Sweden’s AP3 buffer fund knocks back 60% of exec comp packages in overseas holdings

Fund says many foreign companies unable to meet its pay criteria.

Tredje AP-fonden, the SEK208.6bn (€22.2bn) third Swedish buffer fund (AP3), voted down or abstained on executive pay proposals at 60% of the corporate AGMs it participates in outside Sweden, according to its latest corporate governance report from July 2009 to June 30, 2010. 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, beexpensed in the company’s income statement, and subject to review to establish whether they are in shareholders’ best interests. In the year to June 30, 2010, AP3 voted on 6,000 resolutions overall at 375 AGMs outside Sweden, abstaining or voting against the board’s proposals in a quarter of cases; a much higher ratio than its votes at Swedish companies. Christina Kusoffsky Hillesöy, head of communications and sustainable investments at AP3, said that on many occasions it voted against board resolutions due to “inadequate information”. She added: “It should also be noted that we voted in favour of almost half of all shareholder resolutions. This was because many institutional investors submitted their own resolutions to the AGMs of foreign entities and these were often of a high standard.” AP3 has a diversified portfolio of investments in 4,500 equities worldwide, much of this under passive index management. Link to report