Proxy voting guidelines for European, Middle Eastern and African securities. February 2018

Transcription

1 Prxy vting guidelines fr Eurpean, Middle Eastern and African securities February 2018

2 Cntents Intrductin... 1 Cmply r explain... 1 Engagement... 1 General guidelines fr EMEA... 2 Our apprach t remuneratin and benefits... 7 General crprate gvernance matters Scial and envirnmental issues Cuntry-specific cnsideratins... 20

3 Prxy vting guidelines fr Eurpean, Middle Eastern and African securities These guidelines shuld be read in cnjunctin with BlackRck s Glbal Crprate Gvernance and Engagement Principles, which are available nline at Intrductin These vting guidelines cver issues specific t certain markets within Eurpe, Middle East and Africa (EMEA) in which BlackRck is an investr. If yu are interested in ur apprach t gvernance in a market that is nt specifically addressed in this dcument, yu can refer t BlackRck s Glbal Crprate Gvernance and Engagement Principles, which prvide a brad verview f ur philsphy regarding gvernance. These guidelines are intended t prvide ur views acrss a range f key tpics and t give an indicatin f hw we are likely t vte. We assess cntentius vting issues n a case-by-case basis, taking int accunt the circumstances f the cmpany, and ur vting decisins at any individual sharehlder meeting may diverge frm the general apprach described in these guidelines. As nted in ur glbal principles, BlackRck expects cmpanies t bserve the relevant laws and regulatins f their market as well as any lcal cdes. These market-specific guidelines prvide the base pint fr ur EMEA vting guidelines, as we believe they reflect investr expectatins n gd practice within the cntext f each market. Hwever, ur vting guidelines might smetimes differ frm these cdes, especially when we expect a higher level f prtectin f minrity sharehlders. Further, we wuld expect cmpanies t develp an apprach t crprate gvernance which demnstrates accuntability, transparency, fairness and respnsibility. The fllwing cuntry-specific cnsideratins are intended t summarise BlackRck s general philsphy and apprach t issues that may cmmnly arise in these markets. This dcument is nt intended t represent cmprehensive vting guidelines n its wn. Cmply r explain In many markets, lcal crprate gvernance best practice guidance is underpinned by an apprach that allws cmpanies t deviate frm recmmended practices as lng as they explain why they have dne s. We believe strngly that this s-called cmply r explain apprach prvides the apprpriate mechanism fr ensuring effective and pragmatic gvernance f cmpanies. BlackRck expects such explanatins under a cmply r explain apprach t be made in the cntext f why nn-cmpliance better serves sharehlders lng-term interests. Engagement BlackRck takes an integrated apprach t crprate gvernance and engagement, t the extent pssible, as we believe this results in bth better-infrmed decisins and a mre cnsistent dialgue with cmpanies. Activities are c-rdinated by the Lndn-based EMEA Investment Stewardship Team. The Investment Stewardship Team hlds meetings with nn-executive directrs t discuss aspects f crprate gvernance such as management successin planning, bard structure and perfrmance and executive remuneratin. The team als discusses material envirnmental and scial matters such as the transitin t a lw carbn ecnmy, the impact f adverse r extreme weather events, emplyee relatins, and wrkplace health and safety that culd impact the cmpany s perfrmance and achievement f strategic bjectives. When we engage, we aim t ask infrmed and fcused questins that help us build an understanding f a cmpany s apprach and cnfirm that we shuld supprt management in ur vting. We als engage practively with cmpanies that seem t be underperfrming n financial, peratinal, Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

4 envirnmental, scial r gvernance measures. Where there are issues, we will engage directly with cmpanies t bring abut change. In additin, BlackRck s active prtfli management teams regularly meet with the management f EMEA-incrprated cmpanies in which ur clients funds are invested t discuss strategy and perfrmance, as well as, where necessary, the aspects f crprate gvernance fr which management is respnsible. The Investment Stewardship team wrks with the active prtfli managers when preparing engagements and bth teams peridically engage with cmpanies jintly. As part f ur engagement with cmpanies, we will be lking fr CEOs t lay ut fr sharehlders each year a strategic framewrk fr lng-term value creatin. Additinally, because bards play a critical rle in strategic planning, we believe CEOs shuld explicitly affirm that their bards have reviewed thse plans. When cmpanies set ut a clear and succinct framewrk, we may nt need t engage with them n a frequent basis, allwing us t fcus n thse cmpanies where there are perfrmance issues. BlackRck engages with cmpanies frm the perspective f a lng-term sharehlder. The majrity f ur equity investments are made thrugh indexed strategies s ur clients are ging t be invested as lng as the cmpanies are in the index. As a fiduciary acting n behalf f these clients, BlackRck takes crprate gvernance particularly seriusly and engages with ur vice, and with ur vte, n matters that can influence the lng-term value f firms. In line with the recmmendatins f the UK Stewardship Cde and under the umbrella f the Cllective Engagement Framewrk f the Investr Frum, we will als participate in cllabrative engagements with ther sharehlders where cncerns have been identified by a number f investrs. We prefer t engage with cmpanies directly befre vting against management. Where we believe that directrs r management have nt acted in the best interests f sharehlders, r have nt respnded adequately t sharehlder cncerns regarding strategy and perfrmance, r that ur direct engagement ver time has failed we may withhld r vte against directrs. General guidelines fr EMEA The general guidelines cntain the principles supprting ur vting decisins acrss all EMEA markets and must be read in cnjunctin with the different cuntry-specific guidelines belw. Bards and directrs BlackRck will nt supprt the electin f directrs whse names and bigraphical details have nt been disclsed sufficiently in advance f the general meeting fr us t take a cnsidered decisin. Indeed, disclsure f names and details are critical in assessing directrs skills and experience, including but nt limited t relevant qualificatins and prfessinal experience. Bard f directrs skills and diversity We encurage bards t peridically renew their membership t ensure relevant skills and experience within the bardrm. T this end, regular perfrmance reviews and skills assessments shuld be cnducted by the nminatin cmmittee. Furthermre, we expect bards t be cmprised f a diverse selectin f individuals wh bring their persnal and prfessinal experiences t bear in rder t create a cnstructive debate f cmpeting views and pinins in the bardrm. In additin t ther elements f diversity, we expect t see a sufficient gender mix n every bard. In identifying ptential candidates, bards shuld take int cnsideratin the diversity f experience and expertise f the current directrs and hw that might be augmented by incming directrs. We encurage bards t disclse their views n: Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

