As part of its policy of active stewardship, Allianz Global Investors (AllianzGI) says it has continued to use its proxy voting power to hold directors accountable if their companies do not have credible net-zero targets in place. It also regards executive pay as a top area of concern.
“Throughout 2022 we continued to utilize our proxy voting power to influence companies – this remains one of the most powerful tools we have to effect change,” says Matt Christensen, global head of sustainable and impact investing at AllianzGI. “As we look towards the 2023 voting season, we will continue to utilize this form of influence to help to shape a more sustainable future for the companies and society, in the best interests of our clients.”
Last year, AllianzGI participated in 10,205 shareholder meetings and voted in more than 100,000 shareholder and management proposals. The firm voted against, withheld or abstained from at least one agenda item at 69% of all meetings globally, compared with 68% in 2021. It opposed 16% of capital-related proposals, 23% of director-related proposals, and 43% of remuneration-related proposals.
The biggest cause for disagreement was once again the compensation of management teams. AllianzGI voted against 43% of compensation-related resolutions proposed by management. Many companies fail to adopt long-term incentives that are truly aligned with the interest of shareholders by rewarding outperformance, not merely market movement.
“We often had concerns on transparency, in particular when it came to clearly disclosing the link between performance and payout, as well as discretionary pay components that were not backed by performance as well as high pension payments,” comments head of stewardship Antje Stobbe.
Fewer ‘against’ votes
In Asia, AllianzGI voted against around 56%, 37%, and 12% of compensation-related resolutions in Hong Kong, mainland China, and Japan respectively. This shows gradual improvement when compared with its voting statistics in 2021 (95%, 48%, and 17% respectively).
“The fewer ‘against’ votes are in accordance with our observations on investee companies’ increased transparency in more granular indicators inside their remuneration proposals, including detailed performance hurdles and vesting conditions,” says Hong Kong-based stewardship analyst Chris Liu, at AllianzGI.
“However, we’re still concerned in areas such as remuneration plans disclosed in the second half of the year still including the first half’s already-achieved numbers as part of performance targets, board directors who’re recipients of incentive schemes not excluded from the scheme’s administrative body, as well as a lack of formal clawback policy. Additional efforts are in need to tackle the above common practices.”
In light of current economic conditions, in particular high inflation rates in many countries, AllianzGI promises to carefully evaluate generous pay packages, taking into account how they relate to pay increases of the wider workforce and whether companies underwent significant layoffs, restructuring or cut dividends.
“We generally vote against if we consider pay packages overly generous taking these aspects into account,” says Stobbe. “As of 2023, we further strengthen our voting guidelines with respect to sustainability aspects: we expect European large-cap companies to include environmental, social and governance key performance indicators into their remuneration and would vote against pay policies if this is not implemented.”
In Europe, AllianzGI voted on 52 climate-related proposals from management and supported 70 of 87 shareholder proposals on climate in the past year.
“We expect in particular that high emitters implement a net-zero strategy and share it with their owners,” Stobbe says. “In addition, we continue to support shareholder proposals addressing climate change issues. We are ready to vote alongside independent shareholders including NGOs if this helps the cause. There is no ‘opt out’ from climate change for any company.”
Unlike in Europe, climate-related proposals have not gained traction in Asia. Yet, Japan continues to stand out from the rest of Asian markets with steady increase in climate-related shareholder resolutions urging Japanese companies' commitment to developing robust decarbonization strategies.
Going forward, AllianzGI says it will hold directors accountable if the company does not have net-zero targets in place and a credible strategy for how to achieve them. For 2024, depending on the set-up of the board, the firm says it will vote against the chairperson of the sustainability committee, the strategy committee or the chairperson of the board of certain high-emitting companies if the net-zero ambitions or the climate-related financial disclosures are deemed dissatisfactory.