An interview with Michaël Herskovich, Head of Governance at BNP Paribas Investment Partners
Labrador: how can companies better prepare their annual meetings?
We ask companies to prepare annual meetings as far in advance as possible, making us able to exchange views with them. This is actually happening more often. Having a dialogue with investors over the first quarter allows companies to explain their specific issues and get a clear take on investors’ expectations ahead of the board meeting that sets the agenda. At later stages in the process, it becomes too complicated to alter a contentious resolution.
Over the next few days, we will be sending companies our voting policy, which serves as a basis for dialogue. Issuers are already ahead of the game: for some this is simply good practice. For others, it is a way to deal with a resolution that was rejected the previous year, or a method of probing the market about a specific issue.
If companies do not respond to our letter, we do not dwell on the matter. We just let them know if we intend to vote against a resolution.
How does the opinion of proxy advisors influence your voting?
Proxy advisors are there to help us; however, their recommendations are of little importance to us because we ourselves keep an eye on each company’s annual meeting where we are stockholders. However, proxy advisors do have a very strong influence on foreign investors who vote in France, particularly on certain regulated agreements, which are quite specific to France.
Overall, we are heading toward the professionalization of the voting process. Investment managers are voting less favorably than ten years ago.
Does the preparation of the say-on-pay system differ from one country to the next?
Practices evolve in accordance with national demands. In Germany, the Netherlands and Scandinavia, there are binding votes on future compensation. In France and the United States, the votes serve as recommendations on compensation already paid. The British system mixes the two. A specific feature in France has shareholders vote for each corporate officer, whereas everywhere else, the voting covers the compensation of all top management. Discussions continue to be far too focused on past compensation and not the future.
After two years of fine-tuning the say-on-pay system in France, and now that we have both better understanding and transparency, we would like an in-depth explanation of the compensation structure and the choice of performance criteria.
Where can we find best practices on say-on-pay?
When it comes to the transparency of say-on-pay, the British are exemplary (although not for the levels of pay!). In France, Legrand should serve as a model for other issuers.
To improve these practices, we are pushing for discussions with independent directors, particularly with the lead director. This way we can address questions of CEO compensation and succession more easily, as well as hypothetical conflicts of interest. It is a win-win practice. We do not have to go through intermediaries and the directors begin to recognize the importance of such exchanges.
Interview by Thomas Fenin