Below is a summary of the company engagements we held in 2022 and 2023 and the issues that we raised.
Are our engagements worthwhile?
We believe that the “G” within the ESG framework is the most important consideration because it is rare to come across well-governed companies that experience poor environmental or social outcomes.
Good governance outcomes are supported by aligning the executive managers’ objectives with those of the company and long-term shareholders. The most effective way to achieve this is through executive remuneration: a well-designed remuneration structure that sufficiently stretches executives to achieve high-performance levels while rewarding them appropriately for attaining desirable outcomes. This includes outcomes that don’t seem to be of a financial nature but are desirable for the long-term sustainability of the company, such as its social license to operate.
Governance is so important that it is the focus of many of our engagements with boards of directors. Changes in this area are rarely rapid or immediately satisfactory, so engagements are methodical and persistent. We believe that every engagement is time well spent as improvements here contribute significantly to creating additional value in the long term.
This article is part of our Stewardship Report 2023 series. You can access the full series here.