annual review indst 2024 public - Flipbook - Side 36
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EOS
emphasise our positive views on restricted shares-based
packages, which aim to simplify executive remuneration.
We continue to be supportive of companies seeking to
make such changes.
In 2025, our voting approach will maintain its focus
on priority issues such as excessive variable pay
and poor alignment with shareholder interests.
We continue to see high shareholding requirements
as an important factor in demonstrating alignment,
and will consider recommending votes against
remuneration structures where we feel the levels
required are insufficient.
For example, during 2024 we piloted an engagement
and voting approach for a target list of companies whose
price-to-book ratio was consistently trading below one.
A significant portion of these companies were South
Korean, but some companies in Europe and the
Americas were also identified. Following the success
of this approach, we will maintain this policy, and will
consider expanding the criteria and target list of
companies in future years.
This builds on a similar approach that we have taken in
Japan, where we continue to implement our vote policy
to oppose directors of companies with crossshareholdings exceeding 10% of net assets.
We believe that executive pay must
be accompanied by robust justification,
and disclosure on how the broader
stakeholder experience has been taken
into account.
Q. Are we making any major changes to our policy or
engagement approach for executive remuneration?
A. The debate around executive remuneration
remained at the top of the agenda for many
stakeholders in 2024, driven by broader
conversations around market competitiveness and
company ambition. We are aware of this, and are
cognisant that executives at truly global organisations
will receive remuneration that is commensurate with
that at their global peers. However, we do not believe
that this should be a justification for continual
increases in pay quantum for all executive teams,
particularly at a time when the broader workforce is
navigating a high cost of living environment at a lower
level of pay in real terms.
We believe that executive pay must be accompanied by
robust justification, and disclosure on how the broader
stakeholder experience has been taken into account.
We welcome the Investment Association’s revised
Principles of Remuneration for the UK market, which
encourage companies to consider flexible approaches
that are different from the conventional bonus and longterm incentive plan (LTIP) packages used by many in the
market. We see this as a good opportunity to re-
Q. Have we made any changes to our climate change
voting policy this time?
A. In our view, it is important to review our benchmark
indicators of good practices on a regular basis, in order to
recognise improved company performance while also
seeking to continue capturing companies that appear to be
failing to adequately manage climate-related risks.
The Transition Pathway Initiative’s Management Quality score
continues to form a part of our voting approach to climaterelated issues. To develop a more nuanced approach, we
now consider certain sub-criteria below different levels when
making an assessment of overall risk management in
addition to the headline score.
We use several other assessments and watchlists as part
of our broader climate change voting policy, and will be
making further updates to how we integrate these for 2025.
For example, we plan to use a benchmark assessment of
methane-leak risk management at upstream oil and gas
companies as an indicator of potentially poor climate-related
risk management. Other indicators that we use include those
covering potentially inadequate risk management of
deforestation and a wider appraisal of the quality of climaterelated risk and opportunity management.
Overall, in common with the appraisal of governance
quality across many different dimensions of company
performance, we recognise the challenge in relying on
third-party indicators of climate-related risk
management. For this reason, we have increased the
range of indicators considered and we seek to engage
with companies to inform our final approach to voting
recommendations, where practicable.
