Implementation Statement, covering the Scheme Year from 1 February 2019 to 31 January 2020

The Trustee of the Williams & Griffin Limited Retirement Benefits Scheme (the “Scheme”) is required to produce a yearly statement to set out how, and the extent to which, the Trustee has followed the voting and engagement policies in its Statement of Investment Principles (“SIP”) during the Scheme Year. This is provided in Section 1 below.

The Statement is also required to include a description of the voting behaviour during the Scheme Year by, and on behalf of, trustees (including the most significant votes cast by trustees or on their behalf) and state any use of the services of a proxy voter during that year. This is provided in Section 3 below.

1. Introduction

No SIP was in place for the Scheme during the year under review. The Trustee implemented a new SIP for the Scheme in November 2020, which included policies on voting and engagement. These policies reflected the Trustee’s views on Environmental, Social and Governance (“ESG") and Stewardship considerations. The employer was consulted on the new SIP and confirmed it was comfortable with the document.

The Trustee has considered its new policies retrospectively in producing this Implementation Statement.

Whilst not formally in place during the year under review, the Trustee has, in its opinion, followed the Scheme’s new voting and engagement policies during the Scheme Year, by continuing to delegate to its investment manager, Aviva, the exercise of rights and engagement activities in relation to investments.

2. Voting and engagement

Over the year under review the Trustee held the Scheme’s assets in a range of funds with Aviva. The Trustee has delegated the exercise of rights attaching to investments, including voting rights, and engagement with relevant persons such as issuers of debt and equity, stakeholders and other investors about relevant matters such as performance, strategy, capital structure, management of actual or potential conflicts of interest, risks and ESG considerations to Aviva.

The Trustee seeks to appoint managers that have strong stewardship policies and processes, however, no new manager appointments were undertaken over the year. As part of its advice on the selection and ongoing review of the investment managers, the Scheme's investment adviser incorporates its assessment of the nature and effectiveness of managers’ approaches to voting and engagement.

3. Description of voting behaviour during the Scheme year

All of the Trustee’s holdings in listed equities are within pooled funds and the Trustee has delegated to its investment manager, Aviva, the exercise of voting rights. Therefore, the Trustee is not able to direct how votes are exercised and the Trustee itself has not used proxy voting services over the Scheme Year.

In this section we have sought to include voting data on the Scheme’s funds that hold equities as follows:

  • Aviva GM UK Equity Pension AP fund;
  • Aviva GM European Equity Pension AP fund;
  • Aviva GM Global Equity Pension AP fund;
  • Aviva GM Overseas Equity Pension AP fund;
  • Aviva With-Profits fund

The Trustee has sought to obtain the relevant voting data for Sections 3.2 and 3.3, from Aviva, however they were unable to provide full fund information for the Aviva GM Global Equity Pension AP and the Aviva GM Overseas Equity Pension AP funds. Missing data has been highlighted in the table in Section 3.2.

The Trustee will continue to work with its advisers and Aviva with the aim of providing fuller voting information in future implementation statements.

3.1 Description of the voting processes

Aviva

Aviva’s voting decisions are based off its voting policy which is reviewed on an annual basis and updated subject to Board approval. Final decisions are made by the Stewardship function (i.e. ESG analysts) in conjunction with portfolio managers who inform the decision-making process by bringing their knowledge and assessment of company strategy and any special circumstances.

To support Aviva in making voting decisions, it uses governance and other research from a number of sources. These include the Investment Association’s IVIS service and ISS. Aviva uses research for data analysis only and it does not automatically follow any voting recommendations.

Given the number of companies Aviva owns in its portfolios (including index funds), it seeks to prioritise engagement by size of holding and where it is most likely to benefit its clients. This allows Aviva to consider additional context from the company which occasionally results in changing a vote. In addition, every year Aviva writes to the large majority of the companies it holds to notify them of its voting policy (highlighting any changes it has made), and also direct them to Aviva’s voting records, where they are able to see how it has voted at their AGMs etc and our reasons for not supporting any resolutions.

As can be seen from Aviva’s voting records, it has a strong record of opposing resolution and holding boards to account.

Aviva maintains a database to record its voting and engagement with companies which allows Aviva to review the effectiveness of its work. For priority engagements, Aviva’s intention is to review these on a quarterly or half yearly basis.

There will be times when, despite engagement with companies, its concerns have not been adequately addressed. Under these circumstances, the matter may be escalated into a more focused project of intervention aimed at securing changes to the board, management, practices or strategy. As part of Aviva’s escalation process, it may ask to discuss issues with executive and/or non-executive directors, work with other institutions and investors to press for change or exercise its voting rights against the board. As a last resort Aviva may requisition a general meeting of a company or a resolution at an Annual General Meeting, or support others who are doing so. Aviva may also make public statements where it believes is appropriate. However, this is expected in only the most extreme cases.

