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UK pension funds dispute board pay and governance with KBC

LAPFF claims “total opacity” in KBC exec remuneration plans as campaign continues.

The board of KBC, the Belgian banking and life assurance group, has become the second financial group in as many weeks to come under fire from a £75bn (€83.3bn) lobby group of UK public pension fund investors that have drawn up a target list of companies where they will challenge pay and corporate governance practices. The Local Authority Pension Fund Forum (LAPFF), a voluntary association of 49 UK public sector pension schemes, has called on its members to veto an approval of the KBC board’s conduct over the last financial year and vote against the re-election of a member of the remuneration committee at its annual general meeting on April 29th. Two weeks ago, LAPFF members voted against the re-election of the compensation committee at T Rowe Price, the US fund manager, over dissatisfaction at performance targets for senior executive pay and bonuses. In its latest announcement, LAPFF said it had written to Jozef Cornu, chairman of the KBC compensation committee, in February but had so far received no response and hence had gone public. It said the letter had raised concernsabout the “total opacity” of remuneration paid to executive board directors at the Belgian bank, parent of KBC Asset Management. It said this included no ceiling for the annual bonus and unclear performance targets for variable remuneration as well as a lack of independent oversight on the remuneration committee. LAPFF chairman, Ian Greenwood, said: “The Forum values dialogue higher than public confrontation; however KBC has not taken the opportunity to explain to us in more detail how their remuneration policy is meant to align management interest adequately with shareholder interest.” However, a spokeswoman for KBC said that Mr Cornu had not received the letter from LAPFF, adding: “We have always been, and continue to be, prepared to answer questions regarding our policy or strategy.” The spokeswoman said KBC’s 2008 annual report included more detailed information than in previous years on the remuneration package of the bank’s CEO and members of the executive committee as well as the company’s general remuneration policy. The report includes the individual remuneration of the KBC president and

outlines the total payment made to the remaining seven members of the executive committee, none of whom have taken bonuses for 2008. In January, KBC received a €2bn government bailout to cover write-downs on investments that led it to a loss of about €2.5bn over the year. LAPFF has said it has singled out 15 companies across the US, UK and continental Europe and sent out similar letters and would issue further alerts ahead of the busy forthcoming AGM season to those that do not address its concerns. Similar investor campaigns are currently taking place in the US as the proxy season moves into gear.At the April 22 AGM of Citigroup, the American Federation of State, County and Municipal Employees unsuccessfully urged other shareholders to vote against re-election of members of the audit and risk management committee.At the forthcoming Bank Of America AGM, the Change to Win Investment Group and the Service Employees International Union are seeking to unseat Ken Lewis, the bank’s chairman and chief executive over what they call the “ill advised” acquisition of Merrill Lynch.