Australia's First Super placed Bermuda-based Orbis Investment Advisory on watch, citing concerns about Orbis' stewardship oversight of portfolio company XPO Logistics Inc.
Bill Watson, CEO of the A$3.3 billion ($2.3 billion) Melbourne-based super fund, in a telephone interview, said disappointment with Orbis' response to board member concerns about the money manager's votes on a handful of governance issues concerning XPO — a Greenwich, Conn.-based transportation and logistics services provider — drove the decision.
A First Super news release Monday cited Orbis' votes against a shareholder resolution calling for a split of the chairman and CEO roles, as well as shareholder proposals calling for sustainability reporting and policies to strengthen prevention of workplace sexual harassment.
Concerns about exposure to "significant legal, regulatory and reputational risks in North America and Europe (have left First Super) reconsidering its long-standing investment with Orbis," Mr. Watson said in the news release.
The South African firm has managed an international equity mandate for First Super since July 2010. At the June 30 close of First Super's latest financial year, the fund reported A$145.9 million invested in the Orbis Global Equity fund, up from A$72.5 million as of June 30, 2011.
A spokesman for Orbis didn't immediately respond to requests for comment.
In the news release, Mr. Watson called XPO Logistics an "interesting case study to illustrate the proposition that firms who lag on ESG imperatives can often constitute a poor investment over the long term."
On governance-related issues, the company has garnered both accolades and brickbats in recent years, with labor organizations highlighting cases of sexual harassment and mistreatment of employees but Newsweek magazine, in its inaugural ranking this month of the 300 most responsible companies in the U.S., pegging XPO Logistics at 95.
Orbis is the largest institutional shareholder of New York Stock Exchange-listed XPO, holding about 23% of outstanding shares.
The First Super news release called the fund's announcement about putting Orbis on watch an example of its "active approach to ESG issues across its investment portfolio."
In the interview, Mr. Watson said, "Orbis understands our position (and) we'll be waiting to see what they do with forthcoming annual general meetings, resolutions" and so on.