10. Exercising Voting Rights Vincent Kaufmann CEO, Ethos Foundation
For a socially responsible investor, being able to exercise voting rights at annual general meetings is paramount. In Switzerland, voting is now a legal obligation for pension schemes with direct equity investments in Swiss-listed companies. Due to the growth of passive management, institutional investors have become captive shareholders, making it more important than ever that voting rights be systematically and consistently exercised in the long-term interest of all relevant stakeholders. Voting implies fostering good governance and social responsibility, thus enhancing a company’s chance of long-term success.
Legal Responsibility and Obligation to Exercise Voting Rights in Switzerland According to the Swiss Federal Ordinance against Excessive Remuneration with respect to Listed Stock Companies (ORAb),1 pension schemes subject to the Vested Benefits Act are obliged to vote at the annual general meetings (AGMs) of Swiss-listed stock companies and to disclose information annually on their voting position (ORAb, Articles 22 and 23). When these pension funds hold the shares indirectly in the form of investment funds, voting and disclosure rights must only be exercised if such shares are held in a single investor fund in accordance with Article 7, paragraph 3 of the Swiss Federal Act on Collective Investment Schemes, or as part of discretionary mandates. For foreign equities owned directly or through mandates, the responsibility for exercising voting rights lies with the final beneficiary and is on a voluntary basis. When companies are domiciled outside Switzerland, investors are not legally obliged to exercise their voting rights. For collective capital investments in Swiss or international equities, the responsibility to exercise voting rights lies with the fund’s management, which can however choose to delegate this responsibility, which should be captured in a transparent manner in the fund contract. Article 34, paragraph 3 of the Ordinance on Collective Investment Schemes (OPCC)2 clearly states that funds are obliged to “ensure a degree of transparency … such that investors are in a position to comprehend the manner in which such voting rights are exercised.” Investors in collective investment schemes therefore have the right to question the fund management company about the exercise of voting
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