Date of publication - 31 May 2023

Compagnie de Saint-Gobain SA

Meeting: 8 Juny 2023

Summary of Resolution: Item 1 & 2: Approve Financial Statements and Consolidated Financial Statements

Candriam's Vote Intention: Abstain (against management recommendation)

Rationale: Compagnie de Saint-Gobain S.A. (SG) expanded its inclusion of climate factors into its sensitivity analysis in FY2022. It provided a sensitivity analysis of most of its industrial assets to carbon pricing, emissions allowances and achieving its own targets through to 2030, disclosing more detailed carbon price assumptions than FY2021. However, the inputs to this sensitivity analysis did not entirely align with achieving the IEA NZE scenario. SG also failed to explain whether or how it had made any climate-related considerations in the preparation of its financial statements, such for impairment testing of goodwill and PPE, and was therefore inconsistent given its reported targets, strategy and risks. The auditors KPMG and Deloitte did not substantially improve their reporting of whether or how they assessed SG's financials for the impacts of climate considerations. They did not appear to audit SG's sensitivity analysis, raise any issues around consistency or discuss SG's alignment with net zero by 2050.
Therefore we will vote ABSTAIN on both items on Financial Statements, to commend the efforts made since last year on the financial statements, but to also highlight that we expect improvements on how Auditors are taking climate into account in their audit (no other audit-related item to target).

Date of publication - 26 May 2023

Exxon Mobil Corporation

Meeting: 31 May 2023

Summary of Resolution: Item 15 – Publish a Tax Transparency Report

Candriam's Vote Intention: For (against management recommendation)

Rationale: At Candriam, we believe that the demand formulated by this resolution is fully aligned with our Proxy Voting Policy as it pushes for more transparency by asking for a country-by-country tax report, which enables us to ensure our investee companies pay their fair amount of tax and assess whether they are involved in aggressive tax planning. Although ExxonMobil argues that much of the asked information is already published, we believe that such a report is a negligible increased burden for the company and would only support the company’s argument that it is both collaborating with various tax authorities in the jurisdictions it operates and subject to some of the highest tax rates in the world. Especially, providing figures on its contributions on a country basis would comfort the company’s statement as well as enable shareholders to assess the risks and opportunities arising from the company’s tax practices.

Candriam considers that the country-by-country reporting of information does not lead to the disclosure of sufficiently sensitive or confidential information as to confer a competitive disadvantage as also specified by the 2018 Review of the EU Commission. We believe that reporting on tax practices and providing stakeholders with more granularity on the different company’s paid taxes should not be seen as a competitive disadvantage. In contrast, we see among the company’s peers that some whose reporting is in line with GRI Tax Standard benefited from such disclosure. Finally, since coming legislation will require ExxonMobil to align with such reporting practices, taking the lead on this would help the company to gain more understanding from investors on its tax practices and on the challenges it faces. As such, we vote FOR this shareholder proposal.

Date of publication - 22 May 2023

Amazon.com

Meeting: 24 May 2023

Summary of Resolution: Item 11 – Publish a Tax Transparency Report

Candriam's Vote Intention: For (against management recommendation)

Rationale: At Candriam, we believe that the demand formulated by this resolution is fully aligned with our Proxy Voting Policy as it pushes for more transparency by asking for a country-by-country tax report, which enables us to ensure our investee companies pay their fair amount of tax and assess whether they are involved in aggressive tax planning. Although Amazon.com argues that much of the asked information is already published, we believe that such a report is a negligible increased burden for the company and would only support the company’s argument that it is both collaborating with various tax authorities and a significant tax contributor in the jurisdictions it operates. Especially, providing figures on its contributions on a country basis would comfort the company’s statement as well as enable shareholders to assess the risks and opportunities arising from the company’s tax practices.

