It is critical to have an integrated approach across all the elements of committed share-ownership, from properly and intelligently casting votes at general meetings to actively engaging in order to help bring about change that will support improved performance. To that end, Hermes has 58 people (as at 30 September 2008) involved in its responsible share-ownership activities on behalf of clients. The depth and breadth of this resource reflects our philosophy that these activities are on a continuum and require a co-ordinated and appropriately skilled approach. This thinking has also been adopted in the Myners Report and the Institutional Shareholders' Committee's recommendations in the UK, both of which encourage institutional investors to act as owners of companies on behalf of their clients.
The diagram below highlights the key features of our comprehensive responsible share-ownership programme.
Firstly, Hermes has a clear and easily communicable explanation of what it believes well-managed (well-governed) companies do, both in terms of structural governance, which covers matters such as board composition and remuneration, and strategic governance, which covers matters such as efficient financing, 'best parent' issues, growth strategies and risk management. Second, Hermes commits significant resource to monitoring company performance and understanding company-specific situations that explain financial underperformance in terms of variance from what we consider to be governance best practice. This is reflected in our pragmatic approach to voting, which is focused on value-creation. Third, through our engagement with board directors, we hope to build a better understanding on their part as to what we expect of them, and on our part of what is realistic in light of a company's own circumstances. Finally, where we believe a company's management is not acting in the interests of long-term shareholders, we work to bring about changes in practice that we believe will enhance the company's performance.
