Sweden’s AP3 voted against exec pay deals at 75% of international companies

Tredje AP-fonden, the SEK224.1bn (€26bn) third Swedish buffer fund (AP3), voted down or abstained on executive pay proposals at 75% of the corporate AGMs it participates in outside Sweden, according to its latest corporate governance report from July 2010 to June 2011. The votes against signal a toughening of the Swedish fund’s stance on pay. Last year it voted against 60% of the same pay deals at corporate AGMs. The high level of non-approval for foreign company pay packages, the fund said, was because overseas groups find it “considerably more difficult” than Swedish companies to meet AP3’s requirements on remuneration for senior executives. 
As part of its long-term pay criteria, AP3 insists on pay packages being subject to independent director design and control. It stipulates that compensation reports include a set of ‘principles’ for key executives and directors, including salary, cash bonus, share-based compensation and other benefits. 
Options and other share-based compensation, AP3 says, should also have vesting conditions linked to relevant performance measures, have a ceiling, be expensed in the company’s income statement, and subject to reviewto establish whether they are in shareholders’ best interests. In the year to June 30, 2011, AP3 voted on approximately 7,000 resolutions at some 400 foreign AGMs. The fund manages a highly diversified listed equity portfolio of SEK 110 billion, invested in more than 4,000 companies worldwide. The AP3 governance report also highlights some of the funds most recent corporate engagement initiatives as well as outlining many of its reasons for voting at AGMs. The fund notes that after the BP oil spill in the Gulf of Mexico in 2010, the Ethical Council of the combined AP funds and a group of other investors contacted 15 oil companies to inquire about safety measures undertaken during deep-sea drilling. The Ethical Council also joined several large funds in an initiative to tackle corruption and conducted an overview of preventive anti-corruption measures undertaken by a group of companies.
In the year July 2010 – June 2011, AP3 voted on a total of 399 AGM agenda items for international companies and 7,085 for Swedish companies where it has a much more active voting strategy. In total, the fund abstained or voted against a board resolution in 28% of cases.