Candriam considers that the country-by-country reporting of information does not lead to the disclosure of sufficiently sensitive or confidential information as to confer a competitive disadvantage as also specified by the 2018 Review of the EU Commission. We believe that reporting on tax practices and providing stakeholders with more granularity on the different company’s paid taxes should not be seen as a competitive disadvantage. In contrast, we see among the company’s peers that some whose reporting is in line with GRI Tax Standard benefited from such disclosure. Finally, since coming legislation will require Amazon.com to align with such reporting practices, taking the lead on this would help the company to gain more understanding from investors on its tax practices and on the challenges it faces. As such, we vote FOR this shareholder proposal.

Summary of Resolution: Item 22 – Report on Efforts to Reduce Plastic Use

Candriam's Vote Intention: For (against management recommendation)

Rationale: Amazon does not disclose how much plastic packaging it uses but is believed to be one of the largest corporate users of flexible plastic packaging which cannot be effectively recycled. A recent report by Oceana estimates that Amazon generated 599 million pounds of plastic packaging waste in 2020 and up to 23.5 million pounds of this waste entered the world’s marine ecosystems. Flexible packaging represents 59% of all plastic production but an outsized 80% of plastic leaking into oceans. Amazon has no goal to make all its packaging recyclable.  
Amazon is falling behind its peers. Unilever, with the most significant corporate action to date, agreed to cut virgin plastic packaging by half by 2025, eliminating 100,000 tons. At least seventeen other public consumer goods companies including competitors Walmart and Target have virgin plastic reduction goals. IKEA pledged to eliminate all plastic packaging by 2028.
Reducing Amazon’s plastic packaging and making all its packaging recyclable are necessary steps to combat the plastic pollution crisis, and shareholders would benefit from additional information on how the company is managing risks related to the creation of plastic waste.

Summary of Resolution: Item 23 - Commission Third Party Study and Report on Risks Associated with Use of Rekognition

Candriam's Vote Intention: For (against management recommendation)

Rationale: Facial Recognition Technology (FRT) is being rapidly developed and deployed around the world. It is estimated that one billion surveillance cameras in operation around the world, all capable of feeding images into an FRT system. This comes with grave risks to our privacy and our freedom (e.g., freedom of movement, freedom of association). As regulation is by nature reactive and slow, it is essential that companies operating in this technology display impeccable ethics, great care, and a high level of transparency to ensure its safe use before strong regulation is implemented.

In June 2020, following the controversial use of FRT by police force on protesters during the “Black Lives Matter” movement, Amazon implemented a moratorium on use of their facial recognition product Rekognition to law enforcement agencies following the move of other large US tech firms. This decision was a de facto admission that the technology can cause serious harm to human rights and should be researched, developed, used and marketed with extreme care. Since, Facebook has scrapped their FRT functionality on their platform and Microsoft stopped all sales of FRT to police forces, both citing risks to society.

For these reasons we feel that it is crucial that Amazon conducts a rigorous assessment of risks linked to Rekognition in particular and to FRT in general.
A vote FOR is therefore warranted.

Date of publication - 12 May 2023

ConocoPhillips

Meeting: 16 May 2023

Summary of Resolution: Item 9 - Report on Tax Payments 

Candriam's Vote Intention: For (against management recommendation)

Rationale: At Candriam, we believe that the demand formulated by this resolution is fully aligned with our Proxy Voting Policy as it pushes for more transparency by asking for a country-by-country tax report, which enables us to ensure our investee companies pay their fair amount of tax and assess whether they are involved in aggressive tax planning. Although ConocoPhillips argues that much of the asked information is already published, we believe that such a report is a negligible increased burden for the company and would only support the company’s argument that it is both collaborating with various tax authorities and a significant tax contributor in the jurisdictions it operates. Especially, providing figures on its contributions on a country basis would comfort the company’s statement as well as enable shareholders to assess the risks and opportunities arising from the company’s tax practices.

Candriam considers that the country-by-country reporting of information does not lead to the disclosure of sufficiently sensitive or confidential information as to confer a competitive disadvantage as also specified by the 2018 Review of the EU Commission. We believe that reporting on tax practices and providing stakeholders with more granularity on the different company’s paid taxes should not be seen as a competitive disadvantage. In contrast, we see among the company’s peers that some whose reporting is in line with GRI Tax Standard benefited from such disclosure. Finally, since coming legislation will require ConocoPhillips to align with such reporting practices, taking the lead on this would help the company to gain more understanding from investors on its tax practices and on the challenges it faces. As such, we vote FOR this shareholder proposal.

