GOOD DIRECTORS? Deborah Gilshan RPMI Railpen Investments Local Authority Pension Fund Forum, 5 th December 2013

Three Ghosts of Christmas

The Good, the Bad and the ……….  The Good Accountable to shareholders and engage Effective Robust oversight of management Diversity of insights, skills and experiences Focus on culture and values The Board performs  The Bad Not accountable to shareholders and do not engage Lack of independent oversight Ineffective The Board does not perform  The …………………? No clear definition of the third type of directors … but you know it when you see it!

UK USA Best practice codes:No codes of governance Companies Shareholders 10 years of Say on Pay3 years of Say on Pay Moving to Binding voteAdvisory voteBoard structure: Independent ChairCombined Chair & CEO plus Lead Director Director accountability:Director accountability? Engagement withOutside directors tend NOT to Shareholders engage (but this is changing)

A Call on U.S. Independent Directors to Develop Shareholder Engagement Strategies  Why is dialogue between shareholders and independent directors necessary? Establish respect and understanding Create a culture of no surprises Assess the quality and independence of directors “ … no one else can better represent the decisions that have been made than the individual(s) who made them.”  What is being discussed? Engagement with Independent Chairman or Lead Director Chair of the Compensation Committee Chair of the Nominations & Corporate Governance Committee  The benefits: more effective boards and more informed shareholders  Next steps ………… PGGM and RPMI Railpen Investments, 24 th April 2013, published on The Harvard Law School Forum on Corporate Governance and Financial Regulation.

“ As there have been no substantial changes to compensation structure, it is our opinion that the Board of our company is failing in its duties to shareholders by continuing to endorse a pay structure that a majority of shareholders do not support. It is not in the interests of shareholders to elect a Board that interprets the defeat of the advisory vote on pay as a mandate to do nothing and we must question whether re-electing a Board that does not respond to shareholders is a Board that we wish to have continue in our service…… We stress that our concerns are not limited to executive compensation structures but extend to wider issues of proper board accountability and in whose interests the Board of Oracle is acting.” Letter to Oracle Corporation shareholders from CalSTRs, PGGM and RPMI Railpen 28 th November 2013

GOOD DIRECTORS? Deborah Gilshan RPMI Railpen Investments Local Authority Pension Fund Forum, 5 th December 2013