Stockholm (NordSIP) – Allianz Global Investors (AllianzGI) is increasingly concerned about governance standards in its companies, as highlighted by its voting records published this week. The disparity in the manager’s voting record across countries also suggests a significant variation in governance norms across the countries it invests.
AllianzGI’s opped an increasing number of agenda items proposed by the companies (75% in 2018, up from 68% in 2017) and management proposals (52% in 2018 versus 42% in 2017) at shareholder meetings. The firm opposed 27% of measures related to the quality, independence and/or diversity of directors in 2018, a slight improvement compared to 2017 (28%). The asset manager struck a more optimistic note on environmental and social proposals.
“AllianzGI pays close attention to shareholder proposals related to environmental and social matters. Our voting decisions are determined by the nature and implications of these proposals for our investee companies. We are pleased to have been able to support over 50% of shareholder-led proposals related to environmental and social matters, and see these as an important part of our stewardship programme aimed at reducing environmental and social risks in our portfolios by improving corporate practices,” said Eugenia Unanyants-Jackson, Global Head of ESG research at AllianzGI.
Governance concerns varied widely across countries, but remuneration concerns were generally dominant. On average, companies domiciled in Hong Kong were the most concerning, with Allianz IM voting against as much as 95% of the remuneration proposals there. A similar concern on a smaller scale was also observed for the USA, Italy and the Netherlands where the asset manager voted down 74%, 63% and 60% of compensation-related proposals. The UK, Sweden and Switzerland were the best performers. AllianzGI only opposed 16%, 31% and 32% of remuneration proposals in these countries, respectively.
“A poor link between executive pay and company performance, insufficient transparency of performance KPIs and actual performance targets, the short-term nature of incentive awards, and concerns over potentially excessive pay have been the main drivers in our opposition to compensation related proposals,” said Unanyants-Jackson about AllianzGI’s remuneration concerns. “Clear information on KPIs and targets is critical to enable investors to assess the appropriateness and robustness of performance measures. We would also like to see a lot more emphasis on long-term performance across a reasonable range of key value drivers for the business in the total executive compensation package.”
Japan, and perhaps Taiwan (information was not available for remuneration proposals), stand out as the only countries where AllianzGI’s main concern was director-related proposals, of which it opposed 48% and 35%, respectively.
“AllianzGI would like to see majority independent boards, and at least 1/3rd independence in cases where a higher standard is hard to achieve due to market practices and ownership structures. However, independence alone is not enough to achieve high standards of governance – it should be accompanied by diversity of backgrounds, experience and skills that are both relevant and helpful to the business. It is really important that nominations committees adopt a robust approach to board composition and refreshment to ensure our investee companies are led by high quality boards that reflect the current and future needs of the business,” said Unanyants-Jackson regarding board independence.
Regarding overboarding, she added that “We would like to caution against directors holding a large number of board mandates, which we believe can compromise their ability to discharge their board and committee responsibilities to a high standard both under normal circumstances and when special situations or unexpected developments require substantial additional time commitment from directors.”
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