Date of publication - 26 April 2023

SAP SE

Meeting: 11 May 2023

Summary of Resolution: Item 8.3 - Elect Punit Renjen to the Supervisory Board

Candriam's Vote Intention: For (aligned with management recommendation)

Rationale: As an active investor, Candriam engaged with SAP SE since 2020 within the context of our pre-AGM engagement campaign to share our concerns about the influence of the non-independent chairperson on board committees and the company’s remuneration structure. We shared with the company in our AGM question submitted at the 2022 meeting that the chairperson of the supervisory board, Hasso Plattner, has been involved in several committees at the board level which increases our concerns about his high influence as a long-tenured director at the company. While noting that he has been handing over his responsibilities to the other members of the board gradually over the past years, our concerns remained unchanged as he stayed as a member of the sub-committees of the board.
 
During our engagement, however, the company announced that Hasso Plattner leaves office at the May 2024 AGM and a new successor would be appointed at this meeting. Considering that the company has nominated Punit Renjen as an independent candidate for the upcoming elections and he will also be the designated successor to the chairperson of the board, our concerns on the biased functioning of the committee work, continuity and the smooth transitioning of the board were cleared.
 
In the absence of any concerns, we support the election of Punit Renjen.

Summary of Resolution: Item 9 - Approve Remuneration Policy for the Management Board

Candriam's Vote Intention: For (aligned with management recommendation)

Rationale: As an active investor, Candriam engaged with SAP SE since 2020 within the context of our pre-AGM engagement campaign to share our concerns about the influence of the non-independent chairperson on board committees and the company’s remuneration structure.  After two years of engaging, we finally submitted two AGM questions at the company’s 2022 shareholders’ meeting on the personnel and governance committee composition and the remuneration structure. Although the answers at the meeting were not satisfactory, the company reached out to its shareholders in the upcoming months to address the concerns raised by the investors and to communicate the changes they wish to bring to their remuneration policy.
We acknowledge that with this revised policy, the company:

• introduces ESG targets in its LTI plan which better reflects the company’s business performance in the executive remuneration package,
• removes the retention share units component which was solely time-based,
• removes the special bonus scheme from the policy,
• introduces shareholding guidelines to align executives’ interests with the other stakeholder,
• lowers the total maximum compensation,
• introduces a deferred element into the STI compensation which further strengthens the long-term alignment of the total package,
• Adopts a claw-back clause.

While the newly-brought improvements clear a majority of our concerns, there are two remaining questions that will be closely monitored in the upcoming years. First, we note that the company keeps the discretion to adjust the variable remuneration upwards and downwards to a certain limit. However, the company communicated in our engagement that such cases will be explained and always be accompanied by a compelling rationale in the compensation reports. Secondly, the company has not changed the change-of-control provision which would result in the accelerated vesting of 50 percent of performance share units which would otherwise be forfeited and this is not in line with the best market practices nor aligned with the G. 14 of the German Corporate Governance Code. As such, we will keep engaging with the company on this matter.
 
Overall, considering the changes that the new policy brings for further alignment with SRD II, we support this resolution.

Date of publication - 21 April 2023

AIR LIQUIDE SA

Meeting: 3 May 2023

Summary of Resolution: 1 & 2 - Financial and consolidated financial statements

Candriam's Vote Intention: Abstain (against management recommendation)

Rationale: Air Liquide has shown again this year its ability to bring improvement following investor engagement, notably by adding a scope 3 lobbying policy (e.g., in recent years, brought Net Zero commitment in 2021, Scope 3 inclusion in 2022). As one of the top emitting companies in our portfolios, we need consistent proof and quantitative reassurance that Air Liquide accounts are consistent with the transition challenge we are all facing. However, Air Liquide does not provide details around how it made this determination, such as the estimates and assumptions it used for short- and long-term carbon pricing or the useful lives on carbon-intensive assets. Therefore, to acknowledge the progress but to highlight the improvements needed, we vote Abstain.

