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NAB Wealth Proxy Voting Principles

Introduction

Shareholder voting is a means by which shareholders can influence a company's operations, its corporate governance and activities of social responsibility. Proxy Voting is where a vote is cast on behalf of a shareholder.

MLC1 represents it’s investors in matters of corporate governance through the proxy voting process. The process is designed to protect and enhance the investment value of our fund’share investments, recognising the strong link between good corporate governance and investment value. MLC applies the Financial Service Council (“FSC”) Standard and Guidelines on proxy voting to its operational processes where applicable.

Proxy Voting Principles

The guiding principle when MLC votes on a resolution is that our voting decision must be in the best interests of our investors. MLC believes that corporate governance creates the framework within which a company can be managed in order to provide the greatest possible long term return.

MLC’s general position with regards to corporate governance is reflected below:

Long term value
We believe that there is a strong connection between good corporate governance and the creation of long term shareholder value.  Therefore we believe that the Board of Directors should be held accountable for ensuring high standards of corporate governance.

Remuneration - Alignment of Management and Shareholder interests
Remuneration paid to management should be linked to company performance to align to shareholder interests of seeking increased value for their investment. There should be an appropriate balance between performance based short term and long term incentives in addition to base salary for management and employees.

Board size and composition
Board size and composition is important. Board size should be reflective of the size and complexity of the company. There should be a sufficient number of directors to ensure that depth and breadth of experience, diverse background and skills exists amongst the independent directors.

Independence
Independent directorship is key in order for the Board to make objective decisions which protect shareholders and create value over the medium to long term. In reviewing director’s independence, there should be no familial or material business relationship with the company executives and other directors which would impact the director’s decisions or create a material conflict of interest.

Effective disclosure
Information impacting operations and financial performance should be disclosed in a timely and transparent manner. This includes performance metrics used to determine executive compensation and why these metrics have been used.

Board responsiveness to Shareholder concerns
Where there has previously been a significant number of shareholder votes against a meeting proposal, the Board should take action to address shareholder’s concerns by performing an appropriate level of engagement to identify the underlying issues which will be representative in management’s recommendations.

NAB Wealth Proxy Voting Policy

Proxy Voting Principles

The Proxy Voting Policy outlines that MLC assess and vote all proxies for every resolution in respect of holdings beneficially owned by MLC entities in companies publicly listed in Australia, excepting entities for which MLC has no discretion to vote. That is, MLC aims to vote at 100% of the annual and extraordinary shareholder meetings for Australian Listed companies we invest into and where we have the voting authority to do so.

MLC's decision to assess and vote all proxies in which we have discretion to vote represents a large commitment to encouraging these companies to be accountable for their actions and to uphold good corporate governance.

By exerting influence on corporate policies through discussion with company management and the exercise of proxy voting rights, we can achieve our goal to enhance shareholder returns.

Every resolution is considered and voted upon according to the Proxy Voting Policy. Resolutions that are not considered contentious are voted according to standing instructions. For non-contentious items, the general rule is to vote For management and Against shareholder proposals.

Where resolutions are assessed as contentious they are generally referred to a Proxy Voting Committee for consideration on the exercise of the vote.

Proxy Voting Committee
The MLC Boards have delegated their voting authority to the Proxy Voting Committee (PVC). The PVC is made up of senior management within MLC. Changes to PVC membership and to the PVC charter require Board approval. The objective of the PVC is to:

(a) protect and enhance the investment value of the assets held by the MLC funds;

(b) ensure that the interests of investors are represented in accordance with applicable requirements of the Corporations Act; and

(c) recognise the strong link between good corporate governance and investment value.

The PVC must always act in the best interests of investors. This includes giving priority to the interests of investors over the interests of NAB in the event that there is a conflict of interest.

The PVC reports directly to the MLC Boards and performs the functions and responsibilities that are outlined in the PVC Charter in respect of holdings in entities or trusts listed on Australian exchanges only.

Consideration of contentious matters
The proxy voting approach places an emphasis on contentious shareholder resolutions. In considering contentious proxy voting items, the Principle Investment Advisor will seek advice from a range of sources including:

  • independent advisors
  • appointed investment managers
  • MLC portfolio managers
  • market information
  • PVC members

MLC take into consideration market information and reports from independent corporate governance groups such as Glass Lewis & Co. that provide comprehensive details on the following: resolution background, analysis, commentary, discussions with company representatives and voting recommendations.

MLC also receive commentary on any nominated resolution from MLC's appointed investment managers holding the related security in the MLC funds that they manage. Investment managers may also speak to the PVC directly on complicated matters or where the PVC requires additional background regarding a resolution. MLC believe that our investment managers provide highly valuable insight into contentious resolutions, as it is their responsibility to perform ongoing in-depth analysis on company decisions and speak to companies directly regarding matters of concern.

Contentious issues can include (amongst other things) any of the following:

  • Executive remuneration, including whether there are any performance hurdles to be met (share price or company specific), the options/shares/rights are granted at an unreasonable discount to market price, and whether retention incentives are being offered
  • Option issue resolutions where the hurdles are not relative (absolute share price only), or hurdles not clearly stipulated, or measurable
  • Option issues for non-executive directors
  • Changes to the voting rights of ordinary shareholders
  • New share issues or placements if the rights or standing of existing shareholders are impacted.
  • Takeovers, schemes of arrangement and business restructures
  • Share buy-backs, if preference is given to any shareholder or group of shareholders over others.
  • High profile general meetings
  • Group shareholder action
  • Re-election of directors and board composition.

Proxy Voting in Foreign Markets
In respect of beneficial holdings in foreign companies, given the number and diversity of the overseas companies in which MLC invests, we view that our international equity managers or their appointed representatives are best placed to represent the interests of investors. Therefore proxy voting of international holdings has been delegated to MLC’s international equity managers. The international equity managers themselves assess and vote proxies on all international holdings within their portfolios. This obligation is included in the investment manager’s Investment Management Agreement. For some foreign markets, there will be instances where we refrain from voting as the expected costs of voting exceeds the expected benefits of voting, or voting would result in trading restrictions for the fund.

MLC also considers:

  • best practice standards of corporate governance such as the Financial Services Council Bluebook, the ACSI (Australian Council of Superannuation Investors) Guidelines and the ASX Corporate Governance Council recommendations when considering the voting decision and reviews its processes on an ongoing basis.
  • historical data on previous resolutions and company policy/practices.

The Proxy Voting Principles and Policy have been approved by the MLC Boards. Proxy voting is carried out without regard to MLC’s or NAB’s relationship/business with the company concerned.

Disclosure
FSC Standard 13 requires that no later than three months after the close of the financial year we publish a summary of our proxy voting activities on our website at www.mlc.com.au.

Proxy Voting Summary FY 2016 PDF – Proxy Voting records – 1 July 2015 to 30 June 2016

1. 'MLC' collectively constitutes: MLC Investments Limited ABN 30 002 641 661 and Navigator Australia Limited ABN 45 006 302 987. 2. Only resolutions for which the Scheme Operator has discretion to vote are included.