5 The mix f cmpetencies, experience, and ther qualities required t effectively versee and guide management in light f the stated lng-term strategy f the cmpany The prcess by which candidates are identified and selected, including whether prfessinal firms r ther surces utside f incumbent directrs netwrks have been engaged t identify and/ r assess candidates The prcess by which bards evaluate themselves and any significant utcmes f the evaluatin prcess, withut divulging inapprpriate and/ r sensitive details The cnsideratin given t bard diversity, including, but nt limited t, diversity f gender, race, age, experience, gegraphy, and skills, and ther factrs taken int accunt in the nminatin prcess. While we supprt regular bard refreshment, we are nt ppsed in principle t lng-tenured directrs. A variety f directr tenures within the bardrm can be beneficial t ensure bard quality and cntinuity f experience. Our primary cncern is that bard members are able t cntribute effectively as crprate strategy evlves and business cnditins change, and that all directrs, regardless f tenure, demnstrate apprpriate respnsiveness t sharehlders. We acknwledge that n single persn can be expected t bring all relevant skill sets t a bard; at the same time, we generally d nt believe it is necessary r apprpriate t have any particular directr n the bard slely by virtue f a singular backgrund r specific area f expertise. Where bards find that age limits r term limits are the mst efficient and bjective mechanism fr ensuring peridic bard refreshment, we generally defer t the bard s determinatin in setting such limits. T the extent that we believe a cmpany has nt adequately accunted fr diversity in its bard cmpsitin, we may vte against the nminatin cmmittee members. Directr independence BlackRck expects that a bard shuld include a sufficient number f independent directrs. We believe an independent bard faces fewer cnflicts and is best prepared t prtect sharehlder interests. Business relatinships with directrs that culd create cnflicts f interests shuld be avided. Cmmn impediments t independence include but are nt limited t: Emplyment by the cmpany r a subsidiary as a senir executive within the previus five years Status as a funder f the cmpany Substantial business r persnal relatinships with the cmpany r the cmpany s senir executives Family relatinships with senir executives r funders f the cmpany Sharehlding in the cmpany ver 10% f the issued capital Excessive tenure We als take int accunt market standards t cnsider the independence f a bard member. When analysing the independence level f the bard, BlackRck nly takes int accunt bard members wh are elected by sharehlders (excluding gvernment r emplyee representatives whse presence might be legally required). If the level f bard independence is insufficient, BlackRck wuld usually vte against the re-electin f the members f the nminatin cmmittee. If nne f the cmmittee members are prpsed t be re-elected, we wuld usually vte against the chairman f the bard r the lngest serving nn-independent candidate, in that rder Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

6 Bard cmmittees BlackRck expects the audit, remuneratin and nminatin cmmittees f the bard t be cmpsed exclusively f nnexecutive directrs and t be chaired by an independent directr. These directrs shuld be independent where called fr by market practice. In any event, nn-independent cmmittee members shuld represent n mre than a minrity f the cmmittee s members. Additinally, the chairman f the bard shuld serve n the audit cmmittee nly if he/she is independent. When the cmmittee cmpsitin is nt in line with ur guidelines due t the presence f sharehlder representatives, we wuld still supprt the electin f these representatives if the sharehlder they represent hlds less than 30 per cent f the capital r vting rights f the cmpany. Bard chairmanship Independent leadership is imprtant in the bardrm. BlackRck believes that the peratin f the bard is generally enhanced when there is a clearly independent, senir nn-executive directr t lead it. In thse cases where there is cmbinatin f the rles f CEO and chairman, the bard wuld be expected t implement sme mechanisms that may ffset a ptential cncentratin f pwer, including but nt limited t, a majrity f independent bard directrs, majrity independent cmmittees, the presence f a senir independent directr and/r the reductin in the re-electin perid fr directrs. If the bard decides t appint a nn-independent chairman, specifically in the case f a frmer executive, we expect the cmpany t prvide strng supprting ratinale. Lead independent directr BlackRck generally cnsiders the designatin f a lead independent directr as an acceptable alternative t an independent chair if the lead independent directr has pwers t: 1) prvide frmal input int bard meeting agendas; 2) call meetings f the independent directrs; and 3) preside at meetings f independent directrs. We expect the lead independent directr t be available t meet with sharehlders. Where a cmpany des nt have a lead independent directr wh meets these criteria r any ther ffset mechanisms, we generally supprt the separatin f chairman and CEO. Bard and cmmittees chairmanship BlackRck may cnsider vting against the chairman f the bard, r against members f a bard cmmittee, in a situatin where we have identified a gvernance issue which has nt been reslved. This includes situatins where we bserve a lack f bard respnsiveness t sharehlders n bard cmpsitin r executive remuneratin cncerns, evidence f bard entrenchment, insufficient attentin t bard diversity, and/r failure t prmte adequate bard successin planning ver time in line with the cmpany s stated strategic directin. Bard engagement As a lng-term sharehlder, BlackRck believes maintaining an pen dialgue with cmpanies in which we invest t be essential. We prefer this dialgue t happen at bard level as this bdy is respnsible fr crprate gvernance decisins and strategy, as elected representatives f sharehlders. In particular, n matters such as executive cmpensatin we als prefer t discuss this with the relevant bard members rather than management due t the ptential cnflicts that may therwise arise. Therefre, BlackRck expects nn-executive bard members t be available t meet with sharehlders frm time t time. In a situatin where the bard wuld repeatedly refuse t meet sharehlders, we wuld cnsider a vte against members f the bard Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

