GOOD DIRECTORS?

Deborah GilshanRPMI Railpen Investments

Local Authority Pension Fund Forum, 5th December 2013

Three Ghosts of Christmas

The Good, the Bad and the ……….

The Good •Accountable to shareholders and engage•Effective •Robust oversight of management •Diversity of insights, skills and experiences•Focus on culture and values•The Board performs

The Bad •Not accountable to shareholders and do not engage•Lack of independent oversight•Ineffective•The Board does not perform

The …………………?•No clear definition of the third type of directors … but you know it when you see it!

UK USA

Best practice codes: No codes of governanceCompaniesShareholders

10 years of Say on Pay 3 years of Say on PayMoving to Binding vote Advisory vote

Board structure: Board structure:Independent Chair Combined Chair & CEO

plus Lead Director Director accountability: Director accountability? Engagement with Outside directors tend NOT to Shareholders engage (but this is changing)

A Call on U.S. Independent Directors to DevelopShareholder Engagement Strategies

Why is dialogue between shareholders and independent directors necessary?

• Establish respect and understanding• Create a culture of no surprises• Assess the quality and independence of directors

“ … no one else can better represent the decisions that have been made than the individual(s) who made them.”

What is being discussed?

•Engagement with • Independent Chairman or Lead Director• Chair of the Compensation Committee• Chair of the Nominations & Corporate Governance Committee

The benefits: more effective boards and more informed shareholders

Next steps …………

PGGM and RPMI Railpen Investments, 24th April 2013, published on The Harvard Law School Forum on Corporate Governance and Financial Regulation.

“As there have been no substantial changes to compensation structure, it is our opinion that the Board of our company is failing in its duties to shareholders by continuing to endorse a pay structure that a majority of shareholders do not support. It is not in the interests of shareholders to elect a Board that interprets the defeat of the advisory vote on pay as a mandate to do nothing and we must question whether re-electing a Board that does not respond to shareholders is a Board that we wish to have continue in our service…… We stress that our concerns are not limited to executive compensation structures but extend to wider issues of proper board accountability and in whose interests the Board of Oracle is acting.”

Letter to Oracle Corporation shareholders from CalSTRs, PGGM and RPMI Railpen28th November 2013

GOOD DIRECTORS?

Deborah GilshanRPMI Railpen Investments

Local Authority Pension Fund Forum, 5th December 2013