European AGM Season 2022 Recap

While say-on-pay was already common in certain European markets (e.g. the UK), the implementation of the EU Shareholders Rights Directive (SRD II) has made the 2022 AGM season the first where remuneration policies and reports were put to shareholder vote around the region. Our analysis of voting outcomes and proxy agency feedback across Europe reveals continuing country-specific issues alongside emerging region-wide trends.

Conclusions

In summary, the majority of voting results show the support of proxy advisors and shareholders, and the criticism focuses on a small number of essential points. However, companies cannot sit back and relax – we’d draw attention to three points:

1. We expect investors will raise the bar: As evidenced in the UK, once a Say-on-Pay system is in place we expect that proxy advisors and investors will continue to raise their expectations after the first phase of implementation asking for greater transparency and focusing in on hot button topics each year.
2. Taking account of the economic context will be necessary: In the current economic environment, excessive salary increases, use of discretion and pay-for-performance demonstration are likely to be at the top of this list for investor scrutiny. Investors will want to understand how companies have considered the wider employee and stakeholder experience in decisions on executive pay.
3. Disclosure will be critical: Investors are asking companies to provide greater and greater levels of detail in their disclosure on executive remuneration. It is imperative that organisations use the remuneration report as a mechanism to rationalise pay decisions in the context of wider company performance and decisions.