By continuing on this site you have agreed to cookies being placed and accessed by this website. More information and adjusting cookie settings.
Robeco prefers a process of dialogue but sometimes voting against management is the only option. Michiel van Esch explains why Xstrata’s remuneration report was rejected.
Engaging is often the best way to influence unsatisfactory executive-pay arrangements. But what do you do when a company’s remuneration policy has lagged best practice for several years? Sometimes there’s no option but to vote against management.
That’s precisely what Robeco did at the Xstrata AGM in May. A raft of remuneration issues—including excessive pay, inappropriately structured incentives and continuing lack of clarity on retirement benefits—pushed Robeco into voting against the company’s remuneration report, as well as rejecting the re-election of the chairman of the Anglo-Swiss mining group’s remuneration committee.
Excessive pay and inappropriate incentives
Let’s look at those issues in more detail. “We were mainly concerned about the structure of the remuneration plan,” explains Engagement Assistant Michiel van Esch. “Pay levels remain excessive, particularly for the chief executive, with an inappropriate emphasis on short-term, rather than long-term, performance.”
That’s not all. Van Esch describes the terms for outstanding equity awards—which allow for full vesting in the event of a change of control at the company—to be “extremely troubling”, given the proposed merger of the company with Glencore International, the integrated commodities producer.
Van Esch’s concerns were deepened by the company’s intransigence in the face of a significant level of sustained shareholder opposition.
“Structural issues have not been addressed and disclosure of retirement benefits remains opaque”