The “Say on Pay” shareholder resolutions placed by Ethos and eight Swiss public pension funds on the agenda of the general meetings of the five largest Swiss listed companies bore fruit. Four amongst the targeted companies (ABB, Credit Suisse Group, Nestlé and UBS) accepted to submit the executive remuneration to the shareholder vote, allowing Ethos to withdraw the resolution.
Only Novartis refused to do so and recommended shareholders to vote against. 31% of the votes however supported the resolution sending a strong signal to the Board of Directors.
At ABB, Credit Suisse Group, Nestlé and UBS, the shareholders were asked to vote on the remuneration report or the remuneration system. Ethos considers that the transparency and structure of the executive remuneration of all these companies still did not meet international best practice requirements. Between 8 and 14% of the investors shared Ethos' opinion and refused to approve the remuneration report/system. A signal well received by several Boards that promised to improve their remuneration systems.
The important support to Ethos' resolution should now prompt Novartis' Board of Directors to give shareholders some rights with regard to executive remuneration next year. Otherwise, it is very likely that the same resolution will be tabled again and that it will receive more support, as the advisory vote on executive remuneration is becoming the norm and therefore adopted by an increasing number of companies.
At ABB, Credit Suisse Group and Nestlé, the advisory vote of the remuneration report allowed an important minority of investors to express their disagreement toward the remuneration system. While only 8 to 14% of votes refused to side with the Board, the signal was sufficiently clear, prompting the companies to announce changes in their remuneration system. In particular, performance criteria should be attached to the incentive plans or made more challenging. Ethos commends this attitude and hopes that the improvements will allow approval of the report next year.
Finally, at UBS Ethos hopes that the Board of Directors, partially renewed at the 2009 general meeting, will acknowledge the signal sent by the shareowners that rejected the new remuneration system. In fact, for many investors it is indispensable that the system include a cap on variable remuneration in terms of base salary.
In the following months, Ethos will continue the dialogue with Swiss listed companies regarding executive remuneration. As in the previous years, Ethos will publish in the beginning of Fall its detailed study on 2008 executive remuneration.
