Diegem, 8 February 2024 - As the public awareness grows around how CEOs are rewarded, Belgian listed companies are tending to review CEO remuneration more frequently and with greater scrutiny. According to PwC’s latest Corporate Governance & Executive Pay report based on 80 publicly listed companies in Belgium, shareholders are increasingly focussing on integrating ESG-related goals into executive compensation schemes. “As companies feel the public opinion breathing down their necks, a more modern and ESG-focussed approach to remuneration is crucial,” says PwC Belgium’s Chairman Axel Smits. Looking at the corporate governance, PwC notices how companies, although they recognise the necessity of diversity in the boardroom, are not always able to put their wishes into practice.
PwC Belgium’s latest Corporate Governance & Executive Pay report draws on data gathered from 80 publicly listed companies in Belgium, and pinpoints how growing attention on CEO pay is pushing companies to greater scrutiny of executive remuneration. Since 2017 shareholders have had the right to vote on executive compensation packages presented by the company. In Belgium this vote is binding and the remuneration package should be transparent to the public. This increased transparency and accountability has resulted in more attention being paid to remuneration, both in the boardroom and in public debate. In more than 7 out of 10 companies (73%) in PwC’s sample, executive remuneration is reviewed on a yearly basis. Shareholders are being more discerning, showing a decline in shareholder acceptance on the proposed remuneration packages.
Axel Smits, Chairman of PwC Belgium states: “All of these things reflect an escalating demand for transparency and accountability in corporate remuneration practices. With public opinion breathing down boards’ necks, the need to carefully consider the composition of CEOs’ compensation packages is being keenly felt, and rightfully so. While assembling compensation packages, companies can benefit from linking a part of their pay structure to sustainability metrics and long-term goals to encourage responsible decision-making.”
Push towards ESG incentives
A growing number of shareholder and investor proposals, in combination with increased legislation and non-financial reporting regulations, is stimulating companies to integrate sustainable (ESG) goals into their executive compensation schemes. Today executive performance is still largely measured in relation to financial performance, with financial KPIs representing on average at least two thirds of the weighting criteria for short-term incentive (STI) and long-term incentive (LTI) plans, as determinants of the variable pay components in the CEO’s remuneration package.
The glass ceiling is still intact
While boards are more vigilant about executive pay, the composition of the board itself is also increasingly under scrutiny by investors, regulators and others in the governance community.
Although awareness of the need for more diverse boards may be rising, in practice boards are in general still mainly composed of men over 50. Within PwC’s sample, only 13% of executive directors are female, illustrating a significant gender disparity within executive boards. A disparity companies don’t seem able to overcome, being stuck at the status quo with almost no to minimal improvement in the last 5 years. In the 80 companies surveyed, only 4 CEOs are women, underscoring the gender gap in top leadership positions. In contrast, non-executive directors present a more balanced gender representation, with 42% being female and 58% male. Another concern for shareholders is “overboarding”: candidates who already hold an excessive number of board appointments are less likely to be accepted.
While directors believe in the added value of diversity in the boardroom, engaging in difficult conversations regarding necessary changes and the dedicated effort required for long-term board succession planning continue to pose significant challenges when it comes to refreshing the board. Bart Van den Bussche, Reward Director at PwC Belgium quotes: “Companies can enhance their board performance by adding to the table a greater diversity in gender, age but also new skills and knowledge as technological disruption emerges. Although companies realise the need of this fundamental shift in board composition, in reality it remains a tough challenge. Our findings highlight the necessity for robust board succession plans, combined with effective onboarding and mentorship programmes for new directors. These initiatives are essential to properly equip individuals for their first board mandates, ensuring they can contribute effectively and navigate their roles successfully.”
About the report
PwC Belgium’s Corporate Governance & Executive Pay report is based on a survey conducted on executive compensation design in Belgian listed companies. The data is gathered from the annual remuneration reports published in 2023, the majority of which include information for the period from January 1st, 2022 up to December 31st, 2022. For the purposes of the 2024 report, publicly available data was gathered for 80 listed companies in Belgium.
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