7 External bard mandates As the rle f directr is increasingly demanding, directrs must be able t cmmit an apprpriate amunt f time t bard and cmmittee matters. Given the nature f the rle, it is imprtant a directr has flexibility fr unfreseen events. BlackRck is especially cncerned that where a full-time executive has a nn-executive directr rle r rles at unrelated cmpanies, there may be a risk that the ability t cntribute in either rle culd be cmprmised in the event f unfreseen circumstances. Cmpanies shuld disclse bard and cmmittees attendance t enable sharehlders t mnitr directrs availability. BlackRck expects cmpanies t prvide a clear explanatin in situatins where a bard candidate is (1) a directr serving n mre than three ther public cmpany bards; (2) a chairman chairing a bard f anther listed cmpany, r (3) an executive fficer at a public cmpany and is serving n mre than tw ther public cmpany bards. In case f an executive fficer, we wuld vte against his/her (re)electin nly at external bards. BlackRck may vte against the (re)electin f a directr where there is a risk the directr may be ver cmmitted in respect f ther respnsibilities and/r cmmitments (taking int accunt utside emplyments and/r bard mandates n private cmpanies/investment trusts/fundatins). Fr BlackRck, in ur experience, the test f an ver-cmmitted directr is nt just attendance recrd but includes an assessment f a directr s ability t prvide apprpriate time t meet all respnsibilities when ne f the cmpanies starts facing difficulties. When lking at the number f bard mandates, BlackRck will usually cunt as ne bard membership all memberships n bards f listed cmpanies in the same grup, except when the subsidiaries perate in different sectrs. BlackRck may vte against the electin f an utside executive as the chairman f the bard as we expect the chairman t have mre time availability than ther nn-executive bard members. We expect the cmpany t explain why it is necessary fr this external executive t lead the bard f directrs. BlackRck may vte against the (re)electin f any directr fr whm the disclsure f ther already held bard and cmmittee psitins is deemed t be inadequate, r where a directr has a pattern f pr attendance at the bard and/r applicable key cmmittee meetings. Auditrs and audit-related issues In apprving auditr and audit fees, BlackRck will take int cnsideratin the level f detail in cmpany disclsures. Where the cmpany has nt prvided full disclsure n the name f the auditr, the audit fees as well as nn-audit fees, BlackRck may abstain n the apprval f the auditr and vte against the (re)appintment f the members f the audit cmmittee. Audit fees shuld be reprted separately frm ther fees and fees earned fr tax wrk but BlackRck will take int accunt the varius market practices. BlackRck may als take this actin if audit fees are lwer than nn-audit fees and an adequate explanatin is nt prvided. Capital structure, mergers, asset sales and ther special transactins BlackRck will nt supprt prpsals t restrict freign wnership unless such a restrictin is a legal requirement. BlackRck des nt supprt the use f anti-takever defences. BlackRck supprts pre-emptive rights in line with lcal market guidelines and practices; these guidelines prvide a key prtectin fr sharehlders against dilutin f their interests. We recgnise that management requires sme flexibility t raise funds fr general business purpses thrugh the issuance f shares. We generally supprt prpsals seeking a standing authrity t make such issuances subject t lcal market guidelines and practices, the size f the capital pl being fixed, the life f the authrity being specified and the ther terms being reasnable with regard t the interests f existing sharehlders. In general, BlackRck may vte against capital issuance prpsals in excess f 50 per cent f the Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

8 issued share capital with pre-emptive rights and 20 per cent f the issued capital withut pre-emptive rights when the prceeds are nt intended fr a specific purpse. We apply lwer limits in sme markets in line with lcal market practices (e.g. in the United Kingdm r France). Requests fr standing authrity t issue shares in relatin t an acquisitin will be cnsidered n their merits and in light f previus use f such authrities and the cmpany s crprate gvernance prfile. BlackRck expects all share issue authrities t be presented t sharehlder vte at the general meeting. Sharehlder rights BlackRck supprts the ne share ne vte ne dividend principle, and will encurage cmpanies t adpt it Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

