APG Asset Management, which manages $500 bn for Dutch public sector workers, has established guidelines on how much pay should be given to executives at the companies the fund is invested in as part of a push for long-term value creation.
The fund says the guidelines are meant to increase equality of pay, provide incentives for long-term strategy on the part of company executives and ease discussions with companies as it prepares to engage executives on a series of topics related to sustainability and governance.
‘Discussions with company management about incentive schemes can be long and complex,’ says Herman Bots, APG’s head of fundamental equities, in a statement. ‘By clarifying our position, we expect to have a more effective dialogue on the matter. The added benefit is that there will be more time left for other discussion topics, including performance, long-term strategy and sustainability.’
The executive remuneration guidelines will initially be sent out to the 100 most important Europe-listed companies in APG’s portfolio, the fund says. Sending out the guidelines is meant, in part, to allow it to engage in discussions of greater depth on board structure and board nominations, as well as other topics, it adds.
‘As a long-term engaged shareholder, APG puts significant effort into its dialogue with the board and management of its portfolio companies, both to understand their point of view and to express its own,’ the fund says in its statement. ‘With these guidelines, APG clarifies its stance on remuneration, one of the most frequently discussed topics.’
APG says sustainability and governance form an ‘integral part’ of the decision-making process of its investment staff, adding that its management teams will be encouraged to focus on value creation over the long term and not necessarily ‘accounting profits over the short run’.
