Swedish pensions buffer fund AP1 revealed it voted against several proposals at the year’s corporate shareholder meetings on employee compensation, having set tougher criteria for share-related incentive schemes at companies it owns.
In a report on its voting in the current round of annual general meetings (AGMs) – which is being extended over a longer period this year due to coronavirus restrictions – the SEK366bn (€35bn) fund said it had voted in favour of most proposals from boards and nomination committees, but that the compensation issue had been an exception.
The fund, which backs Sweden’s pay-as-you-go income pension, said: “The reason is that the boards increasingly propose programmes that do not meet our wishes.”
AP1 said that it had negotiated with the boards of directors about their proposals for long-term incentive programmes, in some instances doing this in conjunction with other institutions.
“The fund has found performance requirements were not high enough, and seen that in many cases, prices for the participants were too low,” the fund said.
In five cases, AP1 said it had been able to reach agreements that them made it possible to vote in favour of proposals at AGMs. But at four Swedish companies – industrial tools firm Atlas Copco, banking firm Klarna, automaker Saab and gaming company Stillfront – it voted against the board’s proposal, and in the case of Stillfront, this had meant the proposal was not approved.
Ossian Ekdahl, chief active ownership officer at AP1, told IPE criteria in the pension fund’s ownership policy on compensation had not changed, but from this year onwards AP1 had decided to assess incentive programmes more strictly.
“We require that the programmes have pre-determined, clear and measurable targets in order to qualify for allocation in share-related incentive schemes,” he said.
In light of the COVID-19 crisis, the fund also said it pushed through policies at several companies not to raise board fees for 2020 – doing so would be provocative while staff were being laid off, it said.
The other issue at AGMs directly linked to the pandemic was dividends, AP1 said, having already said in mid-March that it did not oppose lower payouts from the companies.
“Companies have the right to decide how large the dividend should be, but we believe that the corona pandemic increases the uncertainty for the companies’ liquidity and the money should remain in the companies,” the fund said.
A large number of corporate boards had in fact withdrawn or postponed proposals for dividends, it said.