9 Our apprach t remuneratin and benefits The key purpse f remuneratin is t reward, attract and retain cmpetent directrs, executives and ther staff wh are fundamental t the lng-term sustainable grwth f the cmpany, with reward fr executives cntingent at least in part n cntrllable utcmes that add value. BlackRck believes that each cmpany shuld structure their remuneratin plicies and practices in a manner that suits the needs f that particular cmpany given the brader cntext and envirnment it perates in. Highly talented and experienced executives are sught by many cmpanies and deserve apprpriate incentives, including substantial remuneratin. BlackRck cnsiders pay frm the perspective f perfrmance. Executive pay shuld be clsely linked t perfrmance, by which we mean strng and sustainable returns ver the lng-term, as ppsed t shrt-term hikes in share prices. When assessing remuneratin plicies and practices f listed cmpanies BlackRck is lking fr a cgent explanatin fr the plicies used and, in respect f executive remuneratin in particular, a clear link t the cmpany s stated strategy. We encurage cmpanies t use these guidelines in develping their pay plicies, as they will infrm BlackRck's apprach t engagement arund pay. Clear cnsideratin f these guidelines will help prduce ptimally prductive engagements. We expect issuers public disclsures t be the primary mechanism fr cmpanies t explain their executive remuneratin practices. Where cncerns are identified r where we seek t better understand a cmpany s apprach t executive remuneratin, we may engage with cmpanies, preferably independent members f the remuneratin cmmittee f the bard. Beliefs and expectatins related t executive remuneratin practices We believe that remuneratin cmmittees are in the best psitin t make remuneratin decisins and shuld maintain significant flexibility in administering remuneratin prgrams, given their knwledge f the strategic plans fr the cmpany, the industry in which the cmpany perates the apprpriate perfrmance measures fr the cmpany, and ther issues internal and/r unique t the cmpany. Cmpanies shuld explicitly disclse hw incentive plans reflect strategy and incrprate lng-term sharehlder value drivers; this discussin shuld include the cmmensurate metrics and timeframes by which sharehlders shuld assess perfrmance. BlackRck believes that remuneratin plans shuld allw remuneratin cmmittees t have discretin t make adjustments as a result f unintended utcmes frm plans. Where discretin has been used by the remuneratin cmmittee we expect disclsure relating t hw and why the discretin was used and further, hw the adjusted utcme is aligned with the interests f sharehlders. BlackRck des nt discurage remuneratin structures that differ frm market practice. Hwever, where remuneratin practices differ substantially frm market practice, e.g. in the event f uncnventinal incentive plan design r extrardinary decisins made in the cntext f transfrmatinal crprate events r turnarund situatins, we expect clear disclsure explaining hw the decisins are in sharehlders best lng-term ecnmic interests. We expect remuneratin cmmittees t ensure that incentive plans d nt incentivise excessive risk taking beynd the cmpany s determined risk appetite and that rewards are reasnable in light f risk-adjusted returns t sharehlders. We expect remuneratin cmmittees t cnsider and respnd t the sharehlder vting results f relevant prpsals at previus years annual meetings, and ther feedback received frm sharehlders, as they evaluate remuneratin plans. At the same time, remuneratin cmmittees shuld ultimately be fcused n incentivising Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

10 lng-term sharehlder value creatin and nt necessarily n achieving a certain level f supprt n Say n Pay at any particular sharehlder meeting. Remuneratin cnsultants We believe bards shuld prvide mre transparency in their reprting n their use f remuneratin cnsultants. Disclsures shuld cver the name f the cnsultant, the nature f all services prvided, and the chain f accuntability, e.g. t the bard r t management. Discurse n what the bard saw as the merits f the particular advisr relative t in-huse r in-bard expertise wuld als be useful. Greater transparency will help demnstrate whether directrs have the required cmpetency and whether there are any cnflicts f interest, e.g. prviding advice t the bard but being paid by management. Say n pay analysis framewrk We analyse the remuneratin practices in the cntext f the cmpany s stated strategy and identified value drivers and seek t understand the link between strategy, value drivers and incentive plan design. We review executive remuneratin granted during the year in terms f ttal remuneratin that may be earned at threshld, target and maximum perfrmance. Such an apprach prvides an understanding f the remuneratin cmmittee s intended utcmes based n varius perfrmance scenaris and t judge the apprpriateness and rigr f perfrmance measures and hurdles. We make an assessment f the relevance f the cmpany s stated peers and the ptential impact the cmpany s peer selectin may have n pay decisins. We cnduct ur analysis ver varius time hrizns, with an emphasis n a sustained perid, generally 3-5 years; hwever we cnsider cmpany-specific factrs, including the timeframe the cmpany uses fr perfrmance evaluatin, the nature f the industry, and the typical business cycle, in rder t identify an apprpriate timeframe fr evaluatin. We review key changes t pay cmpnents frm previus years and cnsider the remuneratin cmmittee s ratinale fr thse changes. Where we see extrardinary pay items (including but nt limited t actual r cntractual severance payments, inducement grants, ne-time bnus and/r retentin awards, r relcatin expenses) we expect t see a clear explanatin t understand the remuneratin cmmittee s ratinale and hw such payments are aligned with lng term sharehlder interests. We may engage with cmpanies, preferably independent members f the remuneratin cmmittee r f the bard, where cncerns are identified r where we seek t better understand a cmpany s apprach t executive remuneratin. We cnsider BlackRck s histrical vting decisins (including whether a cncern that led t a previus vte against management has been addressed, r whether we determined t supprt management at previus sharehlder meetings with the expectatin f future change), engagement activity, ther crprate gvernance cncerns at the cmpany, and the views f ur prtfli managers. We assess the bard s respnsiveness t sharehlder vting results f relevant prpsals at previus years annual meetings, and ther feedback received frm sharehlders Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

