Asset Owners Take Aim at Governance, Climate Risks

Railpen raises “significant concerns” about the Reckitt Benckiser board, as CalPERS brings climate risk reporting to Rio Tinto.

The Railways Pension Scheme (Railpen) has asked the board of Reckitt Benckiser to address “material risks” to the company’s performance.

Railpen, a long-term shareholder in the UK-based consumer goods company, said it had “significant concerns” about the quality of Reckitt Benckiser’s board governance at the company’s annual meeting Thursday.

“We want to invest the capital of our beneficiaries in companies that provide long-term sustainable returns and consider corporate governance to be of paramount importance to us as long-term shareholders,” said Deborah Gilshan, Railpen’s head of sustainable ownership.

Though Gilshan said she believed Reckitt Benckiser had “strong fundamentals,” she raised concerns about the board structure. In particular, she pointed to Remuneration Committee Chair Judith Sprieser, who is seeking reelection after 12 years on the board, despite previous indications that she would step down from her role.

“We are not opposed to longer-serving directors per se; it is also about their effectiveness,” Gilshan said. “In Ms. Sprieser’s case, we have been underwhelmed by her stewardship and oversight on remuneration.”

For example, the new remuneration policy, which the £22 billion ($31.8 billion) Railpen voted against Thursday, failed to address the pension fund’s concerns about short-termism.

“We support remuneration structures that deliver pay outcomes commensurate with long-term performance but we have long held concerns that such a structure does not exist at Reckitt Benckiser,” Gilshan said. “So-called long-term incentive awards become payable immediately after only a three-year performance period.”

Questioning the “logic of the remuneration committee in determining the appropriate level of pay to motivate and incentivize the CEO,” Railpen voted against the reelection of members of the committee, including Sprieser and company Chairman Adrian Bellamy.

Meanwhile, the California Public Employees’ Retirement System (CalPERS) and other Rio Tinto shareholders voted “overwhelmingly” in favor of the $290 billion pension’s climate risk reporting proposal.

The resolution included emissions management and low-carbon energy research.

“Rio Tinto joins the growing number of global companies agreeing to provide investors with risk reporting on climate change,” said Anne Simpson, CalPERS investment director of global governance. “You can’t manage what you can’t measure, so new risk reporting is vital.”

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