Shareholders can be crucial in pushing companies towards better sustainability practices and transparency by voting on issues such as board composition and executive compensation. We believe positive action includes taking an active role at annual general meetings and challenging management proposals as part of a constructive dialogue with the companies we invest in, writes Michael Herskovich.
BNP Paribas Asset Management maintained its firm voting approach in the 2024 season of annual general meetings: we opposed 36% of all resolutions, matching the rate in 2023.
While transparency and practices are improving, we continue to raise our expectations for the companies in which we invest. We voted against more than one in two resolutions on executive compensation, mostly due to the short-term orientation of many such plans, a lack of transparency, or compensation level that was not justified by performance.1
A focus on executive compensation
We expect all companies to integrate environmental or social indicators into executive pay, including a climate indicator. This year, we added the requirement to include a climate component for companies in sectors such as energy, utilities and materials, and for companies that are among the higher greenhouse gas emitters. We will extend this requirement to all companies by 2026.
Integrating a climate component is becoming more common, particularly in Europe but less in the US: three quarters of our votes in opposition to executive pay proposals over the absence of a climate component involved North American companies.
For us to support a remuneration proposal, such criteria must be measurable, quantifiable, and relevant to the company’s sustainable development strategy.
ESG remains a priority
We see voting to promote good environmental, social and governance standards as an essential part of our corporate responsibility.
We opposed more than 2,100 management proposals from 332 companies for environmental and social reasons (79% were related to our climate or biodiversity-related expectations). This compares with 1,521 resolutions opposed in 2023.
In line with our net zero roadmap, we expect companies to set targets to reduce their greenhouse gas emissions to net zero by 2050 at the latest.
The integration of biodiversity into our voting activity requires investee companies to assess the impact of their activities and their dependence on nature.2
Calling for more diversity in director appointment resolutions
Opposition to directors is often linked to weak corporate governance, a lack of effective checks and balances, or a failure to meet our diversity expectations.
We opposed 40% of the resolutions on director appointments, mainly because of shortcomings in the area of diversity and independence.
As our expectations rise, from 2025 we will increase our minimum required level for the number of female board members to 40% in Europe, North America, Australia, New Zealand and South Africa.
Key figures for 2024
| Number of resolutions voted on | of which | BNPP AM filed resolutions | Compensation-related resolutions opposed | |
|---|---|---|---|---|
| company resolutions | shareholder resolutions | |||
| 23 653 | 22 735 | 918 | 7 on governance 5 on environment | 127 (74% in North America) |
Source: BNP Paribas Asset Management, July 2024
1 Check out our governance and voting policy
2 Check out our biodiversity roadmap
Disclaimer
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