Key Takeaways:
- Engagement with a diversified industrial group on its long-term incentive structure shows how stewardship can be conducive to ongoing discussion with shareholders, increasing transparency regarding remuneration policies.
- Engagement with a hotel chain on the topic of proposing to issue warrants convertible into shares as a takeover defense – potentially weakening corporate governance measures and accountability – influenced the company to confirm that the proposal would be excluded at its AGM.
This article is part of a Stewardship in Action series that relays brief, on-the-ground snapshots of how Glass Lewis’ Stewardship team1 engages publicly-listed companies on a range of material environmental, social, and governance (ESG) issues. The engagements are dedicated to helping institutional shareholders identify and address ESG issues that can potentially affect the long-term value of their portfolio companies. Engagement on these issues is essential in fostering constructive dialogue and positive change.2 All company names have been anonymized.
Snapshot One: Addressing Executive Pay at a Belgian Diversified Industrial Group
Best Practices on Executive Pay
In addition to having an effective board, a robust executive pay structure is integral to ensuring alignment with the long-term interests and performance of both a company and its shareholders. This involves tying executive pay to performance metrics assessed over the short and long term. A balanced mix of incentives should incentivize prudent risk-taking while discouraging behaviours favouring short-term gains over sustainable growth and shareholder value.
In addition, transparency is essential, allowing shareholders to evaluate the structure’s efficiency. Companies should provide clear disclosure of the rationale behind compensation decisions. Finally, in cases where say-on-pay votes receive significant shareholder dissent, it is vital for companies to take steps to address shareholders’ concerns and explicitly address the dissent.
The Company: The Diversified Industrial Group, based in Belgium, engages in marine engineering and contracting, private banking, real estate and senior care, and energy and resources businesses worldwide.
The Issues: The engagement with Diversified Industrial Group was initiated in Q1 2024. At that time, its long-term incentive (LTI) awards lacked objective, formula-based criteria and were determined on a discretionary basis. Furthermore, the company did not disclose key elements of its pay plans, such as performance targets under the short-term incentive (STI) plan or individual payout limits under the LTI plan for these long-term incentives. Shareholders are better served when pay is tied to metrics with pre-established targets, clearly linking executive rewards to company performance and aligning management’s interests with those of shareholders.
The Engagement Objective: The company needed to improve its long-term incentive structure, including by subjecting vesting to performance and increasing disclosure of key plan elements.
Progress on Change
Initial Discussions
Our team notified the company about the engagement objective in Q1 2024 and followed up in Q3 2024 and again in Q1 2025. The company’s chief human capital officer was open to discussing the issue in an engagement meeting held in May 2025. During the meeting, it was highlighted that the company had undertaken a comprehensive review in preparation for its 2025-2028 remuneration policy. The review included a benchmarking exercise, surveying proxy advisors, expert consultation and stakeholder engagement to address key concerns.
The revised policy introduced several enhancements. Regarding the overall pay structure, the company highlighted that it improved balance among the components of the fixed remuneration, STI, and LTI, with a shift towards the LTI. A key area of feedback was the lack of disclosure on LTI award levels and caps. In response, the 2025-2028 remuneration policy specifies ranges and caps for stock option grants. Other changes include the addition of clear financial performance targets such as return on equity (ROE) and dividend metrics into the STI alongside ESG-related targets, public disclosure of ESG performance goals, and improved alignment with market best practices.
The company representative also acknowledged that the absence of performance metrics in its LTI plan was a key concern for shareholders. She explained that an implicit share price performance criterion exists for stock options, as value is only created for the beneficiary if the share price increases. It was further noted that, in line with Belgian market practice, where beneficiaries are taxed upfront on stock options, no additional performance criteria at vesting are applied to the LTI plan. However, the company indicated that it remains open to considering further enhancements and will continue to monitor its remuneration framework to ensure alignment with shareholder expectations.
Shareholder and Stewardship Outcomes
The revised remuneration policy was later supported by approximately 81% of the votes cast at the company’s 2025 annual meeting held on May 2025. However, when taking into account the company’s shareholder structure – which includes reference shareholder Belgian Investment Holdings NV – the results suggest that the proposal may have faced notable dissent by free-float shareholders. The outcome signals the importance of maintaining ongoing discussion and transparency in relation to the remuneration policy.
