Hermes sets out expectations of companies

EOS at Federated Hermes has sent out a letter to all FTSE 100 companies and additional companies within its UK engagement programme outlining its principles regarding diversity and inclusion, climate change and remuneration.

In the letter to 124 listed UK companies, EOS has outlined its expectations across a number of important strategic governance, environmental and social topics. The principles will guide the team’s corporate engagement programme and approach to recommending votes at shareholder meetings throughout the course of the year for the £938bn of assets on which it currently advises.

From 2021 EOS will be introducing several new, stricter policies with regards to voting against companies that it regards as making insufficient progress on diversity and inclusion and will be taking an industry leading policy position on diversity below the board level voting against the chair of any FTSE 100 company with materially less than a 20 per cent female representation in the combined population of the executive committee and its direct reports or that lacks at least one director from an ethnic minority background or plans to do so.

For the first time a vote against the chair of the board or responsible directors of companies will be recommended where a company’s strategy is materially misaligned with the goals of the Paris Agreement. A vote against would also be recommended where companies do not demonstrate sufficient management of climate-related risks, such as those below a Level 4 management rating from the Transition Pathway Initiative.

Boards must also use their judgement to ensure executive pay can be justified in the context of the experience of broader stakeholders, particularly for companies that have made redundancies or made use of government support including to furlough employees during the pandemic.

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