Regulation and Investor Expectations: A corporate governance insight paper

Key corporate governance areas are examined to determine the extent of impact on UK and Irish companies, and the wider potential risks going into the 2020 AGM season.

Regulation and Investor Expectations: A white paper ahead of the 2020 AGM season

What should UK and Irish companies expect in the 2020 AGM season?

Over the past five years the focus on corporate governance has become particularly pronounced. With the 2018 iteration of the UK Corporate Governance Code and the capabilities of institutional investors increasing, 2019 saw significant change in a number of key areas.

An analysis of these key areas is examined by FTI Consulting and CGLytics to determine the extent of impact on UK and Irish companies, and the wider potential risks going into the 2020 AGM season.

Areas examined in the white paper include:

  • – Pension schemes
  • – Chair tenure
  • – Women in leadership positions
  • – Workforce engagement
  • – Remuneration policies
  • – Restricted shares
  • – ESG & Proxy Voting
  • – Overboarding

 

Download the report to learn more

DOWNLOAD THE REPORT

Latest Industry News, Views & Information

  • All
  • Blog

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

CEO Pay Continues to Increase, but Performance Often Lags

Shareholders, including large institutional investors, are continuing the growing momentum to link executive pay to company performance.

Shareholders, including large institutional investors, are continuing the growing momentum to link executive pay to company performance.

The UK Investment Association, which represents more than £7 trillion ($9 trillion) in assets, responded to investor dissent of FTSE350 companies not acting on executive pay concerns by issuing a new version of executive pay guidelines for disclosures in 2019. With a statement claiming, “companies need to demonstrate the link between pay and company performance. If they don’t, they should brace themselves for more shareholder revolts”. It is clear from this statement that executive pay and pay regimes are still hot topics.

In the US, the Council of Institutional Investors (CII) have also commented in the past on the “excessive complexity in U.S. executive pay plans, and questions on the effectiveness of approaches to pay-for performance.”

There are indeed vast disparities between compensation at select companies within the S&P500 index and their Total Shareholder Return (TSR).  CGLytics, as part of its S&P 500 CEO/Executive Compensation review, has developed an extremely granular view of CEO pay in comparison with performance for the index, helping to focus the debate on the issue.  The review examines different aspects of CEO pay among the constituents of the S&P 500index, including fixed v. variable compensation mix, overview of Pay vs. TSR, and a pay for performance review on a one- and three-year basis.

Realized Pay Correlates with Growth

CEOs received an average of $14,748,284 in Total Granted Compensation (TGC) and $19,276,476 in Total Realized Compensation (TRC) in 2018, the report shows.  Yet the average TSR for S&P 500 companies in 2018 was -6 percent. While this is an improvement from 2008, in which average TSR was -39 percent (average granted pay was $9,563,165 and average realized pay was $10,318,656), it is not a result that is likely to satisfy shareholders.

Indeed, the report indicates a trend that supports the need for performance-related incentives: Granted pay steadily increases from year to year while realized pay tends to coincide with absolute growth.

 

That need is further supported by the comparison of CEO pay with TSR. Naturally a zero-percent margin or zero disparity between a CEO’s realized pay and the company’s TSR is considered perfect alignment.

Historic number of shareholders oppose boards on executive pay

Companies such as Michael Kors Holdings Limited, NVIDIA Corporation, Constellation Brands, Inc., Goldman Sachs Group, and Capital One Financial Corporation all had CEOs rank in the top of their sectors for Total Realized Compensation in 2018. Yet, each of these companies also had a 2018 TSR in the bottom 20 percent of their industry.

Not surprisingly, this leads to shareholders questioning the pay practices of the board, and, in fact, opposition from shareholders for executive compensation issues is at an all-time high. In total, about six percent of director nominees have received less than 80 percent support, and 0.3 percent have not secured majority support. Eight percent of Say on Pay votes have secured less than 70 percent support, and two percent have not achieved majority support.

