Dutch pension fund campaigns against executive pay rises

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Pensioensfonds Zorg en Welzijn (PGGM), the second biggest pension fund in the Netherlands has announced a number of guidelines in order to campaign against excessive corporate salaries.

“We can no longer let our voting guidelines and vote record do the talking on our behalf. Renumeration is important enough for long-term sustainable returns, and we believe that the risk of current day remuneration practices on society is serious enough, that we need to set out our own expectations on the subject. We should be willing to take some challenging steps in the process” explains Catherine Jackson (pictured) senior advisor Responsible Investment at PGGM.

“We have attempted to seek a dialogue, both in and outside of shareholder meetings in order to address executive pay, this has been largely unsuccessful” adds Marcel Jeucken managing director Responsible Investment at PGGM. Consequently, the fund pledges to take a more active stance.

PGGM covers the healthcare industry, it has more than 690.000 participants and €182bn in assets under management as of December 2014. As a non-profit foundation, it is controlled by trade unions and employers in the healthcare sector.

It is not the first time Dutch pension funds made the news for its activist stance on ESG. At the beginning of 2014, the fund announced it would divest from five Israeli banks due to their involvement in settlements in the occupied Palestinian Territories. Similarly, ABP, the biggest Pension Fund in the Netherlands divested from Japan’s Tokyo Electric Power Company which was responsible for the Fukushima disaster.

While PGGM’s initial Renumeration Guideline for Portfolio Companies was completed already in December 2014, the measures have now been officially publicised. “The process of developing these Guidelines took us over a year. In fact, at first we did not know where to begin. The academic research and volume of public material on the subject was overwhelming. We came to the conclusion that we have our own beliefs, and we set out with these beliefs to craft what remuneration could look like in an ideal world” explains Jackson.

The announcement is timely in the Netherlands, as a national debate on the remuneration of ABN Amro executives has recently contributed to the decision to delay an IPO of the bank, which is still partly owned by the Dutch government.

Yet while the question is likely to generate controversy, PGGM acknowledges that the exact delineation of what constitutes excessive pay remains complex. The initial proposals in PGGM’s guideline seem almost obvious. “Employees and management expect to only receive fixed remuneration for achieving what is expected of them by doing their regular jobs” the guideline states, which also emphaises that while substantial wealth may be realised through skilful asset management, excessive wealth should not originate in executive rewards at the expense of shareholders.”

While these suggestions seem self-evident, PGGM’s voting pattern as shareholder participating in annual general meetings suggests that the implementation of these norms lacks significantly. The confrontation is particularly revealing in the funds US investments. According to PGGM, it voted against 91% of remuneration proposals of its US investments.

Nevertheless, the group acknowledges that a significant change cannot be achieved individually. Consequently, it aims to form alliances with other institutional investors. “We will also be speaking more with our peers and colleagues about remuneration to continue to evolve our collective thinking on this important topic. We believe that PGGM has a role to play in helping to formulate the shareholder perspective on remuneration, and the PGGM Remuneration Guidelines for Portfolio Companies is our first step towards achieving this goal” Jackson says.


Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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