Date of publication - 21 April 2023

CRH PLC

Meeting: 27 April 2023

Summary of Resolution: Item 1 – Accept financial statements and statutory reports

Candriam's Vote Intention: Against  (against management recommendation)

Rationale: Despite some improvements, we cannot approve CRH’s financial statements where there remain questions over critical accounting assumptions such as the carbon price and discount rates used, and where they fail to provide the requested visibility for a 1.5°C pathway. This vote is taking into consideration the long standing engagement led under the umbrella of IIGCC, where Candriam has been active since 2019.

Summary of Resolution: Item 4.e. – Re-Elect Shaun Kelly as Director

Candriam's Vote Intention: Abstain  (against management recommendation)

Rationale: CRH plc accounts continue to lack visibility for 1) how material climate risks are reflected in critical accounting assumptions, notably the carbon price and discount rates used in impairment testing, 2) how precisely CRH’s medium to longer-term decarbonisation targets are integrated into its financial statements, and 3) the implications of a 1.5°C pathway for its financials given the results of the 1.5C scenario in CRH’s TCFD disclosure suggests this is high probability and high impact. However, in recognition of the efforts made by the company on its accounts and the long standing engagement with the IIGCC Lead where Candriam has been active since 2019, we will vote Abstain this year.

Summary of Resolution: Item 6 - Ratify Deloitte Ireland LLP as Auditors

Candriam's Vote Intention: Against  (against management recommendation)

Rationale: While Deloitte provides additional commentary in its UK report on how climate risks have been considered, and the consistency between the financial statements and climate targets, they offer no disclosure on how the medium to longer term decarbonisation targets are accounted for, or views on the carbon price assumptions used. No comment is provided on the sensitivity to a 1.5°C pathway, despite CRH’s net-zero ambition. This vote is taking into consideration the long standing engagement led under the umbrella of IIGCC, where Candriam has been active since 2019.

Date of publication - 20 April 2023

ENGIE SA

Meeting: 26 April 2023

Summary of Resolution: B - Amend Articles 21 and 24 of Bylaws Re: Climate Strategy

Candriam's Vote Intention: For (against management recommendation)

Rationale: Despite ENGIE’s efforts to decarbonise its activities, investors currently lack significant pieces of information in order to evaluate the company’s projected plans against a 1.5°C pathway with low or no overshoot. Although the company has a SBTi well-below 2°C target, we have been reminded by the Intergovernmental Panel on Climate Change (IPCC) that any decimal in temperature increase above 1.5°C will have significant negative impacts. The Investor Coalition is not asking ENGIE to change its strategy. Rather, it is asking for improved disclosure to gauge the gap between ENGIE’s current projected trajectory and what would be required of the company to align its decarbonisation plan with requirements of 1.5°C scenarios. This assessment is particularly relevant in light of ENGIE’s purpose (“raison d’être”) to “act to accelerate the transition towards a carbon-neutral economy”. As investors, we are bound by our climate commitments and legal obligations. Disclosure on relevant data of the company’s climate strategy, including assumptions and scenarios, are key for proper shareholder understanding. In the process leading up to the filing, the investors have had multiple meetings with ENGIE’s Board of Directors and teams and have worked with a number of stakeholders including energy and climate experts in the regular course of business as well as NGOs and lawyers. The wording of the resolution was carefully crafted and aims at ensuring that it is receivable from a legal standpoint. The fact that ENGIE’s Board of Directors has decided not to support it demonstrates that the resolution is ambitious and pushes the company to go further in its disclosure. Furthermore, while we appreciate ENGIE’s commitment “to consult its shareholders on its climate strategy every three years or in the event of a significant change in it”, we regret that the company was unable to commit to including specific information in their progress report, which will now be presented at every annual general meeting. This prevents investors from knowing whether they will be able to assess Engie’s alignment with a 1,5°C scenario. Therefore, we disagree with the Board of Directors’ statement that “ENGIE has responded to the essential concerns expressed by the investors who proposed this resolution”. We had a constructive dialogue with Engie throughout the whole process, and our vote For this resolution should be seen as a further encouragement for disclosure to have a well-informed conversation about ENGIE’s contribution to climate change impacts.