11 Engagement and vting n say n pay In many instances, we believe that direct discussin with cmpanies, in particular with the members f the remuneratin cmmittee, can be an effective mechanism fr building mutual understanding n executive remuneratin issues and fr cmmunicating any cncerns we may have n executive remuneratin. In the event that we determine engagement has nt r is nt expected t lead t reslutin f ur cncerns, we will cnsider vting against members f the remuneratin cmmittee, cnsistent with ur preferred apprach t hld members f the relevant key cmmittee f the bard accuntable fr gvernance cncerns. When evaluating executive remuneratin arrangements, BlackRck will take int cnsideratin the balance f fixed versus variable pay, the chice f perfrmance measures and their targets, the length f vesting and/r hlding perids, the verall cmplexity f the schemes, as well as the verall level f transparency. BlackRck expects executive remuneratin arrangements t demnstrate a clear link with the executin f strategy. As such, BlackRck prefers all executive remuneratin beynd salary and benefits t cmprise variable pay based n relevant and challenging perfrmance criteria that are clearly linked t the strategic bjectives set by the management team. BlackRck expects the larger prtin f this variable pay t be based n sustained perfrmance ver a multi-year perid. We will vte against the electin f remuneratin cmmittee members and/r Say n Pay prpsals in certain instances, including but nt limited t when: We identify a misalignment ver time between threshld, target pay and maximum remuneratin utcmes and cmpany perfrmance as reflected in financial and peratinal perfrmance and/r sharehlder returns; We determine that a cmpany has nt persuasively demnstrated the cnnectin between strategy, lng-term sharehlder value creatin and incentive plan design; We determine that remuneratin is excessive relative t peers withut apprpriate ratinale r explanatin, including the apprpriateness f the cmpany s selected peers; We bserve an verreliance n discretin r extrardinary pay decisins t reward executives, withut clearly demnstrating hw these decisins are aligned with sharehlders interests; We determine that cmpany disclsure is insufficient t undertake ur pay analysis; and/r We bserve a lack f bard respnsiveness t significant investr cncern n executive remuneratin issues. We will typically vte against Say n Pay when: There is n mentin f the use f perfrmance criteria fr the vesting f lng-term awards r it is explicitly stated there will nt be any disclsure arund the perfrmance criteria, with the exceptin f restricted schemes (see belw); A lng-term incentive plan allws fr retesting, i.e. multiple pprtunities t achieve the perfrmance criteria; and/r A bard f directrs decides t make retrspective/in-flight changes t perfrmance criteria Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

12 Remuneratin guidelines Fixed remuneratin When setting fixed pay, we expect bards t start by determining the right cst fr the specific psitin. This amunt shuld be based n a calculated assessment f what needs t be paid t get the jb dne and shuld be aligned with the pay plicy f the cmpany fr the rest f the wrkfrce. The bard shuld als cnsider the pay rati between the CEO and the rest f the executive team, lking at bth the fixed and the ttal remuneratin. Benchmarking shuld be used nly t establish a frame f reference fr what cmpetitrs are paying, rather than as the starting pint fr negtiatins. We expect cmpanies t select peers that are bradly cmparable t the cmpany in questin, based n bjective criteria that are directly relevant t setting cmpetitive remuneratin; we evaluate peer grup selectin based n factrs including, but nt limited t, business size, relevance, cmplexity, risk prfile, and/r gegraphy. Benchmarking tls shuld be used in a transparent manner, i.e. we expect the results t be disclsed by the cmpany, especially the peer grup selected. In case f a significant pay increase year-n-year that is ut f line with the rest f the wrkfrce, BlackRck expects the cmpany t prvide a strng supprting ratinale. Large increases shuld nt be justified principally by benchmarking r cmpany s perfrmance but shuld prgress in pace with the evlutin f the scpe f the rle and its cmplexity. If justified by additinal cmplexity, we expect cmpanies t prvide a detailed explanatin f hw the rle has substantially changed. We d nt see the size f the capital f the cmpany as an apprpriate prxy fr the cmplexity f the rle r as apprpriate justificatin fr an increase in salary. Pensins and benefits Pensins and benefits shuld nt be used in the calculatin f variable pay. We view pensins as being part f the benefits ffered by a cmpany and therefre we expect pensin cntributins fr executives t be in line with the rest f the wrkfrce. Cntracts fr new executives shuld reflect this alignment. Any dwngrade f the wrkfrce s pensins shuld als be applied t the executives. Recruitment packages Any prpsed package shuld be primarily determined in relatinship t the nature and the specifics f the rle fr a cmpany f this size and cmplexity. Any large disparity with the remuneratin f the frmer executive shuld be explained in detail by the cmpany. Buyut awards, if necessary, shuld nly be made in shares r similar at-risk vehicles and shuld be aligned with the recruiting cmpany s strategy and metrics; vesting can be aligned with the executive's prir emplyment cycle. Severance, retirement and change in cntrl Severance payments shuld nt be made t executives whse cntracts have been terminated as a result f pr perfrmance, wh have chsen t leave the cmpany, r wh are retiring. Severance payments shuld be limited t tw years f fixed remuneratin (including bnus in markets where this is the expected practice). This limit includes payments frm nn-cmpete agreements. Severance payments shuld nly be paid in case f frced departure f a gd leaver. The nn-renewal f a mandate shuld nt be cnstrued as a frced departure Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

