The shareholder dialogue programme was launched in May 2004 at the instigation of Ethos and two pension funds. Two decades later, 186 pension funds have entrusted Ethos with the task of conducting a continuous and constructive dialogue on governance and sustainability issues with the largest listed companies in Switzerland, in order to encourage them to improve their practices.
It was 18 May 2004. The pension fund of the city of Zurich and the pension fund of the staff of the public medical establishments of the canton of Geneva (now part of CPEG), both members of the Ethos Foundation, entrusted Ethos Services "with the task of seeking dialogue with companies to raise their awareness of specific issues, with the aim of thereby sustainably increasing the value of these companies". The Ethos Engagement Pool (EEP) Switzerland was born.
The concept was innovative at the time and remains unique in continental Europe 20 years later: institutional investors, particularly with pension funds, decided to form a 'pool' to promote best practice in environmental, social and governance (ESG) issues among the companies in which they invest. In this case, the 100 (then 150) largest listed companies in Switzerland.
Since then, the number of members of this shareholder dialogue programme has grown steadily. There were 50 members in 2010, 100 in 2014 and 150 in 2021. Today, the EEP Switzerland has 186 members, representing approximately CHF 360 billion in assets under management, of which around 10-15% is invested in shares of companies listed in Switzerland. This success gives the members of the pool greater weight, legitimacy and influence in their dialogue with companies on key sustainability issues.
Ethos and the members of the pool have always considered this discreet dialogue to be essential and complementary to the exercise of voting rights. Indeed, the rejection of items at general meetings should be systematically discussed and explained to companies.
An ever-increasing number of topics and issues
Over the years, the topics for dialogue have also increased: remuneration, governance, diversity, shareholders' rights, environmental and social reporting, codes of conduct, respect for human rights, climate change, biodiversity and fiscal responsibility. The members of the pool meet once a year to suggest and define new topics for dialogue, such as digital responsibility, which has been defined as a new priority topic back in 2020.
The reaction of companies has also changed since 2004. “Initially, companies were rather reluctant, feeling that it was not up to their shareholders to raise sustainability and governance issues,” recalls Vincent Kaufmann, CEO of Ethos. “Some even suggested that unhappy shareholders should just sell their shares. But over time, most companies have come to realise that it is in their interest to engage in a proactive dialogue with their shareholders, and it is now often the companies themselves that seek dialogue in order to anticipate their shareholders’ expectations as best they can.”
It is clear that the shareholder dialogue has proved its worth over the past 20 years. The governance of companies listed in Switzerland has improved considerably, with far fewer combined mandates (Chair/CEO), higher levels of independence and greater diversity on boards, both in terms of gender and skills. Transparency and corporate reporting have also improved be it related to remuneration or sustainability issues. Ethos and the members of the pool have also demonstrated their ability to intensify the dialogue, whether when supporting Sika's independence between 2014 and 2018 or by influencing companies towards more sustainable way by filing shareholder resolutions as part of the "Stop Chair/CEO", "Say on Pay" or, more recently, "Say on Climate" campaigns.
20 years after the creation of the pool, the shareholder dialogue has finally been recognised as an integral part of active ownership by being included, alongside voting at general meetings, among the nine principles of the "Swiss Stewardship Code", a set of guidelines published in October 2023 by Swiss Sustainable Finance and AMAS.