Date of publication - 19 April 2023

Kingspan Group Plc

Meeting: 28 April 2023

Summary of Resolution: Item 3a – Re-elect Jost Massenberg as Director

Candriam's Vote Intention: For (aligned with management recommendation)

Rationale: Our active engagement with the company over the past 3 years has covered many topics including the lack of diversity at the board level which impacts in our view the ability to exercise a real counter-power at the company. Candriam encourages diversity at the board level in all aspects including gender, skills and international representation. We acknowledge that the company commits to increasing female representation to a minimum of 40 percent and to increasing international representation on the board over the years. With the successive appointment of  Senan Murphy in Q4 2022 and  Louise Phelan, the diversity of competencies has increased among independent directors and the representation of women at the board level has increased to 36 percent which is considered a strong improvement. However, we raise concerns about the fact that Ms Phelan’s appointment has not been put up for shareholders’ vote at this AGM although her appointment has been confirmed before the meeting date. With this practice, shareholders are not able to voice their opinion on her appointment for another year and cannot express potential concerns on the recruitment & nomination processes, including whether it could be relevant to seek assistance from external recruitment agencies to broaden the scope of candidates beyond Board members’ personal networks.
Moreover, we still believe that the board would benefit from a wider representation of the regions in which it operates (over 46 percent of the revenue was generated outside of western and southern Europe and the remaining 54 percent includes France, Benelux, Spain and Britain). While it is noted that the appointment of Senan Murphy is a step in the good direction of enhancing industry expertise, we encourage the company to appoint new Board independent members from various nationalities with strong international experience who would sufficiently respond to the key business challenges.
Given also the fact that Kingspan is not planning to put another proposal linked to its Planet Passionate strategy on the ballot nor an annual resolution linked to the progress towards the targets and objectives as set in the strategy, the board members appointed should be skilled enough to identify and react to the company’s key sustainability challenges including climate-risk management and other sustainability risks. On this point, we strongly encourage the company to adopt progress votes on the targets and objectives set in the strategy.
Appreciating and acknowledging the company’s efforts in constructing an inclusive dialogue with its stakeholders and expecting that continuous efforts will be paid to further increase the diversity on the board in all aspects, we vote FOR the election of Jost Massenberg.

Date of publication - 18 April 2023

The Coca-Cola Company

Meeting: 25 April 2023

Summary of Resolution: Item 9 –  Report on Risk Due to Restrictions on Reproductive Rights

Candriam's Vote Intention: For (against management recommendation)

Rationale: Reproductive rights actually referred to in the resolution are fundamental human rights: as expressed by human rights bodies such as the Office from the High Commissioner on Human Rights [1], access to abortion is a fundamental right. Restricting such rights impact not only individuals and their relatives but also their whole personal and professional life. In that respect, Candriam brings its support to the resolution as corporates will indeed be impacted by such laws restricting access to reproductive technologies. With that being said, our support is not without concern. Indeed the wording of the proposal may have an impact of focusing on a specific group of employees only and asking a company to report on the risks and costs caused by the above legislation which may reinforce prejudices about working parents and deepen discriminatory behaviours based on gender. While the wording of the proposal only mentions reporting on risks and costs associated with the said laws (which is an intentional choice by the filer to eliminate the possibility of the proposal being rejected by the issuer), we share the objective that is mentioned in the supporting statement by the filer that the company should demonstrate the consequences of such laws on employee hiring, retention, and productivity, and decisions regarding closure or expansion of operations in states proposing or enacting restrictive laws and strategies such as any public policy advocacy by the company, related political contributions policies, and human resources or educational strategies.
In that context, we reiterate Candriam defends non-discrimination values and in particular promotes measures supporting
• working parents ( flexible work arrangement, quality childcare options, adapted health coverage, prevention of discrimination etc)
• workers seeking access to reproductive technologies and forced to travel out of their residence state due to laws restricting reproductive rights
• any corporate initiative advocating against state laws restricting access to fundamental human rights.
We believe such measures, as they participate in the well-being of employees, will also increase their level of engagement and ultimately serve the sustainable fundamentals of the company.
[1]https://www.ohchr.org/sites/default/files/Documents/Issues/Women/WRGS/SexualHealth/INFO_Abortion_WEB.pdf