13 In case f gd leavers, unvested awards shuld vest pr-rated fr time and perfrmance and lapse in full in case f bad leavers. In case f a vluntary change f emplyment, the executive s unvested awards shuld lapse in full as well. A gd leaver is ne which leaves the cmpany due t: retirement, persnal circumstances preventing the executive frm fulfilling the rle, change in cntrl/strategy when the pst becmes redundant r the incumbent executive's skills are nt aligned. A bad leaver is ne which leaves the cmpany due t frced r agreed departure due t inadequate perfrmance r behaviur f that individual. One-ff awards Any ne-ff award t an executive shuld be based n very exceptinal circumstances that wuld need t be detailed by the cmpany in the remuneratin reprt. Withut adequate explanatin, we will usually ppse ne-ff awards linked t transactins as these awards culd create an incentive fr executives t undertake unnecessary (and at times value-destrying) acquisitins. Mrever, any merger r acquisitin entails significant risks that investrs will have t face fr a number f years after the transactin. We will als usually vte against retentin awards as, in ur experience, they are nt an effective tl t retain emplyees. Variable pay Given the uniqueness f each listed cmpany, and the numerus industries in which cmpanies perate, we d nt believe there is a ne size fits all apprach t the structure f executive remuneratin. Bards f directrs shuld structure executive remuneratin plans that best suit their cmpany taking int accunt such factrs as the cmpany s pay plicy, strategy and business cycle. We d nt set frth a preference between cash, restricted stck, perfrmance based equity awards, and stck ptins, amngst ther remuneratin vehicles. We acknwledge that each may have an apprpriate rle in recruiting and retaining executives, in incentivising behaviur, in fstering the right culture and perfrmance and in aligning sharehlders and executives interests. Remuneratin cmmittees shuld clearly disclse the ratinale behind their selectin f pay vehicles and hw these fit with intended incentives. We als bserve that different types f awards exhibit varying risk prfiles, and the risks assciated with pay plan design shuld be in line with the cmpany s stated strategy and risk appetite. Bards shuld prvide a picture f what the pay package culd lk like depending n different perfrmance scenaris and n different time hrizns fr investrs t be able t assess adequately the pay-related prpsals. We expect cmpanies t disclse the value f the remuneratin t be granted in a particular year based n threshld, target and maximum perfrmance (values shuld be measured by face value at grant date). BlackRck may nt supprt lng-term incentive plans: where vesting f awards is nt subject t the achievement f pre-determined perfrmance targets where the perfrmance perid is nt sufficiently lng-term riented with insufficient disclsure n matters such as grant limits, perfrmance criteria, vesting perids and verall dilutin, as this will nt allw BlackRck t fully assess these incentive plans; where the ttal vlume f the lng-term incentive plans exceeds 10 per cent f the capital, taking int accunt the prpsed and utstanding authrities; where they allw fr the immediate vesting f awards upn a change f cntrl Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

