Execution

execution[1]Voting at shareholder meetings is by itself not sufficient to influence the behaviour of companies. Entering into a dialogue with companies, engaging with them, is therefore necessary to ensure that the company is being managed in a way that safeguards the interests of all parties affected by the company’s activities. We believe that corporate social responsibility, and therefore also socially responsible investing,  provides long-term economic benefits.

There are a variety of reasons why we would seek to engage with individual companies. For example, in matters of governance, where we repeatedly vote against management at company meetings we may engage with the company where our votes against are not effective in bringing a change of policy or behaviour. Moreover, public shareholder meetings are often not the best place to bring attention to specific financial, social or environmental issues. In this respect engaging with the company at a senior level is a more effective and appropriate way of addressing our concerns.

If a company’s actions conflict with PNO Media’s Corporate Socially Responsible Investment Code or the Hermes Principles, we may also seek to engage with that company on the issues giving rise to the conflict. At any given moment a significant number of companies participate in EOS’s engagement programme, and EOS dedicates significant resources to its engagement work.

Engagements performed by EOS are classified as either Tier 1 engagements (intensive engagements) and Tier 2 engagements (engagements of a more normal intensity).

Tier 1 engagements last for a minimum of two to three years. During this period, the intensity of the engagement may be escalated. In the initial stages correspondence is initiated with the company about the issues that have given rise to our concerns. Subsequently to this early contact, discussions are held with the management and directors of the company. This is of course a process requiring mutual trust and respect in order to arrive at an improvement of the behaviour and policy of the company. Where possible, EOS will cooperate with likeminded shareholders during an engagement. If engagement is not ultimately successful in addressing the issues giving rise to concern, it may be neccesary to vote against management on certain resolutions at shareholder meetings. PNO Media may, as a final resort, take the decision to include the company on its exclusions list.

Tier 2 engagements are typically of a more normal intensity and the issue under discussion with the company may be less intertwined with the company’s other activities.  Tier 2 engagements usually focus on structural environmental, social and/or governance issues. Because this usually concerns specific or well-defined problems within an otherwise healthy and well-operating company, Tier 2 engagements will often run for a shorter period than Tier 1 engagements.

Confidentiality

EOS has a long history of effective engagement with companies and has developed strong relationships with many of those companies over time. Part of its success in achieving positive change at companies is due to the fact that its dialogue with them remains confidential. Any breach of this confidentiality is likely to jeopardise the success of its engagement work and company names have therefore in general been removed from the sections reporting on engagement.