富达国际：2022年中国公司投后管理报告_22页_6mb

Summary of the 2022 China Stewardship Report

Core Content

The 2022 China Stewardship Report is a joint publication by Fidelity International and ZD Proxy Shareholder Services, highlighting the evolving landscape of shareholder stewardship in China's capital markets. The report documents the progress made in recent years, emphasizing the growing role of institutional investors in promoting corporate governance and sustainable practices.

Main Points

1. Overview of Fidelity International and ZD Proxy

• Fidelity International is a global investment firm with over 2.8 million customers and $613.3 billion in total assets, operating in more than 25 locations.
• ZD Proxy Shareholder Services, founded in 2016, is the first domestic proxy advisory firm in China. It has advised over 800 A-share listed companies and oversees $20 trillion in global assets.
• The two organizations collaborate to provide insights into shareholder voting and engagement practices in China, particularly in the A-share market.

2. Evolution of Shareholder Stewardship in China

• Shareholder stewardship is becoming more mainstream in China, driven by regulatory support and growing institutional participation.
• The Covid-19 pandemic led to a shift towards virtual shareholder meetings, which helped maintain voter turnout despite travel restrictions.
• Institutional ownership in the A-share market has increased, and the dominance of controlling shareholders is gradually waning, creating more opportunities for active stewardship.

3. Trends in Shareholder Voting

• The number of shareholder meetings and resolutions has remained stable, with an average of 3-4 meetings per year for A-share companies.
• Minority shareholder participation has increased, with a 27.5% turnout rate in 2021, up from 26.2% in 2019.
• Voting against resolutions has become more common, with the number of resolutions facing more than 10% "against" or "abstain" votes rising from 1,070 (2017-2019) to 1,831 (2020-2022H1).
• Non-controlled companies saw the highest minority shareholder participation, at 37.8% in 2021.
• Environmental and social resolutions remain underrepresented, while governance-related proposals have increased.

4. Key Stewardship Initiatives

• Fidelity International is a strong advocate of ESG investing and has implemented systematic voting processes since mid-2021.
• ZD Proxy plays a critical role in advising institutional investors on how to exercise their voting rights effectively.
• Corporate governance reforms have gained traction, with companies improving internal policies and increasing shareholder communication.
• Regulatory support has been pivotal, including the Shenzhen Stock Exchange requiring ESG performance disclosure and the CBIRC mandating ESG standards in investment processes.

5. Case Studies

Case Study 1: Lopsided Stock Incentive Plan

• A home appliance company proposed an employee stock ownership plan (ESOP) that disproportionately benefited the outgoing chairperson.
• ZD advised against the plan due to its lack of incentives for new executives and overconcentration of rewards.
• The plan was approved, despite opposition, due to a highly concentrated shareholding structure.

Case Study 2: Taking Aim at All-Male Boards

• Fidelity promotes gender diversity in corporate governance and uses voting as a tool to encourage change.
• In one instance, a large Chinese food and beverage company was advised to improve gender representation on its board.
• Despite initial verbal commitments, the company failed to act, leading Fidelity to vote against the re-election of directors.
• The company eventually appointed a female director in December 2021, indicating progress in gender diversity.

Case Study 3: Questioning Donations

• A clinic operator was criticized for its lack of transparency in donation policies.
• The company had been donating 15% of its net profit to a foundation linked to a senior executive without shareholder approval.
• ZD advised minority shareholders to vote against a proposal to revise the corporate charter without changing the donation policy.
• Despite the opposition, the proposal was approved due to the concentrated ownership of the company.

Case Study 4: Small Investors Matter

• A tech company proposed an employee stock ownership plan for a subsidiary, which would have given the controlling shareholder an undisclosed additional stake.
• ZD advised shareholders to vote against the plan due to its large scale, low pricing, and potential conflict of interest.
• The company revised the plan and excluded the controlling shareholder before putting it to a vote, showing the impact of minority shareholder engagement.

Key Findings

• Minority shareholder participation is increasing, though still lagging behind Hong Kong-listed firms.
• ESG disclosure is improving, with 262 A-share companies publishing ESG reports by the end of 2022.
• Voting activity is becoming more common, especially on governance-related issues.
• Regulatory support is a key driver of stewardship development, with new guidelines promoting ESG transparency and responsible investing.
• Collaboration between investors, companies, and regulators is essential for advancing corporate governance and sustainable growth in China.

Conclusion

The 2022 China Stewardship Report underscores the positive but gradual progress in shareholder engagement and ESG practices in China. While there are still challenges, such as low minority participation and limited ESG-related proposals, the report highlights that small steps are contributing to meaningful change. Fidelity International and ZD Proxy remain committed to promoting responsible investing and improving corporate governance through active stewardship and dialogue.