Increase focus on risk management - Eumedion
NETHERLANDS - Eumedion, the platform for institutional investors, has called on the Netherlands' 75 largest listed companies to focus on risk management and the structure of remuneration policy, in a bid to improve their firms.
In Eumedion's opinion, companies need to supply more information on strategic and operational risks to investors, as these appear to be the main causes of failure or near-failure of firms' performance, the lobby organisation writes in a ‘spearhead letter'.
The companies must also provide more clarity on financial risks, and present this information in a concentrated way, instead of data scattered over their annual report and account, Eumedion argued.
"The participants view this information as more important than the board's declaration on the efficiency and adequacy of the internal risk management and control systems regarding the financial reporting risks," it stated.
Eumedion reiterated attention should be placed on the structure of companies' remuneration policy, by recommending executive pay should be linked to the long-term aims of the company.
"Investors prefer (relative) total shareholder return as a benchmark for the long-term bonus," it said, while suggesting firms take the average performance of the peer group during a number of years as the benchmark's base.
During the past two years, Eumedion has asked companies to improve the set-up of the general shareholders' meeting, so noted in its letter real progress has been made on these issues.
Eumedion represents 61 institutional investors with over €1trn of assets.