German fund manager Allianz Global Investors has said it will vote against large UK and European companies it has invested in that fail to link executive pay to environment, social and governance metrics from next year.
Executive pay has become a flashpoint between asset managers and investee companies in recent years as they tighten scrutiny of high payouts.
Allianz, which has €673bn in assets under management, opposed only 21 per cent of all management proposals globally in 2021, but voted against 47 per cent of those related to remuneration — down from 49 per cent in 2020.
“As an active investor, exercising our voting rights is one of the most powerful tools we have to effect change,” said Matt Christensen, AllianzGI’s global head of sustainable and impact investing.
“In keeping with our desire to shape a more sustainable future with measurable positive outcomes, we want to ensure that our investee companies align their executive remuneration policies with ESG KPIs and we will vote against those that don’t.”
The manager voted against only 4 per cent of overall proposals in the UK in 2021, but opposed 20 per cent of UK pay proposals.
“The UK continues to lead the way in corporate governance standards, with our analysis demonstrating the UK has strong leadership,” said Virginie Maisonneuve, AllianzGI’s global CIO for equity.
Almost 60 per cent of UK FTSE 100 companies link ESG benchmarks to executive pay, according to PwC, a development that was backed by two-thirds of investors they surveyed.
AllianzGI is not alone in scrutinising the link between remuneration and sustainability ambitions. Activist group Cevian Capital said last year that it would vote against companies that failed to include targets in pay packages.
In November, shareholder advisory group Institutional Shareholder Services released a consultation on its voting guidelines for Europe and the UK that proposed evaluating non-financial ESG metrics in compensation plans in a similar way to financial ones.
PwC called the move “a powerful signal that investors will seek to hold companies to a high bar for ESG metrics in pay”.
Last week, UK boutique fund manager Liontrust faced a substantial investor rebellion over new compensation packages for top executives — even though its proposals included ESG benchmarks.
AllianzGI also amended its proxy voting rules last year to scrutinise notable changes in executive pay on a case-by-case basis “whenever companies which received substantial direct state aid recorded substantial lay-offs or cut dividends (not prescribed by regulators) as a result of the Covid-19 pandemic”.
However, some have backed away from a more detailed approach to compensation. The UK’s largest asset manager, Legal and General Investment Management, said in November that it would stop nearly all direct feedback to companies on pay and would intervene only on those considered very exceptional, after its advice was ignored most of the time.
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