These numbers may seem small, but they are actually historic in significance compared with previous years’ levels of opposition for related AGM items. It is clear that large passive investors have become more hesitant to approve large one-time retention awards, unrestricted equity to executives, and executive incentive grant with no performance criteria.

To learn more about the Say on Pay landscape of the S&P 500 index, click here to download the full report.

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

Glass Lewis New Peer Group Methodology for Say on Pay

Due to Glass Lewis now using CGLytics data to power their Say on Pay recommendations and adapting their methodology to peer-based approach, what is the impact on companies’ pay for performance gradings?

Glass Lewis and CGLytics recently held a webinar to explain Glass Lewis’ new peer group methodology, taking effect from January 1 this year.

The new model implemented by Glass Lewis changes the way peer groups are determined for the Say on Pay recommendations in their proxy papers. During the webinar Glass Lewis’ Julian Hamud, Senior Director of Executive Compensation Research, explains:

“The new partnership with CGLytics has given the opportunity to provide better research for our clients. We are moving from a market-based approach to a proven peer-approach, which will improve our say on pay and compensation analysis.”

Hamud goes on to explain in detail the problems they encountered with the previous model including rigidity with no ability for manual adjustments to the peer algorithm when unique context of a company is justified, and large industry favoritism.

The impact on pay for performance grades and recommendations is also highlighted with a case study detailed by Aaron Bertinetti, Senior Vice President, Research and Engagement, Glass Lewis.

Using the example of Franklin Resources Annual General Meeting (AGM) being held on February 12, 2020,  Bertinetti shows the difference in pay for performance grades awarded using both the old and new Glass Lewis model and peer methodology. This example reveals an improved Grade C, whereas using the previous peer groups and model it would result in a Grade D.

Due to the change of Glass Lewis now using CGLytics data to power their Say on Pay recommendations, and adapting their methodology to peer-based approach, companies need to understand:

  • • How the Glass Lewis peer groups are now constructed,
  • • Why you and your company should care, and
  • • The benefits of the new peer group methodology.

 

To learn more, click here to watch the webinar by Glass Lewis and CGLytics.

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

CGLytics S&P 500 Executive Compensation Review

Executive Compensation Review: Which S&P 500 companies showed the greatest Pay for Performance misalignment and conservative practice in 2019?

S&P 500 Executive Compensation Review

Which S&P 500 companies showed the greatest Pay for Performance misalignment and conservative practice in 2019?

CGLytics has released its inaugural S&P 500 Executive Compensation Review. For companies and investors to be fully prepared with insights for the upcoming proxy season, it is imperative to know what concerned shareholders in 2019 and trends to look out for in 2020.

Download the CGLytics S&P 500 Executive Compensation Review and learn:

  • • What are the hottest topics surrounding executive compensation?
  • • Which companies saw the greatest pushback on their Say on Pay proposals?
  • • How does CEO granted and realized pay compare across industries?
  • • What to expect in the upcoming 2020 Proxy Season?
  • • Plus, a deep dive of companies in the materials sector and how they have aligned their pay for performance practices.

Download the report to learn more.

DOWNLOAD THE REPORT

Latest Industry News, Views & Information

  • All
  • Blog

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

Gender diversity in Spanish boardrooms

In Spain, the Comision Nacional de Mercado de Valores (CNMV), has put a series of changes to the corporate governance code of public companies under consultation. This is widely regarded as one of the most relevant proposed amendments relating to gender diversity in boardrooms.

In Spain, the Comision Nacional de Mercado de Valores (CNMV), has put a series of changes to the corporate governance code of public companies under consultation. This is widely regarded as one of the most relevant proposed amendments relating to gender diversity in boardrooms.

