GEO Chapter meeting - AGM Season, UK Corporate Governance Update Andrew Ninian, Director, Corporate Governance and Engagement 11 June Month YEARPresentation title runs here [Go to Header & Footer to edit this text]1

AGENDA The Investment Association The 2014 and 2015 AGM seasons Where next – key issues to consider? Expectation of members – drive for simplicity 2

THE INVESTMENT ASSOCIATION The Investment Association represents the UK investment management industry Our members manage over £5 trillion of assets on behalf of UK and overseas clients - about 30% of the UK stock market On 30 June 2014, a merger was completed between the Investment Affairs Division of the Association of British Insurers and the Investment Management Association The purpose was to create an organisation that covers the full spectrum of investment management activity with a single, stronger and more coherent voice The IMA was renamed The Investment Association in January 2015 The Institutional Voting Information Service (IVIS) and guidance previously issued by the ABI is now part of The Investment Association

THE 2014 AGM SEASON A successful start to the new regulations: −Majority of policies approved with very high level of acceptance −Increased engagement – which brought about change – limiting discretion, change in the policy start date and use of assurances We highlighted the following issues for companies to consider ahead of the 2015 AGM season: −Improving the engagement process −Recommending retrospective disclosure of performance targets −Disclosure of public assurances −Disclosure of policy reports 4

THE 2015 AGM SEASON As with last year - vast majority of companies achieved high level of approval of their remuneration report Although there were a number of companies where issues led to a significant vote against: −Bonus disclosures – improved but still significant number of companies failing to meet investor expectations −Increases to quantum −Leaver and joining arrangements Significant number of companies sought re-approval of their policies 5

2015 AGM SEASON Key issues for members remain: −Quantum – basic salary increases and increased gearing of variable pay −Level of remuneration for threshold performance −Length of performance and holding period −Retrospective changes to performance conditions −Quality of reporting – link to business strategy and Chairman’s introduction 6

WHERE NEXT – KEY REGULATORY PERSPECTIVES TO CONSIDER? The new Conservative Government Shareholder Rights Directive −European Commission approach aligned with UK model −Outcomes still unclear −Outstanding issues with European Parliament e.g. ratios/employees on remuneration committees Updated UK Corporate Governance Code −Malus and Clawback −Significant negative votes at AGMs −Directors’ shareholdings, post-leaving 7

EXPECTATION OF MEMBERS – DRIVE FOR SIMPLICITY Is the current system for Executive Remuneration too complex? What are the ideals? −Key areas for consideration −One bonus, one LTIP −Better linkage of pay to strategy −Better performance disclosures −Executive contracts −When is consultation with investors needed? Time for fresh thinking on executive pay? 8

9 CONTACT: Andrew Ninian