14 We supprt incentive plans that fster the sustainable achievement f results. Althugh we believe that cmpanies shuld identify thse perfrmance measures mst directly tied t sharehlder value creatin, we als believe that emphasis shuld be n thse factrs within management s cntrl t create ecnmic value ver the lng-term, which shuld ultimately lead t sustained sharehlder returns ver the lng-term. We are wary f cmpanies using nly utput metrics such as earnings per share ( EPS ) r ttal sharehlder return ( TSR ). Our preference is fr input metrics as these are within management s cntrl. TSR, if used, shuld be assessed n a relative basis r cmpanies shuld prvide a cgent explanatin fr why this is nt adequate. Cmpanies using EPS shuld exclude the ptential shrt term effects f share buybacks and acquisitins. We als encurage cmpanies t use metrics related t the creatin f value f the cmpany (e.g. the ecnmic prfit r a cmparisn f return n invested capital ( ROIC ) and the cst f capital). Perfrmance metrics shuld be clsely aligned with the strategic bjectives and shuld nt be created fr the sle purpse f cmpensating executives. The use f adjusted metrics in the remuneratin framewrk shuld be cnsistent with the adjustments used in the statutry reprting. Shrt-term and lng-term incentive plans shuld be based n different sets f perfrmance measures. The perfrmance measures shuld be majrity financial and at least 60 per cent shuld be based n quantitative criteria. Variable pay shuld be based n multiple criteria. We expect full disclsure f the perfrmance measures selected and the ratinale fr the selectin f such perfrmance measures. If the bard decides t use ESG-type criteria, these criteria shuld be linked t material issues and they must be quantifiable, transparent and auditable. These criteria shuld reflect the strategic pririties f the cmpany. Fr that reasn, the inclusin in ESG-indexes is generally nt cnsidered t be apprpriate criteria. Where financial measures cnstitute less than 60 per cent f perfrmance measures a cgent explanatin shuld be prvided. Retrspective disclsure shuld be prvided n the perfrmance achieved, brken dwn by measure, fr quantitative and qualitative metrics alike. Fr markets where it is the expected practice, the perfrmance metrics and targets shuld be disclsed prspectively. Regarding lng-term incentive plans, we expect the perfrmance duratin t be in line with the business cycle f the cmpany. When the vesting perid is tw years r less, due t a shrt business cycle, an explanatin shuld be prvided and there shuld be a sufficient subsequent hlding perid beynd the vesting f awards t ensure the lng-term fcus by management. Currency expsure: we d nt believe ne grup f stakehlders shuld be sheltered frm the impact f currency fluctuatins. We expect cmpanies t mitigate currency risks as any ther risk. Restricted schemes Sme cmpanies might cnsider that a restricted scheme fits better with their remuneratin philsphy. We expect these cmpanies t prvide detailed ratinale t justify this decisin. Mrever, the intrductin f a restricted scheme shuld nt result in a mre cmplex pay package. Given the certainty f these schemes, we expect the value f awards t be reduced by at least 50 per cent in cmparisn t the variable pay previusly available. Any subsequent increase shuld be avided r justified by specific circumstances. The vesting/hlding perid(s) shuld have a lnger timeframe, preferably a minimum f five years. T avid pay fr failure, we believe an underpin shuld be applied t these schemes, i.e. the awards shuld nt vest if a minimum level f perfrmance has nt been achieved Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

15 Fr the cmpanies granting restricted shares, we encurage the bard t increase the sharehlding requirement t at least fur times fixed pay, that shuld be maintained fr at least tw years pst departure t ensure lnger term alignment with sharehlders. Matching plans Bards shuld refrain frm using matching plans if they are already using ther types f lng-term incentive plans. Matching shuld be capped and shuld be linked t additinal perfrmance criteria. Sharehlding requirement Fr all cmpanies, we encurage bards t set executive sharehlding requirement at least at the level f maximum annual variable pay (including the bnus and lng-term incentives). Executives shuld be required t build up their sharehlding in a reasnable amunt f time after their appintment. We believe it is a gd practice fr executives t retain part f their sharehlding fr a perid f time (at least tw years) after they leave the cmpany. Remuneratin requirements under CRD IV In BlackRck s view, bards f directrs and remuneratin cmmittees shuld have flexibility in determining pay structure and levels. We are therefre supprtive in principle, f increasing the 1-t-1 cap f variable t fixed pay t 2-t-1 fr cmpanies subject t CRD IV. Hwever, bards shuld exercise this flexibility respnsibly. We will cntinue t review and mnitr remuneratin structures n a case-by-case basis. In additin t the abve and in the cntext f CRD IV, we will assess any material differences between prpsed versus existing fixed pay levels fr impacted staff, as apprved by sharehlders in previus years. In the event a cmpany chses t intrduce an additinal layer f fixed pay, where regulatin permits we have a preference fr the allwance t be paid in shares. Further, we expect that the allwance will release n faster than pr-rata ver five years. Any additinal layer f fixed pay shuld be excluded frm the calculatin f pensin entitlements, benefits and severance and fit within previusly cmmunicated and apprved dilutin limits. In additin, we expect that any increase in fixed pay r an additinal layer f fixed pay, wuld result in a reductin f ttal verall pay given the decreased level f at risk pay. Nn-executive bard members remuneratin BlackRck des nt supprt variable pay elements (e.g. stck ptins r perfrmance shares) fr nn-executive directrs r supervisry bard members and prefers these bard members t receive fixed fees nly. These fees can paid in cash and/r shares Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

16 Disclsure f Public Cmpanies Remuneratin Plicy BlackRck expects cmpanies t disclse a remuneratin plicy which includes all the cmpnents f the remuneratin package f the executive and nn-executive members f the bard f directrs. The plicy shuld prvide a descriptin f the remuneratin philsphy and a ratinale fr the chice f perfrmance criteria used fr the variable pay f executive directrs. We expect cmpanies t prvide a further ratinale whenever the plicy is mdified. The plicy shuld include a descriptin f all the cmpnent parts f the remuneratin package, including: hw that cmpnent supprts the shrt and lng-term strategic bjectives f the cmpany; an explanatin f hw that cmpnent perates; the maximum that may be paid in respect f the specific cmpnent; where applicable, a descriptin f the framewrk used t assess perfrmance including: an explanatin f why any perfrmance measures were chsen and hw any perfrmance targets are set; a descriptin f any perfrmance measures which apply including the level f perfrmance required where mre than ne perfrmance measure applies, an indicatin f the weighting f the perfrmance measure r grup f perfrmance measures; details f any perfrmance perid; and the amunt that may be paid in respect f: the minimum level f perfrmance that results in any payment under the plicy, and any further levels f perfrmance set in accrdance with the plicy; in respect f any cmpnent (ther than salary, fees, benefits r pensin) which is nt subject t perfrmance measures, an explanatin f why there are n such measures; an explanatin as t whether there are any prvisins fr the recvery f sums paid r the withhlding f the payment f any sum (such as malus and claw backs); if any cmpnent did nt frm part f the remuneratin package in the last apprved directrs remuneratin plicy, why that cmpnent is nw cntained in the remuneratin package; in respect f any cmpnent which did frm a part f such a package, what changes have been made t it and why; and an explanatin f the differences (if any) in the cmpany s plicy n the remuneratin f crprate fficers frm the plicy n the remuneratin f managers generally. Apprach t recruitment remuneratin The remuneratin plicy shuld cntain a statement f the principles which wuld be applied by the cmpany when agreeing the cmpnents f a remuneratin package fr the appintment f executives. The statement must set ut the varius cmpnents which wuld be cnsidered fr inclusin in that package and the apprach t be adpted by the cmpany in respect f each cmpnent Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