The new proposal is moving from a “mere” recommendation to a “direct” recommendation of a minimum of a 40% presence of females in boardrooms, significantly up from the current 30%. Besides, the CNMV also acknowledges that the current recommendation hasn’t been given enough attention by Spanish corporates. To address the issue, the new proposal recommends to include executive selection policies and processes in order to promote diversity of knowledge, experience and gender.

Considering these substantial and at the same time exciting changes, I decided to take a look at the current state of gender diversity in Spanish boardrooms, selecting both the IBEX35 and the remainder constituents of the IGBM. The result of the analysis is as follows:

Within the IBEX35, only 3 constituents already meet the new recommendation of the CNMV. Much worse is that only 43% meet the current threshold that has been introduced in 2015, and 20% have less than 20% of females on their board.

Within the rest of constituents of the IGBM (82 corporates), the situation is mixed:

  • • 2 corporates have already achieved real gender parity
  • • 3 corporates meet or exceed the new threshold of 40%
  • • 18 corporates are already above or meet the current recommendation
  • • 59 corporates are below or significantly below the current recommended 30%. Within this group, there are 11 companies which have no females at all in their boardrooms. Following Larry Fink’s latest letter, it is likely that these companies will be facing tougher environments and questioning from investors and stakeholders in the future, as well as higher financing costs.
chart2
Source: CGLytics Data and Analytics

Considering that the current recommendation was set by the CNMV in 2015, it is clear to see that companies will have a challenging future ahead if they want to meet the new recommendation for gender diversity, either via succession planning or boardroom expansions.

In view of the above, how can CGLytics support public corporates’ growing demand for board diversity and effective succession planning, at the required pace?

Whilst at the same time guarantee they achieve a well-balanced board, paramount to maintaining good corporate governance for long-term success?

CGLytics’ Nominations & Governance solution is the answer. Basically, Nominations is a strategic tool through which nomination committees and HR teams are empowered to maintain a pulse on how the board composition of their organisations measures up against peers, investors’ requirements and market standards.

Using Nominations & Governance, nomination committees and HR teams can benchmark the skillset of their boards versus peers and competitors, prepare for investors’ pressure related to board composition, identify the right skills needed now and in the future to best serve the board’s ability to make the right decisions and build a talent pipeline, getting instant access to 125.000+ (including over 20.000 females) global executive profiles of key decision-makers from listed companies, including comprehensive biographies containing employment, compensation, education and extracurricular activities, to search, find, engage and network with the best-quality prospects for boardroom recruitment and succession planning.

Please get in touch should you want to know more.

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

Request a Demo

About the Author

Francisco Lopez, Regional Sales Director

Francisco Lopez is a senior sales professional with two decades of successful experience in delivering growth to organizations and building long-lasting, profitable and sustainable relationships with clients and stakeholders worldwide. Francisco has developed his career in the market intelligence, information services and technologies industries, having fulfilled senior business development positions at blue-chip organizations such as Nielsen and GfK. Prior to joining CGLytics, Francisco was the global head of the Industrials sector at a global supplier of SaaS solutions for third-party risk & performance management. Francisco holds a Master’s degree in Business Administration from the Complutense University of Madrid.

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

About the author

Edna Frimpong: Lead EU Research Analyst

Edna holds a degree in LLM Finance and Law Programme from the Duisenberg School of Finance. In addition she completed her Bachelor’s Degree in Administration in Accra, Ghana. She gained work experience during her internships as a research analyst at Sustainalytics and as a finance and business development intern at Carnomise SAS.

Randstad make data-based decisions going into the AGM season

“At Randstad we are looking at the remuneration policy on a continual basis and it’s an important topic. Prior to the AGM we want to fully understand how all our stakeholders look at our remuneration policy. “

Randstad N.V. is a leading global HR services company. The company, which is headquartered in Diemen, Netherlands, provides work for more than 670,000 people
around the world each day.

With anything less than 80% of approval from shareholders on remuneration policies now deemed as negative by stakeholders (compared to 50% five years ago), and justification requirements increasing (inpart due to implementation of the Shareholders’ Right Directive II in Europe), companies’ remuneration policies are coming
under greater scrutiny.

