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AGM Season 2017: The Trends & What They Tell Us About Shareholder Expectations & Remuneration
Ingo Speich Head of Sustainability & Engagement and Senior Portfolio Manager, Union Investment
Matthias Nau Senior Account Manager, Georgeson
Daniele Vitale Corporate Governance Manager, Georgeson
Introduction to Georgeson
Founded in 1935 and acquired by Computershare
in
2001
70 listed
Clients in the UK, the Netherlands, France,
Germany, Switzerland and more
15 Full time employees in London,
with law, investment banking and corporate governance
backgrounds
We advise on 140+ transactions a year Annual
General Meetings, M&A and Shareholder Activism campaigns
15 Global offices in all
major financial jurisdictions
Georgeson Northern European team has
120 years of
experience combined
Georgeson Global Offices
Engaging with the four key stakeholders
Institutional Investors
Proxy Advisors
Retail & Employee/ Director
Professional Engagement
Firms
• ISS • Glass Lewis • Local Proxy Advisors
• Hermes EOS • BMO REO (ex-F&C) • Robeco SAM • GES (ex-G40)
• Directors’ holdings • Employee Trusts • Retail holders held via
banks/brokers
• Asset Managers • Pension funds • Sovereign Wealth Funds • Focus on Proxy Voting and Corporate
Governance Analysis: › Non-voting shareholders › Opposing shareholders at past
meetings
Shareholder Activism
• Submitting a shareholder resolution • Calling an Extraordinary General Meeting • Campaigning to encourage other shareholders to
vote a certain way • Formal complaints to a regulator • Lawsuits
Objective
Leveraging change to unlock economic upside for shareholders
Active Ownership
• Proxy voting and the exercise of other formal shareholder rights
• Engagement activities (interactions held by institutional investors with investee companies)
Objective
Exercising stewardship over the assets in an
investor’s portfolio
Active Ownership vs. Shareholder Activism
The passive investor and their increasing clout
“We’re riding in a car we can’t get out of… governance is the seat belt and air bag.”*
Glenn Booraem Investment Stewardship Officer Vanguard
*SOURCE: Meet the New Corporate Power Brokers: Passive Investors” published in Wall Street Journal (24 October 2016)
Institutional Investors – How CG teams work
Meetings
17,316 Proposals
163,499 Engagements
1,274
DAX and MDAX Average Quorum
49.9%
55.1% 54.9%
59.9% 60.0%
68.9% 65.4%
68.0% 71.7% 71.5%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
2013 2014 2015 2016 2017
Qu
oru
m (
%)
DAX MDAX
DAX individual quorum levels (2017 season)
20
30
40
50
60
70
80
90
100
Qu
oru
m (
%)
Rejected DAX resolutions (2017 season)
Rejected
Proposals
Approve remuneration system
Allow the Company to call an EGM on a 10 day notice
period
Number of resolutions which received more than 10% against votes (DAX)
0
2
4
6
8
10
12
14
Management &Supervisory Board
Discharge
RemunerationSystem
Election ofSupervisory Board
Members
Authorities to IssueShares
Approve Auditors Other
Nu
mb
er
of
pro
po
sals
2015 2016 20170
.7%
7.9
%
5.3
%
16
.7%
87
.5%
87
.5%
17
.6%
15
.2%
20
.0%
37
.0%
75
.0%
29
.4%
9.1
%
2.6
%
The percentages represent the ratio between the number of proposals that received more than 10% against and the total number of proposals in each category.
Number of negative ISS recommendations
0
5
10
15
20
25
30
35
40
45
Management & Supervisory BoardDischarge
Remuneration System Director Elections Other
Nu
mb
er
of
pro
po
sals
2015 2016 2017
0.7
%
28
.1%
24
.1%
37
.5%
75
.0%
5.9
%
25
.3%
The percentages represent the ratio between the number of proposals that received an against recommendation from ISS and the total number of proposals in each category.
