This year there was an increase in contested remuneration policy votes and contested remuneration report votes, says Daniele Vitale, head of governance for UK/Europe at Georgeson. There was also an increase in director elections contested. ‘About 5 percent [were contested], though that is still the lowest in Europe,’ he notes. ‘A few years ago, it was only about 1 percent. Executive remuneration figures have fallen for four years. Companies are making efforts to meet investor expectations, and investors are being less flexible than last year, when they were more flexible because of the pandemic.’
Jonathan Harker, senior director and head of account management at Morrow Sodali, says he has seen the ascent of director accountability increasing over the last couple of years regarding remuneration practice and policy. If investors or proxy advisers are driving guidelines through, they are looking to drive accountability, he adds. ‘The world is shouting a lot about climate right now,’ he says. ‘Boards are having to wake up and look back at their governance methods, board evaluations, succession, who has the experience on climate to align everything around environmental progress, emissions and what climate metrics to use. The whole board has to figure out whether it is equipped to achieve [oversight and delivery of] the desired climate goals.’
None of this is easy for a board to see and have accountability for. ‘So the board has to up its game from an oversight and accountability perspective,’ says Harker. ‘It is difficult to do. The make-up of the board has to alter and the skills have to alter.’
He also says climate and social issues are connected, which plays into boards’ remuneration and diversity considerations as a whole. ‘It’s hard to unravel these issues from each other,’ he notes. ‘You could look at remuneration and governance in a lump, but everything overlaps into climate, social, sustainability and governance.’
In terms of holding meetings, Harker says hybrid meetings will remain the standard until the Covid-19 pandemic is brought under control. He says in-person meetings are still important, and it is key for people who want to attend meetings in-person to be able to do so eventually, public health concerns permitting.
‘Physical meetings are about minority rights,’ he explains. ‘We want people to be able to meet and speak with the board efficiently. Boards will have to get better at handling questions from shareholders that are not [physically present]. You need to get your shareholders recognized and their questions answered [at hybrid or virtual meetings].’
This is an extract of an article that was published in the Winter 2021 issue of IR Magazine. Click here to read the full article.
