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Article | Executive Pay Memo – Western Europe

How much is enough when assessing remuneration policy voting results?

Executive Compensation|Total Rewards
Preparing for the EU Shareholders’ Rights Directive

By Manuel Montecelos and Piia Pilv | November 17, 2020

This article looks into the tricky question of what percentage is actually a good result for your policy vote

The Shareholder Rights Directive (SRD II) is now fully applicable, although we are still waiting for the European Commission to publish the final version of its guidelines on the standardised presentation of remuneration reports. This is expected in the fourth quarter of this year.

Countries across Europe are working to implement the new measures, and the table below shows the current status of SRD II implementation in each individual country.

Regulatory Environment

Current status of SRD implementation across Europe
Policy Report
Country Transposed ? Start Vote Every Start Annual vote
Belgium AGM 2021 binding 4 years AGM 2021 advisory
Denmark AGM 2020 binding 4 years AGM 2021 advisory
Finland AGM 2020 advisory 4 years AGM 2021 advisory
France AGM 2017 binding annual AGM 2018 binding
Germany AGM 2021 advisory 4 years AGM 2022 advisory
Ireland AGM 2020 advisory 4 years AGM 2020 advisory
Italy AGM 2020 binding 3 years AGM 2020 advisory
Netherlands AGM 2020 binding 4 years AGM 2020 advisory
Norway AGM 2021 binding 4 years AGM 2022 advisory
Spain AGM 2016 binding 3 years AGM 2016 advisory
Sweden AGM 2020 binding 4 years AGM 2021 advisory
Switzerland SRD implementation not foreseen, other requirements in place: annual vote on aggregate remuneration and voluntarily on report
UK AGM 2014 binding 3 years AGM 2002 binding

The early implementation of SRD II measures in the UK, Spain and France has revealed that once shareholders grow accustomed to having their views acknowledged by companies, proxies, investors and general shareholders, they will become gradually more demanding until they feel that a company has reached satisfactory standards.

Many years ago, someone in Spain asked us: “If a proposal is sent for approval, and rules dictate that you just need a majority for it, why is 51% not sufficient?” The answer turned to be “peculiar”: “That is the beauty of advisory voting.” In other words, when you ask your stakeholders for their opinion on a matter in which they have a legitimate interest, a high degree of consensus is required, because you did not bind yourself to ‘legal-alike’ level rules.

As the table above shows, some countries have moved to implement a binding vote once every three or four years, but the practice of advisory voting is so well established that this is unlikely to have much bearing on how proposals are passed. Companies will be expected to obtain a high level of shareholder acceptance, in both their policy and their report voting, irrespective of whether the vote is technically binding or not.

With this in mind, it probably seems more difficult than ever to know exactly how much of a majority vote is enough. However, having access to many years’ worth of voting results data means that this question is actually much easier to answer now than it used to be.

The diagram below illustrates the current state of voting approvals across Europe:

Our research shows that approvals of 90% and higher are universally expected. Using an incentive as a metaphor, your minimum threshold should be at least a 70% approval rate; your target should be between 80% and 90%, depending on factors such as the number of years under say on pay, shareholder structure, changes in policies, controversies arising, financial situation, etc.; and the maximum level you should strive for is 95% or above.

There are many factors which play a part in achieving maximum voting approval; however, basic guidelines include:

  • Early engagement with stakeholders
  • Proper engagement with stakeholders
  • Clarity and transparency of data
  • Clear connection between long-term strategy and short-term actions
  • Consumer-grade reports and disclosures that go beyond the minimum legal requirements
  • Clear pay-for-performance model

Above all, remember to keep your message simple and approachable for shareholders.


Senior Director, Executive Compensation Practice Leader, Western Europe

Executive Compensation Leader, Northern Europe

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