During the 2018 Dutch proxy season, shareholders actively engaged in a range of governance matters, with CEO remuneration remaining a key focus for stakeholders and widely publicised by the media. And, as always, the upcoming 2019 proxy season is likely to be influenced by happenings from the previous year.

As it was the first year that Dutch companies had to comply with the revised Dutch Corporate Governance Code 2016, long-term value creation and CEO-to-average employee pay ratios were reported and picked up by the media. Alignment between CEO pay and performance was again taken into account, and CGLytics’ AEX Proxy Review revealed 44% of companies showed a misalignment between CEO pay and performance over a one year period.

Key themes that dominated the 2018 proxy season that will again be in the spotlight in 2019:

Long-term value creation

Investors will be looking for transparency on how companies’ strategies support long-term value creation, including evaluating the merits of companies’ goals, the internal culture and how they plan to minimise exposure to governance risks.

CEO-to-employee pay ratios

As this became mandatory, companies methodology on measuring CEO-to-average-employee pay ratios varied widely, indicating a more uniformed reporting method is required for fair and accurate measurement. Companies that displayed a large gap were called out by the media in 2018, which should be a consideration for Dutch companies going forward. Companies should expect and be ready to disclose and discuss reported figures.

CEO pay for performance alignment

CGLytics Pay for Performance Study conducted on the AEX 25 companies revealed 44% of companies were misaligned over one year, and 38% were misaligned over a three-year basis. Although these numbers appear significant, it was perceived that there was improvement in the balancing of compensation of AEX CEO’s over the long-term.

The reporting of CEO pay for performance will continue to be a hot topic in the 2019 proxy season, and companies can expect pressure from media, public and shareholders if any extreme executive pay policies and practices are revealed.

Getting ready for the upcoming season

Boards need to be fully prepared to engage during the upcoming proxy season. They must be equally, if not better, informed as shareholders, so they can engage constructively and avoid any reputational risks. Having access to the same intelligence and benchmarking tools as proxy advisors and investors is imperative to prepare.

Click here to download your copy of the CGLytics’ 2018 AEX Proxy Review: Shining the light on pay practices

Aniel Mahabier

CGLytics

Latest Industry News, Views & Information

Are companies incorporating ESG factors into executive remuneration?

The last decade has seen a steady increase in the focus on Environmental, Social and Governance (ESG) factors from a range of stakeholders and that growing scrutiny appears to have reached a crescendo over the past 18 months. Only the topic of executive remuneration continues to be discussed as frequently as ESG.

FTI & CGLytics have conducted an analysis to determine whether those two topics are increasingly converging. Download the white paper to find out more.

How to take testing of equity-based compensation plans into your own hands?

Download the whitepaper and learn more about equity-based compensation plan best practice and how the ECM is supporting decision-making for Say on Pay.

Deutsche Bank: How CGLytics Tools Inform Glass Lewis’ Pay and Governance Analysis

Glass Lewis’ assessment of executive remuneration reflects a balance of quantitative and qualitative considerations, with CGLytics’ suite of tools underpinning the quantitative component. In the following discussion, we review the quantitative assessment with respect to Deutsche Bank, using CGLytics’ analytical tools.

Access Glass Lewis' Equity Compensation Model

Now available via CGLytics

Use the same 11 key criteria as leading proxy advisor Glass Lewis to assess U.S. equity based compensation plans and their overall favorability.

Join the webinar by Glass Lewis to learn more

Register now