Going into the next proxy season, Randstad wants to know which KPIs are being used by other companies to form their own opinion and they also want to compare executive remuneration against peers’ and understand how they will be perceived by proxy advisors like ISS and Glass Lewis.

Read the full story here and find out why Ranstad now goes into their AGMS with greater confidence and how they are able to make data-based decisions rather than assumptions.

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

Reflection on 2019 Executive Pay: Belgium and Luxembourg

In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

In the recent report published by PwC, using CGLytics data and analytics, the critical trends from the 2019 proxy season for Belgium and Luxembourg listed companies surrounding executive compensation were revealed.

Analysis of votes on remuneration items shows an increasing focus on making sure companies have sustainable value creation and a growing expectation of increased disclosure of financial and non-financial information. Shareholders have become more active over the past few years and the average CEO total realised compensation seems to show a decreasing trend and is adapting slowly to the evolution of the total shareholder return.

Belgian companies see more revolt on remuneration items

Belgium listed companies were seen to be more active compared to shareholders of Luxembourg listed companies. The data of the Selected Index of 49 companies indicates that Belgian listed companies were more affected by shareholder revolt on remuneration items than Luxembourg companies.

Shareholder Rights Directive 

Luxembourg successfully implementing SRD II, however Belgium failed to transpose the revised Shareholders Rights Directive to national law by the 10 June 2019 cutoff. Draft law implementing SRD II is being discussed in the Belgian Chamber of Representatives

The new Belgian Corporate Governance Code

The report sheds light on the new Belgian 2020 Corporate Governance Code (‘CGC’) compared to the 2009 CGC, which includes positive steps such as: 

  • • A cap being placed on short-term variable remuneration awarded to executive management; and 
  • • The principle that non-executive board members should receive part of their remuneration in the form of shares in the company.
  • • Particular attention to be paid to diversity, talent development and succession planning

 

Compensation design: Ratio of fixed versus variable remuneration

The report reveals that there is an increasing focus on long-term sustainable value creation.

The proportion of short-term incentives (STI) decreased from 2013 and continued to stagnate over the past few years. Next year’s analysis will tell whether the recent regulatory developments (the introduction of a cap on STI in the 2020 Belgian Corporate Governance Code) will impact the proportion of pay components.

 

To learn more about:

  • • The implementation of the revised Shareholder Rights Directive (SRD II) into Belgian and Luxembourg law,
  • • Evolution of votes on remuneration items,
  • • Shareholder revolt seen in 2019,
  • • Detailed insights into the CEO compensation mix (Base Salary, STIs, LTIs), and
  • • CEO Pay for Performance alignment of the Selected Index

 

Download the report here

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

Corporate governance and executive pay. Reflection on the 2019 proxy season. A joint report with PwC

This report by PwC Belgium and CGLytics takes a closer look at votes on remuneration items and reviews the critical trends of the 2019 voting results in Belgium and Luxembourg. Download the report to better prepare for the 2020 proxy season.

Corporate Governance and Executive Pay. A joint report with PwC

The 2019 proxy season has come to a close. This report by PwC Belgium and CGLytics takes a closer look at votes on remuneration items and reviews the critical trends of the 2019 voting results in Belgium and Luxembourg.

Download the report to better prepare for the 2020 proxy season and learn about:

  • • The 2020 Belgian Corporate Governance Code and how it has changed since 2009
  • • The effects of the implementation of the revised Shareholder Rights Directive (SRD II) into national law
  • • Feedback and results of the 2019 general meetings
  • • Remuneration – A Shareholders Revolt?
  • • The evolution of base salary, short term incentives and long term incentives
  • • Key governance themes for boards, such as Pay-for-Performance and board diversity

DOWNLOAD THE REPORT

Latest Industry News, Views & Information

  • All
  • Blog

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"

Remuneration policy: Directors reward attracts more and more attention

A well-founded remuneration policy is no longer optional. The new European Shareholder Rights Directive demands transparency around remuneration of directors.

