Shareholders of a company have the right to vote on certain aspects of the company's business, such as the election of the company's directors and the appointment of auditors. A proxy is the document that companies send to shareholders to get their voting instructions.
Equity mutual funds and exchange traded funds with an equity component hold shares of companies and are entitled to exercise the voting rights attached to those shares.
RBC Global Asset Management Inc. exercises the voting rights attached to securities held by RBC Funds, PH&N Funds, RBC Private Pools, RBC Alternative Funds, RBC ETFs (“Funds”)1, and segregated client accounts where we have been granted voting discretion.2
How does it work?
Shareholders of a company are entitled to exercise the voting rights attached to their shares. A company’s shareholders receive proxy voting ballots, permitting them to vote on matters raised at annual and extraordinary meetings without physical attendance. Company meetings and the corresponding proxy ballots most frequently contain proposals (i.e. matters put forth to a vote) to elect corporate directors, to appoint external auditors and set their compensation, and to adopt or amend management compensation plans.
Proxy voting is a key part of our stewardship process. It provides us with a method to communicate with issuers on how they can manage their ESG risks and opportunities in the long-term interests of investors. As an asset manager, RBC GAM has an obligation to act in the best interests of our clients, including segregated client accounts and investment funds. Voting responsibly is part of our fiduciary duty, and we make our voting decisions independently and in accordance with our custom Proxy Voting Guidelines.
The RBC GAM Proxy Voting Guidelines (“Guidelines”) summarize the corporate governance principles which we will generally support through the exercise of votes on these issues.
Proposals, including those on business issues specific to the issuer or those raised by shareholders of the issuer, are addressed on a case-by-case basis with a focus on the potential impact of the vote on shareholder value.
The Guidelines are applied in Canada, the United States, the United Kingdom, Ireland, Australia, and New Zealand. In all other markets, RBC GAM utilizes the local proxy voting guidelines of Institutional Shareholder Services Inc. (“ISS”).
For more information, please refer to the Guidelines.
The exercise of voting rights requires the ongoing review of the corporate governance and performance of management of an issuer, and the consideration of the potential impact of a vote on the value of the securities of the issuer held in our portfolios. In order to execute our fiduciary duty, RBC GAM accesses and utilizes research on management performance and corporate governance issues, drawn from portfolio manager and analyst due diligence, information provided by leading independent research firms and involvement in organizations such as the Canadian Coalition for Good Governance.
As part of the governance regime for our Funds, the Independent Review Committee oversees conflict of interest matters for the funds managed by RBC Global Asset Management Inc., including the RBC Funds, Phillips, Hager & North Funds, and RBC ETFs. This includes the review of the Funds' voting for Royal Bank of Canada shares. RBC GAM is a subsidiary of Royal Bank of Canada.
A decision to invest in an issuer is based in part on a portfolio manager's analysis of the performance of management and the corporate governance of the issuer. Since a decision to invest is generally an endorsement of management of the issuer, RBC GAM will generally vote with management on routine matters. However, since a portfolio manager must be focused on shareholder value on an ongoing basis, it is the responsibility of the portfolio manager to be aware of the potential investment implications of any issue on which security-holders are asked to vote.
RBC GAM has retained ISS, an independent firm with expertise in global proxy voting and corporate governance issues. RBC GAM has established the Guidelines which apply to the funds managed by RBC GAM, and segregated client accounts where we have been granted voting discretion. The Guidelines indicate the principles of corporate governance that we will generally support through the exercise of proxy votes.
While RBC GAM will generally vote proxies strictly in accordance with the Guidelines, there may be circumstances where it believes it is in the best interests of a fund or account to vote differently than the manner contemplated by the Guidelines. The ultimate decision as to the manner in which proxies will be voted rests with RBC GAM.
RBC GAM is a subsidiary of Royal Bank of Canada. Some of our Funds hold common shares of the Royal Bank. There is the potential for a conflict of interest between the interests of the Funds and the interests of RBC Global Asset Management Inc. or its employees in connection with the exercise of voting rights of the Funds attached to the Royal Bank shares. There is also the potential for a conflict of interest in connection with the exercise of the Funds' voting rights attached to the shares of another issuer, where the outcome of the vote may directly impact the price of Royal Bank shares.
In order to balance the interests of the Funds in exercising proxies with the desire to avoid the perception of a conflict of interest, RBC Global Asset Management Inc. has instituted procedures to help ensure that a Fund's proxy is voted:
- in accordance with the business judgment of the portfolio manager, uninfluenced by considerations other than the best interests of the Fund;
- free from any influence by the Royal Bank of Canada and without taking into account any consideration relevant to Royal Bank or any of its associates or affiliates.
The procedures for voting Royal Bank proxies, and for other issuers' proxies where there may be a conflict of interest, include escalation of the issue to the Independent Review Committee for its review and recommendation, although the responsibility for deciding how to vote the Funds' proxies and for exercising the vote remains with RBC Global Asset Management Inc.
Due to the volume and diversity of securities held by RBC GAM funds and accounts, we have retained ISS to provide administrative services as a proxy voting agent. In addition, ISS provides custom voting recommendations for proxies based on the Guidelines. RBC GAM subscribes to the research of both ISS and Glass, Lewis & Co. The research and benchmark policy voting recommendations from both proxy advisors may be considered as part of the proxy voting decision. However, the final voting decision is independent and voting authority rests solely with RBC GAM.
RBC GAM has adopted proxy voting procedures to ensure that proxies are in fact voted by ISS in accordance with the Guidelines.