Listed Dutch firms improving ESG disclosure says Eumedion

Listed Dutch companies have taken a “step in the right direction” in terms of improved transparency of environmental, social and governance (ESG) performance, says Dutch corporate governance forum Eumedion – though it added more needs to be done to provide “concrete” information.

Eumedion, which represents 67 Dutch and foreign institutional investors with more than €1trn in combined assets, said the trend of including sustainability criteria in executive bonus plans has continued.

KPN, Wolters Kluwer, BAN Groep, USG People, Macintosh and Qurius all introduced a link between sustainability criteria and executive bonuses recently. SBM Offshore introduced a “CSR multiplier” for short-term bonuses.
They followed firms such as AkzoNobel, DSM, TNT, Royal Dutch Shell, ING, Aegon, Delta Lloyd and Ordina.

But Eumedion was critical of the lack of hard numbers and transparency. “What the companies that have introduced sustainability criteria have in common is that the transparency of the objectives is meagre, both in advance of the performance year and thereafter,” it said.

In its review of the 2011 proxy season, the group noted that firms were “wrestling” with the measurement and target setting of sustainability criteria,highlighting Shell’s decision to replace the Dow Jones Sustainability Index (DJSI) score.
The 2010 introduction of the Shareholder Rights Directive has meant an increase in the number of votes cast at annual general meetings. In 2011, 59.1% of total shares were voted – up from 50.2% a year before and a massive advance on the 33.3% figure in 2005.

The forum also found that the importance of total shareholder return (TSR) is waning as an indicator in executive pay plans. Shareholders are being compensated because companies increasingly want executives to hold shares.

In a related development, Eumedion has also released its response to the European Commission’s Green Paper on Corporate Governance, whose consultation ends on July 22.
Eumedion is calling for the separation of CEO and chairman functions, greater transparency on directors’ pay and clarification of the ‘acting in concert’ term. And it is calling for a review of guidelines (such as Solvency II) to support the concept of long-term shareholder.

Earlier this month Eumedion unveiled a 10-point non-binding set of ownership principles – in effect a “stewardship code” – for its pension fund and asset management members.