PwC & PwC Legal highlight four dilemmas confronting boards of directors due to COVID-19

Corporate Governance and Executive Pay

Tuesday 26 May, 2020 - Boards of directors are facing several specific dilemmas in the areas of governance, stakeholder management and executive reward caused by the COVID-19 crisis. The choices they make are key aspects of their annual general meetings (AGMs), at which they will have to clearly explain their decisions to shareholders. Corporate governance specialists from PwC and PwC Legal have identified four key areas boards need to consider.

AGM: virtual or postpone?

Given the impact of travel restrictions and social distancing, the special Royal Decree N°4 of 9 April 2020 was issued, giving greater flexibility for the organisation of AGMs. The board of directors can choose between:

Holding a virtual meeting - shareholders are not physically present, and can exercise their rights by asking questions in writing in advance and by voting by correspondence (or by giving a proxy) prior to the AGM

Postponing the meeting - delaying the AGM by up to 10 weeks after the legal deadline. For companies whose financial year ends 31 December 2019, the AGM can be postponed until 8 September 2020 (approved annual accounts must be filed no later than 8 October 2020)

All but one of the BEL 20 companies have chosen not to postpone their AGMs, and have opted to hold remote meetings on the planned date,” explains Bart Vanstaen, Director, Corporate & M&A at PwC Legal. “Shareholders are requested to vote by correspondence in advance (or by proxy), given the challenges of verification of identity that would be needed for secure electronic voting in real time. To offset the lack of direct dialogue, about half of the BEL 20 companies offer a livestream or recording of the AGM.” 

Executive pay: cut or not?

Some Belgian quoted companies have already announced actions ranging from applying (voluntary) pay cuts for executives (e.g. Cofinimmo, Solvay, WDP and Deceunick), to deciding that no attendance fees will be granted for attending board meetings related to the COVID-19 crisis (e.g. Cofinimmo). Environmental, Social & Governance (ESG) goals have increased in importance in response to the immediate urgency of the crisis, and are expected to be reflected in more KPIs in future reward packages. However, our research on KPIs of long-term incentive plans ​ in 2019 showed that financial performance criteria (91%) weigh far more heavily than non-financial criteria (9%). It will be interesting to see what next year will bring and whether there will be an accelerated shift following the crisis.

Remuneration committees need to assess how to adjust executive remuneration packages, taking into account the impact of COVID-19,” states Bart Van den Bussche, Director, People & Organisation Consulting at PwC Belgium. “Should current incentive arrangements be changed? Can cash bonuses be paid out, or should they be deferred to preserve liquidity? Is it appropriate to draw up new schemes, and how will performance goals be defined for annual and long term incentives? Boards may consider the introduction of liquidity and affordability targets. Careful communication will be essential: previous research by PwC on the 2019 proxy season identified increased shareholder activism in Belgium over the past few years. Boards will need to act responsibly and transparently to avoid reputational damage.”

Dividend: distribute or not?

D’ieteren recently announced the 2020 dividend would be limited to the same level as in 2019, with the difference being used to fund a solidarity programme to help employees most affected by Covid-19. Similarly, Bpost will use the difference to secure the financial position of the company. European regulators have taken action in the financial sector, prohibiting insurance companies to pay dividends before October 1st, and banks are being recommended to follow prudent dividend distribution policies to protect liquidity and conserve capital.

With revenue and profits under severe pressure in an uncertain environment, companies need to manage cash carefully,” comments Bart Lombaerts, Director, People & Organisation Consulting at PwC Belgium. “Stakeholders in all sectors are looking whether companies will follow these examples voluntarily. If boards propose dividend reductions to support and protect their business and workforce, it’s important that they tell shareholders about the uses to which the retained cash will be put. Boards need to ask themselves which dividend policy is appropriate and prudent.”

Board of directors: diverse enough?

Although research by PwC on the 2019 proxy season showed that some companies took action to increase gender diversity in their board, most of the companies examined reached just the one-third threshold of women in boards set down in Belgian law. In addition, board members in the quoted companies whose board composition was analysed by PwC in 2019 had an average age of 57. Proxy advisors (companies providing advice and voting services to shareholders) have expressed concern that insufficient age and gender diversity can confront boards with an increased risk of their members becoming seriously ill. Future research will show whether succession planning and board renewal will be adapted in order to be prepared for the next black swan event.

Preparation, commitment and a strong governance structure are key for boards to tackle the unexpected change of perspectives which COVID-19 has confronted them with, while safeguarding the interests of their employees, stakeholders and the future of the business.


PwC Belgium’s Corporate Governance and Executive Pay reports

To shed light on current trends in executive remuneration, PwC Belgium and corporate governance data analytics firm CGLytics published reports which analyse these topics in greater depth.



Erik Oosthuizen

0474 56 42 76

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