Date of publication - 11 April 2023

LVMH Moet Hennessy Louis Vuitton SE

Meeting: 20 April 2023

Summary of Resolution: Item 4 – Approve Auditors' Special Report on Related-Party Transactions

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale: Every year, LVMH submits to the shareholders’ vote its related party transactions involving mainly executive directors who also hold shares at LVMH. In line with best market practices, related parties should not participate in the vote submitted to shareholders on such transactions with related parties may represent a material conflict of interests and it is the board’s responsibility that all shareholders are treated fairly. Therefore, such transactions should be up for a vote by non-conflicted shareholders only. The controlling shareholding group has been voting at AGMs on related party transaction items for which it can be considered conflicted.

Moreover, due to the legal process in place in France, auditors are not required to give their opinion on the transaction itself nor to assess whether it is in the interest of shareholders. It is the legal responsibility of the concerned individuals to inform the chair when they are an interested party in a transaction. As the chairperson and CEO positions are combined at LVMH and the related party transactions are mainly concerning him, we raise legitimate concerns on the review and approval process of such related party transactions and vote AGAINST this item.

Summary of Resolution: Item 5 – 9: Re-election of Directors

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale: As an active investor, Candriam engaged with LVMH for four years consecutively to share our concerns on the company’s governance structure. Given that the outcome of the engagement was clear that the company do not intend to make improvements on the concerns we raised and kept the position that as a family-owned company, the best market expectations and practices cannot be applicable to its structure. As our escalation, we submitted questions on four main topics at your AGM in 2022, however, the answers provided were elusive and veiled.

Our main concern was on the balance of powers at the supervisory level as the current structure of combined CEO and chairperson roles (given also the lack of a succession policy, it represents a serious degree of key-person risk), the long tenure of the lead independent director and the overall independence of less than 40 percent (calculation based on the AFEP-MEDEF code defining independence classification) pose a risk to resolving potential conflicts of interest and weaken the company’s risk management ability (as also recognized by AMF multiple times). As this structure raises questions on the board’s ability to oversight the management actions thoroughly and the incumbent board members have not been responsive to the concerns raised in this matter, we vote AGAINST the re-election of incumbent board members.  Also, we would like to underline that the company is expected to commit to announcing its succession planning for the roles of CEO and chairperson and the roadmap for the handover of the tasks and responsibilities as the lack of such visibility may become a material risk that is threatening the business continuity.

Summary of Resolution: Item 14: Approve Compensation of Bernard Arnault, Chairman and CEO

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale:We draw attention to the fact that LVMH is lagging behind the best market practices for the disclosure of weightings for each non-financial criteria, threshold, target and maximum level of each performance metric attached to the variable remuneration. The company argues that no details can be given due to confidentiality reasons vis-à-vis competitors, however, ex-post information on the target and achievement levels do not pose a potential confidentiality risk and the justification provided cannot remain valid. Without such information, it is not possible for investors to assess whether or not the interest of executives is aligned with those of other stakeholders.

Moreover, the nature of the financial criteria attached to the long-term incentive plan is short-term oriented and the company failed to provide information on the non-financial metric used for the assessment. As such, we vote AGAINST this item.