In terms of our objective, the awards granted under the revised LTI plan for the executive committee will not yet be explicitly tied to measurable performance outcomes. Nevertheless, it is encouraging that based on shareholder engagement disclosures and information shared by the company representative, the company internally discussed shareholder concerns related to executive pay, including those related to the LTI structure.
Snapshot Two: Approaching Shareholder Rights at a French Hotel Chain
Best Practices on Safeguarding Shareholder Rights
The safeguarding of shareholder rights is a fundamental part of stewardship. As such, our engagements target issuers that maintain questionable practices relating to shareholder rights, such as anti-takeover devices, cross-shareholdings, unequal voting rights and inadequate responses to shareholder proposals.
Shareholder rights can be jeopardised by corporate decisions that diminish voting power, hindering shareholders’ capacity to voice their opinions effectively. The institution of anti-takeover defences may impede shareholder rights to evaluate and accept buyout offers. Similarly, significant cross-shareholding relationships can further exacerbate transparency and corporate governance issues, leading to artificially inflated stock prices, conflicts of interest, and reduced shareholder stewardship.
The Company: French Hotels SA, headquartered in France, operates a chain of hotels worldwide. It operates through three segments: Management & Franchise; Services to Owners; and Hotel Assets & Others. The company owns, operates, manages, and franchises hotels.
The Issues: In March 2006, the French government passed a law allowing companies to issue warrants, convertible into shares, to existing shareholders at steep discounts (or in some cases for free), as a means to preventing hostile takeovers. While legal, such authorities are not conducive to strong corporate governance and can reduce management accountability by substantially limiting opportunities for corporate takeovers. In cases as critical as takeovers, shareholders should have a say as to whether they support the implementation of the takeover defence – a decision left solely to the board in this case. This issue is different from other matters that are typically left to the board’s discretion, as its impact on shareholders is both direct and substantial.
In this case, the proposal to issue convertible warrants had regularly received shareholder opposition exceeding 30% of vote cast before our engagement was initiated. Despite this consistent level of dissent, the company had neither addressed the concerns nor disclosed its efforts to engage with shareholders on the matter.
The Engagement Objective: The company needed to take into account the significant level of shareholder dissent it regularly received for its proposal to issue warrants as a takeover defence.
Progress on Change
Ongoing Discussions
Following our outreach efforts in Q1 and Q3 2024 and Q1 2025, the company agreed to meet with our team in a digital meeting in April 2025 to discuss its approach to the issue.
The company shared that it conducted a structured engagement process ahead of its 2025 annual general meeting (AGM) including pre-AGM outreach and engagement in the fall of 2024 allowing for a year-round dialogue with shareholders. Feedback received during these engagements was factored into the final drafting of AGM proposals.
Shareholder and Stewardship Outcomes
The company representatives confirmed that the proposal to issue warrants would not be reintroduced in the 2025 annual meeting (scheduled for May), reaffirming the disclosure in the company’s 2024 Universal Registration Document. This exclusion was subsequently confirmed in the company’s 2025 Notice of AGM. The company representatives also noted that shareholders responded positively to the decision to exclude the warrant issuance proposal this year and appreciated the rationale provided.
The engagement is considered successfully finished, as the company did not reintroduce the resolution authorising the issuance of free share warrants during takeover periods at the 2025 AGM held in May.
To learn more about Glass Lewis' active stewardship engagement, see our most recent report here.
Notes and References
- This article is co-authored with Cindy Blaney, Lead Analyst, Stewardship and Francis Opada, Senior Analyst, Stewardship.
- The Glass Lewis Stewardship team, representing institutional investor clients, engages with public companies to discuss the identified ESG issues and track progress towards addressing them. The meetings between the stewardship team and companies are separate and distinct from meetings with Glass Lewis’ Proxy Research team, which is responsible for producing Glass Lewis’ Proxy Paper research reports. The company-specific issues discussed in Active Stewardship Engagement meetings with companies are based on the needs and priorities of clients and may not necessarily overlap with Glass Lewis’ Proxy Research policies and guidelines.
.png)
