From the point of view of a proxy advisor, the remuneration system for members of the Management Board is not forward-looking.
(Photo: dpa)
Frankfurt Before its general meeting, Commerzbank encountered headwind from a shareholder advisor: the voting rights advisor Glass Lewis has again recommended that shareholders vote against the remuneration system proposed by the bank at the general meeting. This emerges from a study by Glass Lewis, which is available to the Handelsblatt.
Glass Lewis believes that the planned remuneration system contains some improvements, but one of the main points of criticism has not changed. “We are concerned about the reliance of the entire incentive system on a backward-looking performance timeframe with no forward-looking goals,” the voting rights recommendation reads.
“In general, we believe that companies benefit when managers receive incentives based on long-term, forward-looking goals that are aimed at long-term growth,” argues the proxy advisor.
Glass Lewis had already criticized this aspect in the run-up to the 2020 Annual General Meeting, when Commerzbank last had its shareholders vote on the remuneration policy. At that time, 23.55 percent of the shareholders rejected the proposed remuneration system.
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If a company’s free float support rate is less than 80 percent, then that is a “reasonable level of shareholder protest,” writes Glass Lewis. In such a case, a company should respond to points of criticism.
Group target should be calculated differently
Commerzbank’s currently proposed remuneration system now also differs from its predecessor in many respects. The share-based portion of the variable compensation is to increase from the current 50 percent to 60 percent. In addition, concrete qualitative and quantitative sustainability goals should also play a role in the calculation of bonuses in the future.
The group target will also be calculated differently in the future: instead of economic value added, there will be a trio of indicators consisting of the operating result, the net return on tangible equity and sustainability targets.
Glass Lewis can also gain something from many of the changes and speaks of “numerous improvements”. Among other things, the performance of the board members is measured against a wide range of financial indicators and specific sustainability indicators.
However, Glass Lewis is critical of the fact that the long-term bonus components will no longer be retained for a full five years in the future, but that one fifth of the amount will be paid out every year over a period of five years.
Since, from Glass Lewis’ point of view, nothing has changed in the “basic structure” of the compensation system rejected by a large minority in 2020 – i.e. in backwardness – the voting rights advisor recommends rejecting the proposal.
The vote of the shareholders on the remuneration system of a stock corporation is not binding. However, in the event of a rejection, companies are obliged under the German Stock Corporation Act to present a reviewed remuneration system for a vote at the latest at the following ordinary general meeting.
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