SAP’s shareholders growing disaffection over executive pay
The last general assembly held by SAP on the 10th of May could be described as a wake-up call for the German multinational, which produces enterprise software to manage business operations and customer relations.
Whereas General Assemblies are largely routine annual events to which shareholders are invited to voice their support for the supervisory board, this year’s SAP General Assembly took on a different turn far from the routine as just 50.49% of votes were cast in favour of endorsing the actions of the supervisory board.
This vote reflected the discontentment of SAP shareholders with their remuneration policy and practices. The Supervisory Board hurried to promise increased transparency on management pay but clearly failed to convince many of those present at the General Assembly.
Christiane Hölz, Regional Manager at DSW, Germany's oldest and largest association for private investors and member of BETTER FINANCE, was present at the Meeting and voiced her frustration that “SAP did not act, but only reacted” and that the proposals by the Board were “too little, too late”.
SAP co-founder Hasso Plattner, who did not expect this demonstration of discontent, asserted that this executive pay system was “reasonable” and “must be seen in comparison with other software companies”. Simple comparing with other companies however falls dismally short of addressing a situation that seems totally out of line with Bill McDermott, SAP’s Chief Executive, earning € 15.6 million last year. This means that, when including stock options, his annual pay could reach up to € 41 million… sure, it is all just a matter of comparison…
Mr. Plattner was quick to reassure those present stating that “we should not begrudge Bill and our employees" since “shareholders would also make billions of euros under such a scenario.”
Shareholders Rights Directive
On the 3rd of April the Council of the European Union formally adopted the Shareholders Rights Directive which provides, amongst others, shareholder oversight over directors’ remuneration. Thanks to this directive, shareholders will have the right to vote on remuneration policy for directors. The idea behind this directive is to strengthen the engagement of shareholders in European companies by ensuring that the remuneration policy contributes to the business strategy as well as the long-term interests and sustainability of the company.
The directive provides that the level of remuneration should be determined on the basis of financial and non-financial performances. The question is now whether such measures do actually work with some indication that it seems to start bearing fruits: the provisions on executive pay are already being applied in some Member States such as in the UK where BP Group had to cut its CEO’s 2016 package by 40% after shareholders rejected the remuneration policy.
Read Fortune article here
Read Reuters article here