Dutch investors apply pressure over pay
Apr 18, 2008
Corporate governance forum calls for more dialogue
AMSTERDAM -- Dutch investors have scored three victories over pay in the last three weeks, putting executive salaries in the spotlight and leading to calls for more dialogue between companies and their shareholders.
Last week, retail fund VastNed lost a vote on pay at its annual general meeting. On the same day, Corporate Express, an office supplies group, pulled remuneration proposals from its AGM agenda after pressure from shareholders. This comes two weeks after electronics giant Philips lost a vote on the same issue, the first defeat of its kind in Dutch corporate history.
Rients Abma, executive director of Eumedion, a corporate governance forum, hails the votes as a big step forward for corporate governance in the Netherlands. Speaking to IR magazine, he suggests a marker has been laid down for Dutch companies. ‘I hope companies will now take into account our recommendations before making changes to executive pay,’ he says.
Abma goes on to say that companies and shareholders should get together five or six months before AGMs to discuss new proposals. ‘The two parties need to have a long and constructive dialogue about any major changes,’ he suggests.
The role of RiskMetrics, the proxy advisory firm formerly known as Institutional Shareholder Services, is seen as key to the defeats of the last few weeks. Dutch investors have been unhappy about executive salaries for some time, but have been unable to make their voices heard without the help of US investors, which control around 50 percent-60 percent of the biggest Dutch companies. Abma says RiskMetrics now takes into account Eumedion’s advice on corporate governance, which has made defeats much more likely.
Questioned over its defeat, Philips defended its pay proposals while accepting that investors were unhappy. Arent Jan Hesselink, a spokesperson for the company, said the proposed remuneration package was a big step forward for the company in terms of best practice and rejected the suggestion that there is a lack of dialogue between Philips and its investors. He added, however, that the vote is something Philips ‘will take to heart.’
A new remuneration package is being worked on. Hesselink says it may be put forward at an emergency general meeting, but the company could also wait until next year’s AGM before going back to shareholders.
VastNed also defended its pay proposals. The company has been criticized for offering a retention bonus – a bonus without performance criteria – to keep senior management at the company while it is in talks about a sale.
But Arnaud du Pont, a spokesperson for VastNed, says such a bonus was necessary to retain management during the current period of uncertainty. He also claims Eumedion’s charter on corporate governance supports this kind of offer.
Furthermore, Du Pont says RiskMetrics supported the company’s proposals and the defeat was down to the opposition of one pension fund, PGGM, which holds a 22 percent stake in VastNed.
‘I completely disagree that there needs to be more dialogue,’ adds Du Pont. ‘We had a long consultation with PGGM and it could have brought up this problem at an early stage, but it didn’t.’
Abma refuses to be drawn on any forthcoming AGMs that might suffer similar revolts, but notes that Eumedion is continuing its research. He also says Dutch companies would improve their corporate governance if they imported standards from the UK.
By Tim Human