ROBECO CAST OVER 3000 VOTES IN THE SECOND QUARTER

In the second quarter of 2004 Robeco has cast 3149 votes on 263 meetings world wide, via proxy voting. In half of all meetings at least one vote was cast against management's advice. Most important issues were the issuance of equity without pre-emptive rights, discharge of the board, remuneration of directors and election of non-independent non-executive directors. 

 

The assets, for which Robeco actively voted in 2004, represent over 10 billion euros. Among these assets are mutual funds, institutional funds as well as discretionary mandates. Robeco expects a significant increase in the 'assets under voting' for next year's voting season.

 

The second quarter typically represents the brunt of voting. In the United States and in Europe most shareholder meetings are held in April and May, while in Japan almost all meetings take place in one week in June.

 

In the United States, where the subject has been topical for a longer time, the governance of companies has further improved. Data of Institutional Shareholder Services (ISS) shows that ISS recommended withholding support from 32% of director nominees. In 2002 this percentage was 52%. Robeco withhold support from 54 nominees worldwide in the second quarter.

 

In addition to this, the amount of shareholder proposals that made it to the ballot dropped by 5% this season. This means companies are listening to shareholders and before the AGM already implement positive changes.

Furthermore it seems that compensation plans are also designed more in line with shareholders' views. In 2003 ISS urged to vote against 25% of option plans. This compares to 40% in 2002.  It is up to shareholders to monitor and make sure this positive trend is continued! Worldwide Robeco voted against proposed option plans in 33 cases.

In judging option plans, the sector and country averages, local customs as well as possible dilution is taken into account. It is also important that rewards should be related to targets based on long term shareholder value creation.

 

Worth mentioning is the management of a number of companies that asked for adjournment of the meeting, right before an important voting item. Management could use this time to gain support from opponents for the following important item on the agenda. In these cases Robeco voted against adjournment of the meeting.

 

Within Europe, the Netherlands specifically gained attention. On the recommendation of Tabaksblat committee, corporate governance was subject of discussion at most Dutch shareholder meetings. Most companies have taken the effort to scrutinize their corporate governance structures. Research of IRIS shows that many Dutch companies recently implemented significant improvements.

 

In the Netherlands, two meetings stood out; Royal Dutch and Ahold. Both companies had irregularities in their operations, which led to an improper reflection of reality. Discharge of management was for both companies an important agenda item. Many shareholders were not willing to grant discharge to the board. In case of Ahold, the item was removed from the agenda so no discharge was granted. In case of Royal Dutch, management was discharged despite the fact that 40% of shareholders voted against. Robeco was among those shareholders that voted against discharge of the board in case of Royal Dutch.

 

Another important issue is our votes against giving management the discretion to issue equity or equity-linked products without pre-emptive rights. In case of approval, this would enable management to issue equity to befriended parties in case of a take-over or at a discount. This hurts shareholders' rights and Robeco voted against these propositions, as for instance was the case with ING and KPN.

In the United Kingdom good corporate governance has been a topic of interest for long time. As a result the governance of British companies is on average of higher quality than of other European companies. This is demonstrated by the relatively low percentage of meetings in which Robeco voted against management's advice. Robeco voted against management on one or more proposals in less than 10% of British shareholder meetings, compared to 50% of world wide meetings. This low percentage is also a consequence of the withdrawal of several controversial items after pressure of large institutional investors before the meeting.

 

In Switzerland, one company stood out negatively by proposing to shareholders before the meeting to support management in case of any, unknown shareholder motion during the meeting. This item was removed from the agenda in advance of the meeting.

 

In Japan Robeco has regularly voted against proposals to give management unlimited rights to buy back shares at their own discretion. Even though share buy backs usually are in the interest of shareholders, this proposal does limit shareholders' rights. Furthermore there are instances in which this could even be negative for shareholders. For example if there is a big shareholder and free float is very limited. Buying back shares reduces liquidity further and might even lead to a creeping take-over. It is the opinion of Robeco that shareholders should be able to prolong their consent with a buy back program every year.