3.2 Summary of voting behaviour over the Scheme Year

A summary of voting behaviour over the period is provided in the table below.

Fund name Aviva GM UK Equity Pension AP fund Aviva With-Profits fund Aviva GM Global Equity Pension AP fund Aviva GM Overseas Equity Pension AP fund Aviva GM European Equity Pension AP fund
Total size of fund at end of reporting period (£m) 4.2 4,100 0.2 3.4 0.4
Value of Scheme assets at end of reporting period (£m) 0.204 4.9** 0.215 0.118 0.181
Number of equity holdings at end of reporting period 53 168 -* -* 67
Number of meetings eligible to vote 134 207 311 258 30
Number of resolutions eligible to vote 1,879 2,819 4,087 3,419 195
% of resolutions voted 99.0 89.6 98.2 94.3 72.8
Of the resolutions on which voted, % voted with management 94.5 81.4 91.0 92.0 79.6
Of the resolutions on which voted, % voted against management 3.9 16.0 9.0 8.0 16.9
Of the resolutions on which voted, % abstained from voting 1.6 2.6 0.0 0.0 3.5
Of the meetings in which the manager voted, % with at least one vote against management 46.3 63.4 54.0 46.0 50.0
Of the resolutions on which the manager voted, % voted contrary to recommendation of proxy advisor 4.0 12.0 3.9 3.4 13.0

*Aviva was unable to provide this data and so it is omitted from the draft Statement.
**Valuation provided for the With-Profits fund is the surrender value at year-end.

3.3 Most significant votes over the Scheme Year

Commentary on the most significant votes over the period is set out below. We have asked Aviva to comment on votes that they believe to be significant. We have selected a subset of the commentaries provided by Aviva below for each fund based on a combination of factors, including the potential financial impact of the vote, how significant the holdings are in relation to the funds, and whether the vote was particularly controversial (for example, if it was high profile). Details of other significant votes are available upon request.

Aviva has outlined their criteria for interpreting “most significant votes” below:

“We looked at a number of criteria for the list of votes undertaken for the fund including:

  • the impact on the company (both short and long term) if the resolution was or wasn't approved;
  • the materiality of the shareholder resolutions;
  • the level of public and / or media interest in certain companies and resolutions;
  • and how significant the holdings are in relation to the fund and to Aviva Investors (acknowledging that the larger the aggregate/percentage holding, the more ability we have in affecting change).

It is evident in some of the votes selected that these reflected multiple criteria explained above, but it is important to note that this the selection process was quite subjective.”

Please note that the wording below has been provided to us by Aviva.

Aviva GM UK Equity Pension AP fund

  • BHP Group Plc, October 2019. Vote for the resolution.

    Summary of resolution: Approve suspension of memberships of industry associations that are involved in lobbying inconsistent with the goals of the Paris Agreement.

    Rationale: “Whilst BHP is a leader in climate change within its sector, their continued support of industry bodies that work against their own interests (which has been raised by investors repeatedly in the past), has not resulted in any meaningful change. There remain material differences between BHP’s position on climate change and those taken by some of its trade associations, notably, the Minerals Council of Australia (MCA), the US Chamber of Commerce, and the Business Council of Australia (BCA). It is estimated that BHP provide approximately 20% of the MCA’s funding.

    We do not consider our support for the resolution being a vote against the company; in fact it will support the company’s own objectives to transition and the interests of our beneficiaries. We believe that allowing more time for engagement is simply counter to the urgency of climate science and BHP’s own objectives to manage an orderly transition to a low carbon economy.”

  • Royal Dutch Shell Plc, May 2019.

    Vote against management

    Summary of resolution: Approve Remuneration Report

    Rationale: “Our vote against reflected both the high percentage of Long Term Incentive Plan (“LTIP”) award vesting for threshold performance and the continuation of generous LTIP grants (e.g. 680% of salary for the CEO), which means that awards equivalent to approximately 230% of salary will vest for the achievement of threshold performance conditions only. We considered this to be excessive for such levels of performance We also had concerns over the amount of LTIP gains for the CEO (his FY2016 LTIP vested at EUR 15.2 million), although we were mindful that this was primarily due to the company’s performance being ranked first out of the five companies in three of the four performance measures (and second in the other, return on average capital employed growth), and is also due to share price appreciation. Finally, we also had concerns over the generosity of pension contributions.”

  • Prudential plc, October 2019. Vote for management.

    Summary of resolution: Approve matters relating to the demerger of the M&G Group from the Prudential Group

    Rationale: “There was strong strategic rationale for the Demerger, in particular the improved operations and shareholder benefits with the independent businesses. Further, we / existing shareholders can still participate in the potential upside of the demerged business.”

Aviva With-Profits fund

  • Unilever PLC, May 2019. Vote against resolution.

    Summary of resolution: Election of Directors.