At many of the annual shareholders meetings, the remuneration of the directors will soon be prominently on the agenda. It is one of the most important governance issues for companies. In 2019, companies already received a taste of the increasing interest in this topic of shareholders and employees. We expect that this attention will only increase. It is not only shareholders who look critically at the remuneration of the directors and everything that is related to it. The legislator is also alert. De new European Shareholder Rights Directive (SRD II) demands the transparency of the company around the remuneration of directors and senior managers. The reward must also be in line with the long-term value creation.

Active involvement

An increasing number of directors, supervisors renumeration committees and investors are using corporate governance analytics to review remuneration policy. That helps determine an adequate reward structure. And overseeing it. The wide-ranging discussion on Shell-CEO’s remuneration, Ben van Beurden, illustrates that. It more than doubled to € 20.1 million in 2018. Important detail: the data shows that his wages are 143 times higher than the average wage of the British staff of Shell. At Shell’s most recent meeting, shareholders had the chance to vote on the pay package, 10 percent of the shareholders voted against.

Equal to employees

We also see how stakeholders can appreciate a long-term remuneration policy. For example, insurer ASR came into the news positively when it wanted to permanently put an end to bonuses and pay in shares for the board. After the agreement with the shareholders, it is also stipulated that there are no variable remuneration schemes for the members of the Board of Directors, thus the remuneration policy is equal to that of the other employees in the company.

Effect new law

It is clear that companies need to be aware of the effects of their remuneration policy. We see a positive effect if companies do talk about the remuneration policy with shareholders and other stakeholders before the general meeting of shareholders, underpinning this with data. We see signals that this reduces the number of oppositions to the proposed policy.

A well-founded remuneration policy is no longer optional. Dutch companies must draw up their remuneration reporting for the 2019 financial year in line with the new requirements of SRD II. This includes a comprehensive overview of the remuneration and benefits of each individual director covered by the advisory vote of shareholders. In addition, Dutch listed companies need to explain how their salary strategy connects with the long-term goals. The new law also gives shareholders more participation and influence. Since the introduction of the law, companies need 75 percent of shareholders’ votes to adapt their salary strategy. This was previously 50 percent. All the more reason for companies – also non-listed ones – to put their remuneration policy into perspective.

For more information about how CGLytics’ executive compensation data and tools informs companies of how they compare to their peers reumuneration practices click here.

About the Author

Aniel Mahabier: CEO and founder of CGLytics

Mahabier interviews and writes for Management Scope about the remuneration of directors and corporate governance analytics. This blog was published in Management Scope.

Latest Industry News, Views & Information

Understanding ESG & Annual Incentive Plan

Understanding ESG & Annual Incentive Plan ESG refers to a series of environmental, social and governance criteria taken into consideration by the funds during the investing process. Investing in ESG funds allows shareholders to support companies in transition, that wish to act and develop in a more sustainable and responsible manner. In practice, many indicators … Continue reading “Understanding ESG & Annual Incentive Plan”

Pay for Performance: The Largest Institutional Investors’ View

Pay for Performance: The Largest Institutional Investors’ View   Executive compensation has been one of the trickiest issues within the corporate governance space as of late. Across the board, there seems to be no end in sight to finding the perfect compensation package or philosophy for corporate executives. In this article, we will discuss the … Continue reading “Pay for Performance: The Largest Institutional Investors’ View”

How to design your peer group for compensation benchmarking

How to design your peer group for compensation benchmarking   Given the scrutiny on executive compensation in recent years, it is critical to make sure that your company’s executive pay reflects its performance and aligns with the market. Therefore, it is essential for companies to have an appropriate peer group for performance benchmarking, compensation program … Continue reading "How to design your peer group for compensation benchmarking"