Proxy firm Ethos targets Swiss directors over human rights and environmental damage

Influential advisor represents investors with 3% of Swiss stock market

Swiss proxy advisor Ethos has unveiled updated voting guidelines that include new criteria for recommending against discharge of Swiss board directors if there is evidence that the companies they oversee have violated human rights or, through an accident, damaged the environment.

In Switzerland, as in Germany, shareholder votes on discharge of the board and management establish whether investors have confidence in the executives. Should company executives lose the discharge vote or even if there is significant opposition to them, their removal is possible.

Indeed, last June Anshu Jain was asked to step down as Deutsche Bank’s Chief Executive after shareholders had voted almost 40% to deny him discharge at the bank’s annual general meeting (AGM). The shareholders were angry at a series of scandals that had cost Deutsche billions of euros and damaged its reputation.

Ethos has recommended for years that Swiss directors be denied discharge if they are found to be incompetent, convicted of a crime or if the company’s financial situation has greatly deteriorated.

But heading into the Swiss 2016 proxy season, the criteria for which Ethos will recommend discharge have been expanded.For example, Ethos will recommend against discharging board directors if the company faces “well-grounded accusations of systemic violations of the rights of local communities and the company refuses a dialogue with these communities.” A serious environmental accident or, again, “well-grounded accusations” of employee rights violations along the supply chain are other criteria for advocating against discharge. And, Ethos will not discharge boards whose decisions constitute “major environmental or social risk.”

Ethos’ voting guidelines for 2016 also reaffirmed its long-held support of shareholder democracy (i.e. one share, one vote) in most cases as well as its opposition to excessive executive pay. Excessive was defined as that which is significantly higher than the level approved by shareholders at the AGM.

Founded in 1997, Geneva-based Ethos represents the interests of 220 Swiss pension schemes and foundations. They in turn own CHF37bn (€34bn) worth of Swiss stock – or 3% of the firms’ outstanding share capital.

Beyond voting recommendations, proxy voting and engagement, Ethos offers institutional clients in Switzerland access to a range of sustainable investment funds. Link