    Rationale: “As large, long-term shareholders of Unilever, we engaged extensively with the group in 2018 following its announcement to simplify from two legal entities, NV (Dutch) and plc (UK), into a single legal entity incorporated in The Netherlands. The company’s reason was that the Dutch shares account for approximately 55% of the group’s combined ordinary share capital, and trade with greater liquidity than the UK shares. As Unilever’s sustainable business model including its proactive engagement with stakeholders is one of the factors for our overweight position, we expressed our disappointment that Unilever would disappear from the FTSE 100 Index, and also feared we would also be forced to sell our holdings at depressed prices.

    We welcomed Unilever’s announcement on 5 October 2018 to withdraw the proposal to simplify Unilever’s dual-headed legal structure. However, at the Company’s AGM in May 2019, we voted against the re-election of senior independent director (SID), Youngme Moon to reflect our concerns that she seemed very detached from the restructuring issues and was not present in key meetings. We informed the company that we would have expected to see the SID engaging with shareholders on the proposals, particularly as they were so contentious.”

  • BP Plc, May 2019. Vote for resolution.

    Summary of resolution: Approve the Climate Action 100+ Shareholder Resolution on Climate Change Disclosures.

    Rationale: “As co-filers, we were always going to support the resolution which reflected our view that the company needs to attach more urgency to tackling climate change both from an environmental perspective and for the future viability of the business. The additional climate-related disclosures requested namely: (1) capital expenditure, in particular how the Company evaluates each new capex investment vis- -vis the Paris Goals; and (2) metrics and targets consistent with the Paris Goals will allow shareholders to better assess the company's annual progress in making the transition to lower carbon intensive energy..”

  • London Stock Exchange Group plc, November 2019, Vote for resolution

    Summary of resolution: Approve Acquisition of Refinitive

    Rationale: “We supported the Refinitiv Transaction as it represents a compelling strategic opportunity to transform the Company’s position and create a global financial markets infrastructure leader of the future, including in North America (the world’s largest financial market), Asia and fast-growing emerging markets. It wil also significantly enhance the Company’s customer proposition in data and analytics, utilising the Combined Business’ intellectual property to offer innovative new services and will deepen and expand the Company’s and Refinitiv’s shared core principles of open access and customer partnership. The combination of the Company and Refinitiv is also expected to deliver a highly attractive financial profile for the Combined Business and create significant value for the Company's shareholders, offering amongst other things enhanced revenue mix with attractive growth.”

Aviva GM Global Equity Pension AP fund

  • Johnson & Johnson, April 2019. Vote for resolution.

    Summary of resolution: Report on Integrating Risks Related to Drug Pricing Senior Executive Compensation

    Rationale: “We consider that given the serious nature of the topic including regulatory oversight, some integration of key topics into compensation would help ensure alignment between key KPI and pay.”

  • JP Morgan Chase & Co., May 2019. Vote for resolution.

    Summary of resolution: Report on gender pay gap

    Rationale: “Growing focus on the topic of diversity and increasing regulation requiring companies to report on gender pay gaps means those who fail to do so are at risk of lagging behind. We're keen to push companies to improve disclosure.”

Aviva GM Overseas Equity Pension AP fund

  • Facebook Inc., May 2019. Vote against management.

    Summary of resolution: Election of directors

    Rationale:“The issues at the company were widely reported and stem from a material failure of governance at board level. We felt it appropriate to withhold support on director elections.”

  • Microsoft Corporation, December 2019. Vote against management.

    Summary of resolution: Report on gender pay gap

    Rationale:“We consider that as investors the request for the company to report on the global median gender pay gap does not seem overly onerous and would allow investors to measure the progress of the company's diversity and inclusion initiatives.”

Aviva GM European Equity Pension AP fund

  • Aroundtown SA, December 2019. Vote for the resolution.

    Summary of resolution: Approve issuance of equity or equity-linked securities without pre-emptive rights and amend Articles of Association

    Rationale:“Under normal circumstances we would have voted against the share issuance authority as it would enable the Board to issue shares at the equivalent of 146% of the share capital without respecting pre-emption rights, hence being very dilutive to us and other shareholders. Although the authorization is also partly to be used for the financing the TLG merger, the authorization is substantially larger than what is needed for that purpose. However, Aroundtown’s strategy is predicated on deal-making and growing the portfolio. This is well communicated and understood by us and the market. As such, in this instance we exceptionally supported the resolution.”

  • Iliad SA, December 2019. Vote for the resolution.

    Summary of resolution: Authorise specific buyback program and cancellation of repurchased shares

    Rationale:“The company proposed to repurchase up to 11.7 million shares (20 percent of its issued shares capital) at EUR 120 per share for an aggregate amount of EUR 1.4 billion. We supported as the buyback price represented a premium of 38% on the volume-weighted average price over the past three months”