One of the world’s largest institutional investors speaks on executive remuneration

 

Ms. Michelle Edkins, BlackRock’s Managing Director and Head of Corporate Governance Europe talked about executive remuneration in Europe during her presentation at the Australian Remuneration Forum on 21 March 2011.

 

Independent board remuneration adviser Guerdon Associates, and institutional proxy adviser, CGI Glass Lewis, sponsor the Forum.

 

Forum attendees included institutional investors, company directors, executives and regulators.

 

HERE

 

Ms. Edkins had some key observations:

 

“benchmarking” exercise

 

 

 

Executive shareholding requirements have increased from one times pay to two to three times pay.

 

This simplifies the understanding of likely value for management and shareholders.  However, some shareholders do not support the reliance on short-term performance as the requirement for an award, while others see value in simplification.

 

Instead of earnings per share growth, more attention is being paid to operational measures, as well as environmental and social factors.  As described it appears to resemble a balanced scorecard.  Accompanying these, boards reserve the right to limit vesting based on an assessment of risky behaviours.

 

While investors tend to exercise their vote in context for each company, Ms. Edkins noted that the public and politicians have observed rates of increase, in aggregate, outstripping shareholder returns, resulting in calls for further restraint.

 

 

BlackRock considers this shared accountability inappropriate, and puts it back to the board.  BlackRock would like to see directors have more “courage” to take remuneration decisions.

 

Lastly, BlackRock would like to see better disclosure of reward outcomes and discussion of their alignment with performance.