Number of negative Glass Lewis recommendations
0
5
10
15
20
25
30
35
40
45
50
Management & Supervisory BoardDischarge
Remuneration System Director Elections Other
Nu
mb
er
of
pro
po
sals
2015 2016 2017
1.5
%
30
.9%
23
.7%
33
.3%
37
.5%
62
.5%
7.8
% 11
.3%
3.3
%
The percentages represent the ratio between the number of proposals that received an against recommendation from Glass Lewis and the total number of proposals in each category.
Number of negative DSW/ECGS recommendations
0
5
10
15
20
25
30
35
40
45
50
Management &Supervisory Board
Discharge
Approve Auditor Authorities to IssueShares
Director Elections Remuneration System Other
Nu
mb
er
of
pro
po
sals
2015 2016 2017
4.5
%
32
.4%
29
.5%
81
.8%
92
.7%
82
.1%
77
.8%
62
.5%
58
.8%
43
.1%
55
.7%
23
.3%
83
.3%
10
0.0
%
87
.5%
The percentages represent the ratio between the number of proposals that received an against recommendation from DSW and the total number of proposals in each category.
Key Figures From Across Europe
Remuneration across Europe
205% increase in the number of contested remuneration-related
proposals.
16% increase in the number of remuneration report
proposals contested.
Half of proposals relating to the remuneration report
have been contested for the past three years.
28% decrease in the number of contested remuneration report resolutions in the UK.
50% increase in the number of remuneration report
proposals contested.
17% increase in the number of contested remuneration-
related proposals.
France Italy Switzerland
Netherlands Spain UK
Remuneration in Germany in 2017
88% of proposals relating to remuneration systems received over 10% against votes (7 out of 8), 38% were rejected (3 out of 8).
75% of rejected proposals in Germany were remuneration-related (3 out of 4).
Reasons for shareholder to vote against include: • High level of discretion on variable compensation • Performance targets for STIP/LTIP awards not disclosed or benchmarked against a
disclosed peer group • Excessive total compensation • Lack of independence on the compensation committee
Shareholders have started to vote against the discharge of the supervisory board if no significant improvements to contested remuneration systems have been made.
Proxy advisor vote recommendation on the Remuneration Reports of the FTSE 100
ISS IVIS
Glass Lewis PIRC
OUTLOOK AGM SEASON 2018
Engagement at Union Investment
UnionEngagement integrates
● economic,
● environmental and
● social aspects
with the objective of actively
influencing responsible corporate
management.
Sustain-
ability
Financial
analysis
NGOs
Partners
Standards &
best practice
Net-
works
Voting
policy
Responsible
Corporate
Governance
Extended sustainability cover
7
42
ESG integration
300 sustainability meetings
1.543 votes at AGM
15 AGM speeches
Sustainability analysis
4.000 meetings with companies
SRI & Engagement specialists
Sectoranalyst
UnionVote: voting by country in 2016
24 countries – 1,543 votes
Source: Union Investment.
Engagement trends 2018
• Implementation of the CSR and shareholder rights directive
• Sustainability arrived at ‘mainstream’ investment
• Increase of collaborative engagement & ESG initiatives
• Rise of activist investors
• Strong focus on environmental issues (despite or because of Trump)
• CO2-screening of portfolios
• ESG finds its way in executive compensation
• Regulation on conflict minerals
Major Topics AGM Season 2018 - Compensation
• Simplification of remuneration systems
• Cap
• Reasonable disclosure
• Linkage of operational performance and compensation
• High granularity of performance targets
• Pension scheme
• Clawbacks
• ESG integration
Thank You
Ingo Speich Union Investment
Matthias Nau Georgeson
Daniele Vitale Georgeson
www.georgeson.com/2017ProxyReview
Thank You
Thank you for attending GEO’s 2017 Pan European
Regional Event in Berlin. We hope you enjoyed this
session.
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