Magni votes company proxies on behalf of clients and is guided in its votes by applying corporate governance best practices as described in Magni’s Sustainable Value Creation principles.
When Magni is voting a proxy, it means that one or more Magni clients have the associated security in an account. These accounts use a Magni Corporate Governance strategy so that the resulting portfolio contains the best governed companies, according to Magni research. Hence, the companies are already well run, and Magni is inclined to vote for proforma proposals. Each Magni vote on a company proxy is documented in a post published on Magni’s proxy blog.
No company is perfect, and all companies have opportunities for improvement. If the improvement areas overlap with a proposal, then Magni may vote against the board recommendation.
Company proxies often have a shareholder proposal regarding better disclosure on topics related to diversity. Company boards tend to resist increased disclosure, and often the boards declare that existing disclosures are adequate.
Disclosure is an important part of good governance. Diversity disclosure is about both the shareholder oversight of board responsibilities and risk management regarding the impact of poor people leadership. Magni’s decision on how to vote rests on three key questions:
If the company already provides disclosures regarding diversity in a format and location that is easily accessible, the specific proposal needs to be assessed. If the disclosures are not readily available, Magni tends to vote for the shareholder proposal almost regardless of the specific request.
If the company receives a third-party award (or awards) for the diversity issue(s) documented in the proposal, Magni tends to vote against the shareholder proposal as the company is already doing a good job. If the shareholder proposal does not identify meaningful shortcomings with the existing disclosures (e.g., boilerplate language used in the supporting statement of the shareholder proposal that can be found on shareholder proposals in proxies submitted to other companies), Magni tends to vote against the shareholder proposal.
Conversely, if the company has a track of record of issues and/or lawsuits related to diversity, Magni tends to vote for the shareholder proposal as the company needs to improve. If the shareholder proposal identifies shortcomings consistent with good governance, Magni tends to vote for the shareholder proposal.
If the shareholder proposal focuses on topics that are political as opposed to good governance, Magni tends to vote against the shareholder proposal. Putting a company in the middle of a divisive political discussion where the topic is not relevant to that company increases the risk that it will be pulled needlessly into that debate and hence hurt the brand and/or level of sales.
If Magni votes against any of these proposals, the decision along with the explanation is documented in the blog post.