GOSS Process

Voting-related, structural engagement

In our experience, voting is straightforward at roughly 80% of companies and votes are cast in favour of management. For the other 20%, identified by the review of proxy research and further research, it is necessary to engage (speak, meet, or correspond) with the company about voting issues to ensure that votes are cast intelligently and that the company better understands share owners’ concerns and undertakes changes that enable us to recommend a vote with management in the future. The structural issues of concern include the quality of disclosure, executive remuneration, board processes, succession planning, corporate social responsibility, and internal controls and risk management. The 80:20 principle applies again here in that the engagement with most companies is normally productive. For the 20% where that is not so, the engagement will continue or the company will be included in GO’s enhanced value engagement programme.

Enhanced value engagement on strategic issues

Enhanced value engagements take more time and involve the more senior members of GO’s team. As with the GO Focus Fund, the engagements tend to centre on the more strategic or value-orientated aspects of how a company is run, such as capital structure and financing, strategic direction, board composition and calibre. Those leading the enhanced value engagements are experienced business executives who have credibility at public company board level.

In Europe, GO’s enhanced value engagement programme sits neatly alongside a GO European Focus Fund investment. In our experience, only a small portion, around 5%, of stocks in a universe are suitable for inclusion in the fund as it requires a potential 20% upside in each investment and does not invest in companies with a market capitalisation of over €20bn. Companies not suitable for the fund are covered by the enhanced value engagement programme. In the US, where GO does not currently have a fund and where the governance framework is quite different from that in Europe, engagements tend to focus more on structural matters. In general, the objective is to achieve for clients a notional return on the enhanced value engagement programme that exceeds the cost of the service.