Summary of Resolution: Item 17: Approve Remuneration Policy of Chairman and CEO

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale: Reiterating our concerns put under Item 14, we would like to underline that the company’s remuneration policy lags behind the best market practices and investor expectations due to the fact that:

• There is a lack of disclosure on the nature of the LTIP criteria, vesting scales and performance period taken into account for the assessment.
• The company failed to provide sufficient information on the post-mandate vesting of unvested awards for the executives.
• The board could modify the components of the remuneration under exceptional circumstances and such a level of derogative power may lead to excessive payouts. Furthermore, CEO and Vice-CEO can be granted special remuneration in case of specific assignments from the board and no cap or further details are disclosed.

These concerns are aggravated by the fact that the board is not sufficiently independent (as explained under Item 5-9) and the company’s remuneration committee is only 50 percent independent which raises concerns about the ability of objective oversight of the company’s remuneration practices. We believe that enforcing a sufficiently independent remuneration committee (ideally 100 percent) would have a positive impact on increasing disclosure levels on the company’s remuneration practices and provide some level of confidence for the investors that the company’s practices are overseen by independent members of the board.

Date of publication - 4 April 2023

TELEPERFORMANCE

Meeting: 13 April 2023

Summary of Resolution: Item 6 - Approve Compensation of Daniel Julien, Chairman and CEO

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale: As an active investor, Candriam continuously engaged with Teleperformance both directly and in collaboration with other investors to share our concerns and examples of good practices in both governance and social topics. Despite some improvements on the social pillar (setting up a CSR committee and increased disclosure of human capital),  significant risks remain. Apart from the concerns on the combined role of CEO and chairman and the long-tenure of auditors, executive remuneration has been one of the key discussion points with the company as the financial and non-financial metrics for the variable remuneration plans and the vesting scale of those plans lack stringency.
Under this item, we reiterate our concern that the non-financial metrics chosen by the company to assess its performance are not considered reflective of the recent challenges the company has faced. We find the use of ‘Great-place-to-work’ surveys insufficient as the main indicator of employee well-being and satisfaction. We find an annual qualitative survey insufficiently informative or transparent in an employee-intensive business.
Furthermore, considering the recent events in Colombia and in the US, it is confirmed that the company’s choices of non-financial metrics are not indicative of its performance as the achievement was put at 100 percent while the events caused reputational risk for the company, allegations of bad work conditions and a decrease in the company’s stock price.
Considering all concerns explained above and also the presence of organic revenue growth metric both in bonus and LTI and the total remuneration exceeding two times the median of peers, we vote AGAINST this item.

Summary of Resolution: Item 3 – Approve Remuneration Policy

Candriam's Vote Intention: Against  (against with management recommendation)

Rationale: Following a long-lasting engagement with the company and due to the concerns about the company’s choice of non-financial metrics in executive remuneration, we submitted a question at the AGM in 2022 (please refer to answers provided to investors' coalition’s questions, p9 https://www.teleperformance.com/media/neudhyed/questions-ecrites-en-vdef.pdf)  asking the company to investigate investor views on whether a more verifiable data point that can be measured over time and benchmarked against other companies can be used.
We are pleased that the company has reconsidered the opinion expressed in response to our questions and that it has decided to extend the number and quality of indicators attached to compensation from 2023. The attrition rate is now one of them. With that, we commend and acknowledge that the company has added ‘attrition rate’ to the annual bonus scheme. However, given that 1) the overall weight attached to this metric is 5 percent while the other employee engagement metrics  (based on satisfaction surveys) have 15 percent in the whole bonus payout and 2) the target level is already achieved by the company in the past year in spite of the strong controversies experienced by the company, particularly over the last quarter of 2022, we raise questions about whether the targets are relevant and challenging for the company.
Considering the concerns stated above and also the lack of claw-back clause in the LTI and the high level of LTI grant despite the sharp fall in the stock price, we vote AGAINST this item.

