Companies that are handing generous pay packages to executives while taking government aid, reducing dividends or cutting jobs during the pandemic could face a shareholder backlash, according to a Germany-based asset manager.
Allianz Global Investors (AllianzGI), which manages €582bn (£503bn) worth of assets, said it could use its shareholder powers to vote against pay awards during the upcoming annual shareholder meeting season.
It said it would scrutinise “generous pay proposals on a case-by case-basis whenever companies received substantial direct state aid, substantial layoffs were recorded or dividend cuts happened … as a result of the Covid-19 pandemic.”
The policy echoes warnings by the Investment Association, an industry body that said last April that companies that received government Covid support should cut executive pay and consider clawing back bonuses from bosses.
Many of the UK’s largest companies have tapped emergency support schemes including business rates relief and government-backed Covid loans during the pandemic.
AllianzGI said it would not penalise companies for using government furlough schemes, which have helped cover employee wages during the crisis. It will also give companies a pass if they were forced to cut or cancel dividends by regulators, saving the UK’s largest banks from a potential backlash.
AllianzGI’s global head of sustainable and impact investing, Matt Christensen, said: “The Covid crisis marked a turning point for society and businesses alike; however, companies are affected in different ways. Some received state aid and their business will continue to be affected negatively over the longer term. In these cases AllianzGI expects boards to deal responsibly with taxpayers’ money and we do not see scope for substantial payout to management, if any.
“Other companies decided to forego dividends to save capital. Again, Allianz Global Investors expects boards to act responsibly and align shareholder experience with that of management.’”
AllianzGI revealed on Monday that it rejected 49% of pay votes put forward for shareholder approval last year, even before its new policy was introduced. The main reason for voting against remuneration plans was that corporate payouts were not tied to “robust and challenging” targets, and that companies were not transparent enough about the criteria.
In the UK, AllianzGI voted against 12% of pay proposals last year, down from 20% in 2019. It was among the 30% of shareholders who voted against Ocado’s pay report last May, over a pay rise and £88m bonus for the online grocer’s directors.
The asset manager was also among the shareholders representing just over 67% of the stock at the retailer’s annual meeting who failed to back the remuneration report in June, when the company made a late change to its pay plan and handed an additional £1.6m to its outgoing chief executive, Dave Lewis, and £900,000 to its finance director, Alan Stewart.