 

In Japan the agenda's often contained a proposal to assign retirement bonuses to non-executive (independent) directors or auditors. Because it is not customary to pay retirement bonuses to non-executives, Robeco voted against these items.

 

Robeco also exercises its voting rights in emerging markets. For instance in Russia, where Robeco voted against the management of oil company Surgutneftegaz that asked approval for a transaction without giving further specifics about the counterparty, the date or nature of the transaction.

 

Especially Chinese management, among others the management of China Mobile, frequently proposed to issue equity without pre-emptive rights. For the same reasons as for Dutch companies, Robeco voted against these proposals to prevent dilution of ownership.

 

In several cases Robeco withheld support from nominees up for election. Main reasons were non-independence of supervisors, non-compliance with shareholder resolutions carried by majority vote or simply not enough information on board composition.

 

The category good corporate citizenship contains mostly shareholder proposals. Robeco is in favor of good corporate citizenship. Companies should behave as responsible citizens.  Only then long term continuity of companies can be warranted. Some shareholder proposals however demand too costly, too far stretching reports, too stringent limitation of remuneration policies or require shareholders to vote on issues that are really related to day-to-day management. Robeco voted against such issues, but only after taking the company's track record on social responsibility and its risk profile into careful consideration. Some issues require government regulation rather than shareholder's interference.  In case of insufficient environmental reporting and the associated future risks for the company going forward, Robeco voted in favor of publication of such a report.

 

Robeco provides discretionary asset management products and services, as well as a complete range of mutual funds to a large number of institutional and retail clients worldwide. Robeco's product range encompasses fixed-income and equity investments, as well as balanced accounts, money-market funds and alternative investments.

 

Robeco distributes its funds for the retail market directly, and through other financial institutions. Several of its mutual funds, including the flagship Robeco N.V., are listed on major European stock exchanges such as Amsterdam, Paris, Frankfurt and London.

 

As well as from its head office in Rotterdam, Robeco services its clients from its European offices in Belgium, France, Luxembourg, Switzerland, Germany and Spain. In the United States, Robeco has offices in New York, Chicago and San Francisco (Weiss, Peck & Greer), Boston (Boston Partners), White Plains (Sage Capital Management) and Toledo (Harbor Capital Advisors).

 

Robeco is the center for asset management with full operational independence within the Rabobank Group. The combination of the highest credit ratings from the major international rating agencies and the highest Sustainability Cluster Score within the banking sector reflects the high added value Rabobank has always offered its investors, members, clients and employees.

 

Robeco's corporate-governance philosophy is based on the combination of two academic theories: the principal-agent theory and the public choice theory. This philosophy translates into principles of good governance. Corporate governance is about the division of power between shareholders and managers. A corporate governance system will be successful when the incentive and power structures are shaped to protect the property rights of shareholders. Robeco applies the following principles in considering how to cast its votes.

 

Information distributed by the company should be transparent, relevant, and reliable and give an accurate and fair picture of the company's operations.

 

Information for shareholders is to be distributed in a timely fashion and evenly, and made accessible to everyone at low cost.

 

Each shareholder has the right to vote on all important matters in a convenient and economical way.

 

Each share represents voting power proportional to its economic stake.

 

Align the remuneration packages of board members, executive and non-executive, with shareholders' interests as measured by the company's long-term financial performance.

 

The non-executive board members represent the shareholders and act in their best interests.

 

Display and encourage good corporate citizenship.

 

By means of new technologies the cost of voting are lowered so much that shareholders like Robeco now efficiently can vote their shares. Robeco primarily votes its shares electronically and by proxy.

 

For a more comprehensive elaboration on the above mentioned principles please visit Robeco's website at www.robeco.com, About Robeco, Services, Corporate Governance and click the link in the text under "Corporate Governance Policy".