selective or significantly hinder the capacity of the company to pay a dividend. Finally, following the Sika affair, Ethos added to its proxy guidelines different points dealing specifically with the unequal treatment of shareholders.
The Ethos voting guidelines are revised annually in their entirety in light of the latest developments in corporate governance. The 2016 edition includes in particular different amendments regarding the discharge of the board and executive management, the election to the board of directors, share buy back programmes, as well as the unequal treatment of shareholders.
New corporate governance best practice requirements
A number of requirements regarding corporate governance were specified. In particular, the voting guidelines now contain the following new rules:
- Refusal of the discharge if:
- There is a strong deterioration of the company’s financial situation due to successive poor financial results, large impairments or significant new provisions for litigation costs.
- There are well grounded accusations against the company for systematic violations of internationally recognised human rights of local communities and the company refuses the dialog with these communities.
- The company refuses to recognise the negative impact of some of its products or its operations on humans or the natural environment.
- Refusal of the election of a member to the board of directors if the nominee was involved in a serious controversy in the past.
- Refusal of the total remuneration amount for the executive management if the maximum amount that can be effectively paid out in case of overachievement of targets is significantly higher than the amount requested at the general meeting.
- Refusal of a share buy back plan proposed by the company if:
- The buy backs are selective
- The capacity of dividend payment is significantly hindered by the buy back.
The discussion of principles of equal treatment of shareholders is documented more precisely. In particular, Ethos reaffirms its opposition to the existence of multiple categories of shares, to registration restrictions and to the opting out clause. Exceptions can be made however should the existence of the company be in danger or should the long term interests of a majority of stakeholders be at risk.
Finally, a board member may no longer be considered as independent, if he receives fees in an amount that could compromise his independence.
Voting recommendations for 3% of the Swiss market capitalisation
The voting guidelines allow Ethos to define voting recommendations according to rules which are clearly and transparently established. These recommendations are used by the Ethos funds as well as the institutional clients of Ethos Services, in particular a large number of Swiss pension funds. The total amount of Swiss shareholdings advised by Ethos stands at approximately CHF 37 billion which corresponds to 3% of the Swiss market capitalisation. The Ethos voting positions are publicly disclosed online 48 hours before each general meeting.
