• Despite improved transparency and accountability, there remains a lack of clarity and a considerable ambiguity with respect to the voting guidelines for Management Board compensation
  • Almost half of the major investors do not meet professional requirements
  • Deka Investment and Union Investment as German representatives with excellent ratings, AGI and DWS are also among the top 10

Analysis “Management Board compensation as a challenge for investors 2020” by hkp/// group, University of Göttingen and DIRK - German Investor Relations Association


Frankfurt, August 25, 2020. The voting guidelines for Management Board compensation (Proxy Voting Guidelines) of the major DAX30 investors have improved in recent years, but there continues to be considerable difference in quality and quantity. The study “Management Board compensation as a challenge for investors 2020” recently published, only gives good to very good marks to the voting guidelines of eleven of the 40 top investors reviewed. In 16 instances, even the lowest grade was awarded. A comparative analysis from 2018 showed even weaker results for large international investor groups.

A particularly encouraging result from a German perspective: The voting guidelines of Deka Investment and Union Investment have now been given top marks following a weak assessment in 2018. Together with BlackRock as the world's leading asset manager, they do best in the current overall assessment. Also among the Top 10: the proxy guidelines of DWS and Allianz Global Investors, which were classified as good in the previous study.

The study, conducted together by hkp/// group, DIRK - Deutscher Investor Relations Association and Professor Dr. Michael Wolff from the University of Göttingen, is particularly significant in light of the implementation of the Second European Shareholder Rights Directive (ARUG II). It strengthens the importance of the Annual General Meeting regarding Management Board compensation. But the study shows that many investors are still not sufficiently prepared for these changes.

“Professional investment also requires professional voting guidelines regarding Management Board compensation”, explains hkp/// group Managing Partner Michael H. Kramarsch. He also points out that, in spite of many improvements, some of the largest DAX-listed investors still have not published any or only insufficient guidelines for the structure and communication of Management Board compensation. This can have consequences. “Investors, who keep companies in the dark about their demands, can target them arbitrarily”, says the corporate governance expert.

Kay Bommer, Managing Director of DIRK - German Investor Relations Association, concurs. “Many voting guidelines are too vague, ambiguous and not very helpful for issuers, which prevents large international investors from meeting their own professional standards and from gaining influence with respect to Management Board compensation.”

Key findings from the study

  • In comparison to the first study published in 2018, the current study reveals a positive development regarding the amount of detail in the voting guidelines for Management Board compensation for almost a quarter of the top DAX investors.
  • With the exception of Barclays Bank, each of the top 40 investors has its own proxy guidelines with general requirements for Management Board compensation. Every tenth investor had not published any guidelines in 2018.
  • 90% of investors have issued new and updated proxy guidelines since the end of 2018, with half of them even issued new voting guidelines in 2020.
  • A look at the total assessment reveals that individual proxy guidelines have significantly improved in terms of information content and applicability compared to 2018. But in many cases there is still a lack of information preventing the derivation of concrete design aspects.
  • The German investors Deka Investment and Union Investment, whose guidelines were awarded top marks, are worthy of a mention. For almost every aspect, detailed expectations were set out, which can be translated directly and without much interpretation into the structure of Management Board compensation systems. In 2018, both had a D and a C rating respectively.
  • Also BlackRock's guidelines have become more detailed, resulting in a better overall score than in 2018.
Investor Result 2020 Result 2018
Rank Score Rank Score
Deka Investment 1 A 21 D
Black Rock (Gruppe) 2 A 2 B
Union Investment 3 A 15 C
Allianz Global Investors 4 B 4 B
JP Morgan Asset Management 5 B 3 B
CalPers 6 B 1 A
CPP Investment Board 7 B N/A N/A
DWS 8 B 5 B
UBS 9 B 9 B
BNP Paribas Asset Management 10 B 10 B
Durchschnitt Top 40   C   C

Image: Applicability and validity of voting guidelines: The best ratings for top DAX investors, 2020 vs. 2018 (rating scale from A to D, best to worst rating)


Three investor categories

The evaluation of the current proxy voting guidelines and the votes on Management Board compensation at the Annual General Meeting (say-on-pay) allows to divide the top DAX investors into three investor types.

  1. Investors with detailed voting guidelines, which provide companies with guidance in structuring Management Board compensation.
  2. Investors with barely helpful voting guidelines, whereby as a rule, the proposals of the management are voted on at the Annual General Meeting.
  3. Investors with hardly helpful voting guidelines, who at the same time demonstrate rather negative voting behavior at the Annual General Meeting.

While investors of the first two categories support issuers in structuring Management Board compensation with correspondingly clear expectations or at least pose only a low risk for companies when it comes to the actual vote on Management Board compensation, investors of the third category prove to be major uncertainties. “They are erratic with their non-transparent or poorly defined criteria when a resolution on Management Board compensation is obtained at the Annual General Meeting. At the same time, there are likely to be negative reactions on the agenda item Management Board compensation”, explains Prof. Dr. Michael Wolff, corporate governance expert and holder of the professorship for Management and Controlling at the Georg-August University of Göttingen.

Even if this third group of investors has become smaller compared to the 2018 study, it is still necessary for the purposes of good and responsible corporate governance to have clearly and comprehensibly formulated criteria for Management Board compensation, which must also be made public. The authors of the study argue that the minimum standard should at least be transparency with regard to those aspects, which would definitively be voted against at a say-on-pay when it comes to Management Board compensation. In addition, the authors of the study demand that voting guidelines must specify how a dialog between investor and issuer can take place.

Further details on the study

The study “Management Board compensation as a challenge for investors 2020” by management consultancy hkp/// group with the Professor for Management and Controlling at the Georg-August-Universität Göttingen along with the DIRK (German Investor Relations Association) analyzes publicly accessible proxy guidelines and other documents relating to Management Board compensation of the 40 largest institutional investors in DAX companies on information content and applicability in the field of Management Board compensation. The investor groups included in the analysis represent around 60% of the investment volume in the DAX. The information provided by the voting advisors ISS and Glass Lewis was also taken into account. The rating was on a scale of A to D (best to worst rating).

Author Thomas Müller

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