Executive remuneration causes a stir in shareholders’ meetings

Asset Management - 7/12/2016

In 2015, the shareholders of French companies had been called upon to express their views on double voting rights. This year, the main focus was on executive pay.

For the first time in France, during Renault’s shareholders’ meeting1, most present (54%) voted against a “Say on Pay”2 resolution calling for further transparency on executive
remuneration. This “Say on Pay” is only advisory in nature; it is not binding. Renault’s Board of Directors consequently by-passed this request and approved its CEO’s pay package.

On June 9th, members of parliament voted in favour of an amendment to the Sapin II Law designed to provide a tighter framework for executive compensation.
The vote of the Shareholders’ Meeting becomes binding and no longer solely advisory. The law also allows for ex-post checks to be carried out by shareholders on variable remuneration.

British regulation imposes a binding “Say on Pay” process on compensation policy; however the vote on actual amounts is advisory. BP therefore had to review its remuneration policy ahead of next year’s meeting with new proposals due to be put forward for shareholder approval in 2017.

The climate also on the agenda

During shareholders’ meetings, many company executives and shareholders addressed the issues of corporate social responsibility (CSR), such as climate change in the case of Total. The energy producer and supplier used this opportunity to publish – in compliance with the commitment made to shareholders – a report on climate issues which should align the group’s strategy with the Paris Agreement3, particularly concerning the target for increasing the share of renewable energy sources to 20% of the group’s portfolio within the next 20 years.

Note also that 10 climate-related external resolutions were tabled at Exxon’s shareholders’ meeting. For example, one resolution requested that the oil company assess the financial impact of public environmental policies on its business in the wake of the Paris Agreement on climate change signed at the COP21 summit. Unfortunately, only one resolution received the majority of votes: shareholders will now be able to suggest candidates to be appointed to the Board. Rejected last year, this provision may enable a pro-climate investor to join the group’s Board of Directors.

The "bons Breton" trigger opposition

Other resolutions continue to trigger shareholder opposition, such as the “Bons Breton” warrants4. This scheme allows French companies to issue share warrants for shareholders, enabling them to subscribe to new stocks at an issue price that is much lower than the market price, in the event of takeovers. The “Bons Breton” scheme was narrowly accepted at PSA Peugeot Citroën (68% of votes in favour).

1 On 29/04/2016.
2 Process whereby shareholders are consulted on the individual compensation paid to executive corporate officers.
3 The Paris Agreement was unanimously adopted on Saturday, December 12th 2015 by all 195 parties.
This historic agreement is designed to fight against climate changes.
4 Named after the incumbent Minister for the Economy at the time the scheme was introduced.


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