Date of publication - 31 March 2023

BFF Bank SpA

Meeting: 13 April 2023

Summary of Resolution: Item 1 – Approve Financial Statements

Candriam's Vote Intention: Abstain (against management recommendation)

Rationale: Since 2021, we held several engagement calls with the company to share our concerns about the lack of transparency and alignment with the best market practices. While some of them were addressed in 2022, the policy and the disclosure practices under the remuneration report still fall short of expectations and this concern was shared by other investors given the high dissent received. So far, we have signalled our discontent through our votes against the remuneration-related items only and through engagements held with the company which did not deliver the expected outcome. Furthermore, we note that the AGM will not be broadcasted and shareholders are given the option to attend and vote via the company-designated proxy holder only. This diminishes shareholders’ rights to actively participate in the company’s AGM and interact with the management and the board during the meeting. In such cases, we expect our investee companies to ensure that shareholders’ rights are protected during the meeting and that the meeting is not held behind closed doors without any interaction with the shareholders.
With that, we wish to deliver our message to the company by applying an abstain vote on its financial statements.

Summary of Resolution: Item 3 – Approve Remuneration Policy

Candriam's Vote Intention: Against (against management recommendation)

Rationale: Since 2021, we held several engagement calls with the company to share our concerns on the lack of transparency and alignment with the best market practices. While some of them were addressed in 2022, the policy and the disclosure practices under the remuneration report still fall short of expectations and this concern was shared by other investors given the high dissent received (40 per cent in 2022). As we believed that the company should be guided collaboratively to increase its disclosure practices and align the remuneration package of the CEO with the best market practices, a collaborative engagement has been held in March 2023 under the moderation of the Investment Managers’ Committee (p22 protocollo_funzionamento_112022.pdf (comitatogestori.it) during which the shared concerns were explained to the company. While we acknowledge the improvements that the new policy brings (including more material and relevant ESG metrics next to customer satisfaction), the company still lags behind the market expectations regarding disclosure and transparency.

Furthermore, we raise significant concerns about the composition of the remuneration committee as the company failed to provide the public with compelling explanations after the resignation of an independent member from the board which signals a potential conflict of interest. Given also the lack of reaction to the high dissents over the years, we strongly encourage the board to revise the composition to have a fully independent committee with remuneration experts present.
Considering all the concerns explained above, we vote AGAINST this item.

Summary of Resolution: Item 4 – Approve Severance Payments Policy

Candriam's Vote Intention: Against (against management recommendation)

Rationale: Linked to our collaborative engagement and the concerns raised historically, we vote AGAINST this item as the company's proposed policy on termination payments is not in line with acceptable market practice due to the fact that the potential severance payments will be calculated based on the average of the total variable compensation paid/assigned in the last three years, considering stock options/phantom stock options (instead of only the value of the MBO paid in the last three years). Moreover, the company has failed to address concerns raised in the last year regarding the quantum of the total potential termination payments. Lastly, we raise concerns on the terms of golden parachute payments as the policy provides that the reduction of the CEO’s powers and/or remuneration during any term of office prior to the date of approval of the company’s financial statements on Dec. 31, 2026. It is not clear from the wording of the policy which situations would be considered as ‘substantial reduction’. The company has provided their explanations to the investors who joined in the collaborative engagement, however, the wording of the policy still bears the risk of granting golden parachute payments in case of a substantial reduction of powers and remuneration.
We encourage the company to revise the wording of the policy to precise the conditions under which a golden parachute payment can be made.

Summary of Resolution: Item 5 – Approve Second Section of the Remuneration Report

Candriam's Vote Intention: Against (against management recommendation)

Rationale: Since 2021, we held several engagement calls with the company to share our concerns on the lack of transparency and alignment with the best market practices. While some of them were addressed in 2022, the policy and the disclosure practices under the remuneration report still fall short of expectations. We still consider that without sufficient information on the exact target levels and the assessment of each metric, it is not possible to assess whether the schemes are stringent enough. The company stated during the engagement call that they do not provide ex-post disclosure on the target levels as such information is price sensitive. However, we find that full disclosure on the ex-post target levels and the assessment of the performance already achieved during the performance period are required for stakeholders to assess the objectivity and the stringency of the plans. Considering all together with the fact that the 2022 annual bonus can be paid in full even though some objectives were underachieved, we vote AGAINST this item.