ESG feature – Executive pay
Remuneration allows you to understand the credibility of a company’s ambitions.
Michiel van Esch, Robeco
from being proactive when it comes to executive pay. It is a common misconception, according to Law, that index managers do not have the stewardship tools to drive change. “Because we do not have the discretion to sell specific compa- nies, stewardship is the only tool available to us to protect and enhance the value of the assets entrusted to us,” she adds. “The inability to sell means that index managers are there for
the long term and will be present long after the current board and management team.” BlackRock is essentially a permanent shareholder. “Perma- nency provides a unique opportunity to encourage business practices which are consistent with delivering long-term sus- tainable financial returns,” Law says. BlackRock has more than 45 members in its stewardship team, with analysts based in seven countries. This global cov- erage with regional presence enhances the analysts’ under- standing of the local context in which the companies operate. “Local context is important to do stewardship well, “Law says. In addition, the BlackRock stewardship team is also able to leverage the insights of 200 active BlackRock investors. “We will be looking closely at the decisions boards make in relation to pay this year to see if outcomes are corelated with the employee experience and business performance over a sustained period,” Law says. BlackRock will use its vote to hold directors accountable for their decisions. Human capital management is another of BlackRock’s engagement priorities. “The social pillar of ESG will come further into focus as a result of the crisis,” Law says. “How companies pursue sustainable business practices, diversity, the experience of its workforce and the sustainability of its supply chain are considerations that have been brought to the fore due to the crisis.” Not every company is open to such discussions, but the num- ber of those who are is growing, according to van Esch. “If there is a stakeholder philosophy then there will be an under- standing that this is part of a societal debate,” he says. “Increasingly, we are seeing that that is understood.” It is not just public pressure that will keep this understanding in the conscience of remuneration committees. “You will see more emphasis on pay in the coming years due to regula- tion,” van Esch says.
“Executive pay is something that will remain on the agenda and will receive a lot of focus,” he adds.
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Issue 96 | September 2020 | portfolio institutional | 43
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