PGGM mandates management boards to generate an absolute return on the investments made on behalf of our clients. It is also important that value is created for society by addressing the needs and problems of society (the “shared value” principle). We accept, under strict conditions, for part of the profit to be shared with employees and directors in the form of a variable remuneration. However, we are opposed to this resulting in the accumulation of excessive financial wealth by individuals, as is now the case with NXP.
We believe it is the responsibility of the board to define the total remuneration package and to weigh in the decision making the needs of stakeholders in a due and proper manner. It must analyse the possible outcomes of the variable remuneration components and how they may affect the remuneration of the management board members. The board must (have the power to) intervene in the event such outcomes are unacceptable.
PGGM is convinced that remuneration plans become too complicated and, as a result, their outcomes too unpredictable. We have therefore expressed concern and criticism at the use of stock options among companies for many years. Since early 2015, we have voted at shareholders’ meetings around the world against all remuneration proposals that include stock options. In the case of NXP, however, we have not had this opportunity since 2012, because the remuneration policy or remuneration report were never put to a vote.
PGGM invests in listed shares of NXP. PGGM has also been indirectly invested in NXP via private equity since NXP spun off from Philips, as well as prior to NXP’s Initial Public Offering (IPO) in 2010. We strive to ensure that private companies IPO with an appropriate corporate governance and remuneration structure. Differences between markets, culture and legislation and differences between private and listed companies impact among other things in remuneration practice.
We appeal to NXP, (the members of the remuneration committee of) the board and its CEO to significantly moderate the outcome of the remuneration, in the interest of stakeholders. The fact that the (bonus) shares and stock options were lawfully granted, does not make the outcome of this remuneration structure justifiable.