French public pension fund Erafp has expanded its shareholding policy and set out its voting policy for 2017.
Among changes announced by the institution, Erafp will now require from the asset managers it selects to initiate dialogue with companies involved in proven violations of international standards.
“Following the revision of the Erafp’s SRI charter in 2016, the SRI approach was enhanced by a mechanism for more in-depth monitoring of controversial issues. In this context, the management companies are required to monitor the controversial issues to which the issuers may be exposed.
“As part of Erafp’s shareholder engagement, discussions are entered into with the companies involved in proven breaches of international standards, particularly with regard to the following fundamental principles:
- Universal Declaration of Human Rights
- ILO Declaration on Fundamental Principles and Rights at Work,
- Rio Declaration on Environment and Development
- United Nations Conventions (particularly that against corruption)
These discussions are conducted by the Erafp mandate-holder concerned by the investment.”
Regarding its voting policy, Erafp will increase its focus on the transparency of companies’ business and financial situations.
All companies with revenues of more than €750m will be monitored through financial reporting on a trial basis.
In 2017, the French pension fund also expects all publicly-traded companies to implement voting on the remuneration of corporate officers.
“Erafp will give careful consideration to the remuneration committee’s responses following any disputes arising from such votes,” it said.
For the pension fund, the remuneration of top company officers shall serve as an example in order to ensure strong social cohesion within the company.
Erafp highlighted that when annual pay rises are limited for employees or the company has to implement a major redundancy programme, remuneration of company officers must reflect this (meaning no increase in fixed remuneration, no annual bonus, no stock options or bonus share grants, limits on the variable portion).
“The socially acceptable maximum amount of total remuneration (salary, benefits, options, bonus shares and top-up pension plan contributions) corresponds to 100 times the minimum salary in force in the country in which the company’s registered office is located, which in France corresponds to the national minimum wage (SMIC).
“If there is no legally defined minimum salary in the country in which the company’s registered office is located, other benchmarks may be used, such as the lowest salary paid by the company in the country in which its registered office is located,” Erafp said.
Within its 2017 guidelines, Erafp encourages companies to submit a maximum level of indebtedness that must not be exceeded for approval by the shareholders at the general meeting, in order to limit risks and contribute to the sustainable development of the companies.
Another theme the French pension fund will enhance its focus on this year is the proportion of women on boards of directors.
“After increasing the minimum threshold for women’s representation from 30% to 35% in 2016, Erafp has raised it further for 2017, from 35% to 40%, as required by the Copé-Zimmermann law,” it has announced.