engagement et activisme actionnarial | Page 2

Belle opinion dans The Globe and Mail (8 avril 2020) de Kevin Thomas : « Rethinking executive compensation in times of crisis ».

Extrait :

First, the meetings will largely be held online to avoid spreading the virus, a new experience for most of us.

Second, the oversized pay packages for executives and directors that shareholders often accept will be more clearly out of place, when the rest of the community is facing layoffs, cutbacks and serious financial uncertainty.

Some corporate leaders have been reducing pay, foregoing bonuses or donating pay to COVID-19 relief, which is commendable. Many executives will also take a hit, at least temporarily, on the current value of any stock-based compensation. Many stock options granted years ago and vesting now will not be “in the money” at current share prices and executives may have to wait to exercise them.

But with so many boards basing executive performance targets on their company’s relative shareholder returns, rather than absolute ones, some executives will continue to be eligible for high awards, as we have seen at recent annual meetings of large Canadian banks. The value of any share-based compensation may be low at present, but those grants may set up executives for a much, much happier recovery than the rest of us – something we saw in spades after the 2008-09 financial crisis.

Perhaps this is the right time to rethink our whole approach.

Shareholders have long taken aim at the, “Heads I win, tails you lose,” approach to executive compensation at some companies. Corporate boards justify massive payouts to executives when times are good on the basis that shareholder returns are also high, yet somehow find other reasons to continue high levels of pay when shareholder returns are low.

Those approaches are easy targets for scorn and clearly justify a shareholder vote against the board’s approach. But that’s not all that’s wrong with the current system of executive pay.

The structure itself, where so much of an executive’s pay package is based on incentive rewards rather than base salaries, inevitably serves up exactly the kind of high pay packages we will see now, even in the midst of this crisis.

We’ve become far too used to the idea that large incentive payouts are necessary to align executive performance with shareholder value. We’ve spawned a whole industry that cooks up ever-more-complex formulas to set executive compensation on the assumption that it incentivizes productive behaviour. It’s not at all clear that it does.

As Tom Powdrill at the U.K. pension consultancy PIRC wrote recently, “Watching medical staff worldwide throw themselves into the battle against COVID-19, without any expectation that they will be paid a single penny extra as a ‘bonus’ for their efforts, but with the expectation that some of them will die, requires us to rethink things fundamentally.”

So, what if we take this chance to do things differently?

In the immediate term, we’ll be looking for leadership from more boards and executives, especially when decisions are being made about layoffs, salary cuts, dividend cuts and reduced expenditures that hurt external suppliers. Cancelling discretionary executive pay and taking a pass on director compensation is the least they can do.

That goes double for any firm receiving government assistance. “We’re all in this together” has to mean something.

À la prochaine…

L’influent ICGN a pris récemment position sur les conséquences du COVID-19 pour la gouvernance d’entreprise, sachant que ce réseau international fait de cette pandémie un risque systémique (rien de moins !). Vous pourrez lire les préconisation de l’ICGN dans le document suivant : ICGN Viewpoint, « Coronavirus as a new systemic risk: implications for corporate governance and investor stewardship », 12 mars 2020.

Extrait concernant les investisseurs

Despite these negative economic events investors should avoid focusing on the crisis in terms of its short-term shareholder value implications. It is here where a long-term perspective, and perhaps a grounding ethics and values more generally, should also guide investor responses. In the language of modern finance, this may be less an opportunity for investors seeking alpha generation in individual companies than it is a question of addressing ‘beta’ issues—the volatility/stability of the markets and financial system as a whole. This may be fiendishly complicated, but an important guiding principle for investors relates to their fundamental fiduciary duty of care to their beneficiaries. This confirms the importance of taking a long-term perspective, since most ICGN Members, and large institutional investors more generally, are managing assets for pension plans or retirement saving plans, where the investment horizon is intrinsically long-term, or in theory infinite.

It is beyond the scope of this Viewpoint to suggest specific investment or trading strategies for investors in addressing the impacts of COVID-19. There is no generic solution. These will differ depending on individual investor mandates and beneficiary requirements. But from the perspective of investor stewardship and fiduciary duty — and consistent with ICGN’s Global Stewardship Principles and Policy Priorities3 — it is fair to suggest that in reacting to this crisis investors should generally seek to maintain an approach that promotes long-term investment horizons and sustainable value creation for individual companies and markets.

As a practical matter this requires investors to appreciate that companies will be facing difficult questions in response to the impacts of COVID-19. The first priority for managers and boards will be to ensure the company’s own financial sustainability. Investors must also understand that capital allocation questions may surface where compromise is required. Companies may have to choose between cutting dividend payments, cutting capital spending or cutting costs, possibly leading to redundancies. Investors should demonstrate support for companies as they navigate potentially acute financial threats and market pressures. Investors should also avoid encouraging companies to undertake undue risks that might provide a short-term investor benefit but could also jeopardise a company’s financial stability or the sustainability of its business model. This reflects not only some level of enlightened self-interest, but also the moral imperative to contribute positively to the broader threats to public health and social stability.

À la prochaine…