APG Asset Management has set guidelines on how much executives at publicly traded European companies in its global portfolio should be paid, the firm said in a statement.
APG Asset Management —which oversees the €325 billion ($417.49 billion) assets of the ABP pension fund Heerlen, Netherlands — formulated the guidelines “to clarify its perspective as a shareholder that focuses on long-term value creation and to make discussions on the subject of pay with the boards of these companies more effective,” the statement said.
“Many incentive programs assign greater importance to near-term profit growth than long-term value creation,” the statement said. “However, APG invests in equities for the long term so that its clients … can meet their commitments to future generations.”
Aside from the APG fund, its clients include Stichting Bedrijfstakpensioenfonds voor de Bouwnijverheid, a pension fund for the Dutch construction industry, and Stichting SPW, a pension fund for Dutch housing companies.
APG Asset Management “encourages the management teams of its portfolio companies to maximize value creation over the long term and not necessarily accounting profits over the short run,” the statement said. “APG believes that management teams need to be incentivized to make the right decisions through the right remuneration programs.”
“Discussions with company management about incentive schemes can be long and complex,” Herman Bots, head of fundamental equities at APG, said in the statement. “By clarifying our position, we expect to have a more effective dialogue on the matter. The added benefit is that there will be more time left for other discussion topics, including performance, long-term strategy … sustainability” board structure and board nominations, the statement said.