APG turns against excessive pay

Published on: 17 July 2020

In the 2020 AGM (Annual General Meeting of Shareholders) season, APG and other investors voted out remuneration proposals at four Dutch listed companies. This demonstrates that socially responsible investors such as APG are taking advantage of their increased influence on executive pay at listed companies.

APG - on behalf of its pension fund clients ABP, bpfBOUW, SPW and PPF APG - voted against the new remuneration policy at Besi, Wolters Kluwer, Euronext and SBM Offshore. Overall, shareholders voted out executive pay proposals at five Dutch listed companies; APG is not invested in one of these, metallurgic company AMG.


Say on pay

Since December 2019, the remuneration policy of a Dutch listed company must have at least 75% of shareholder votes behind it. In addition, a company must explain in its remuneration report - in which a justification of executive salary and variable remuneration is provided - how they take ‘social acceptance’ into account. Shareholders have an advisory vote on the remuneration report, the so-called ‘say on pay’.


APG also did not support the remuneration policy at, among others, Van Lanschot Kempen, Basic-Fit and Signify (the former Philips lighting division). One particularly notable negative vote related to Ahold-Delhaize, the parent company of Albert Heijn. We think it was inappropriate for the company to have reduced the importance of sustainability in determining executive renumeration. In addition, Ahold-Delhaize applied only one sustainability measure - the share of healthy food in the sale of its own-brand food products - which furthermore is barely certifiable.


APG wants to see sustainability criteria incorporated into executive remuneration policies of listed companies. “But the criteria must be relevant, transparent and objectively measurable,” says Mirte Bronsdijk, corporate governance specialist at APG Asset Management. However, a large majority of Ahold-Delhaize’s shareholders supported the company’s proposal.


Over the whole developed market equity portfolio, there was a slight increase in the percentage of say-on-pay proposals that APG voted for, moving from 45% in 2019 to 53% in 2020. A large share of our negative votes relate to excessive CEO severance payments in the United States. In the US, severance payments of more than twice the salary plus bonus are fairly common. Compared with Europe and the UK (72%), the level of approval in the US is relatively low (37%).


More women at the top

Shareholders voted on nineteen directors’ appointments at Dutch listed companies; in seven cases a woman was appointed. Most new appointments to Supervisory Boards - which oversee management - went to women. Eumedion, a partnership of large Dutch investors that also includes APG, urges companies to achieve a better gender balance in top positions. Of the companies included in the Dutch stock market index AEX, only ABN AMRO currently does not meet the future statutory quota of one-third women on the Supervisory Board.


Follow This shareholder resolution

Oil and gas major Shell was the only Dutch company this AGM season where a shareholder resolution was put to the vote. APG abstained on a resolution filed by activist shareholder group Follow This, calling on the company to commit to binding climate targets for 2050. While we share the ambition for a climate-neutral economy by 2050, we do not want to continue arguing over long-term binding targets. As far as we are concerned, the focus at Shell (and other oil and gas companies) should be on implementing concrete measures to achieve its recently boosted climate ambitions.