17 Apprach t severance payments The remuneratin plicy shuld describe the terms and the cnditins in respect f any payment fr lss f ffice. The plicy shuld clarify in which situatins these payments wuld be allwed. Change f cntrl The remuneratin plicy shuld indicate if a change f cntrl wuld have an impact n the remuneratin f executives, e.g. the accelerated vesting f equity-related awards. Pensins The remuneratin plicy shuld set the terms and cnditins f the pensin cntributins paid by the cmpany, if any. Statement f cnsideratin f stakehlders The remuneratin plicy shuld cntain a statement f hw the pay and emplyment cnditins f emplyees (ther than executives) f the cmpany were taken int accunt when setting the plicy fr directrs remuneratin. The remuneratin plicy must cntain a statement f whether, and if s hw, any views in respect f directrs remuneratin expressed t the cmpany by sharehlders have been taken int accunt in the frmulatin f the directrs remuneratin plicy Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

18 General crprate gvernance matters Amendments t memrandum / articles f assciatin / charter These prpsals vary frm rutine changes t reflect crprate law r ther regulatry revisins thrugh t significant changes that substantially change the gvernance f the cmpany. BlackRck will review such prpsals in accrdance with ur crprate gvernance plicy and ur assessment f the impact f the changes n the rights f sharehlders. Apprve annual reprt / financial statements Where the annual reprt and/r financial statements are nt published sufficiently in advance f the vting deadline t allw a cnsidered vte we may abstain n prpsals n the apprval r adptin f the reprts. Similarly, we may withhld supprt if ding s wuld prtect sharehlders rights t take legal actin shuld irregularities be discvered at a future date. We may als vte against prpsals n the annual reprt if we have material cncerns abut the quality f reprting and disclsure. Bundled prpsals BlackRck believes that sharehlders shuld have the pprtunity t review substantial gvernance changes individually withut having t accept bundled prpsals. Where several measures are gruped int ne prpsal, BlackRck may reject certain psitive changes when linked with prpsals that generally cntradict r impede the rights and ecnmic interests f sharehlders. Change f name f crpratin BlackRck will nrmally supprt management prpsals n crprate names. Cverage f multi-jurisdictinal cmpanies Where a cmpany is listed n multiple exchanges r incrprated in a cuntry different frm its primary listing, we will apply the mst relevant market guideline(s) t ur analysis f the cmpany s gvernance structure and specific prpsals n the sharehlder meeting agenda. In ding s, we typically cnsider the gvernance standards f the cmpany s primary listing, the market standards by which the cmpany gverns itself, and the market cntext f each specific prpsal n the agenda. If the relevant standards are silent n the issue under cnsideratin we will use ur prfessinal judgment as t what vting utcme wuld best prtect the ecnmic interests f lng-term investrs. We expect that cmpanies will disclse in their annual reprt the ratinale fr their selectin f primary listing, cuntry f incrpratin, and chice f gvernance structures, in particular where there are cntradictins between relevant market gvernance practices. Dividend prpsals BlackRck will generally apprve dividends taking int cnsideratin market standards and practices. We assess mre clsely cmpanies that prpse a lwer allcatin t determine if the lw dividends are necessitated by cmpany-specific cnditins r lcal market factrs. We may ppse dividends that appear excessive given the cmpany s financial psitin. BlackRck will generally supprt prpsals that ffer sharehlders a chice f a stck r cash dividend. We expect cmpanies t explain their dividend plicy and prvide a ratinale fr and terms f any distributin f scrip dividends. We believe cmpanies shuld repurchase shares t avid excessive dilutin in case f scrip distributin Prxy vting guidelines fr Eurpean, Middle Eastern and African securities

19 Increase in authrised share capital / increase in preferred stck BlackRck assesses these requests in light f a cmpany s previus issuance f capital and its crprate gvernance prfile. Generally, we will supprt prpsals if the bard has cncluded that additinal share capital is necessary t carry ut the cmpany s business. We wuld expect cmpanies seeking such authrity frm sharehlders t set ut clearly the anticipated use f the additinal shares and hw this is in the interests f existing sharehlders. Other business BlackRck ppses giving cmpanies ur prxy t vte n matters where we are nt given the pprtunity t review and understand thse measures and carry ut an apprpriate level f sharehlder versight. Private placement BlackRck will generally supprt private placements where the purpse f the prpsed transactin is t raise funds r repay debt. We wuld expect cmpanies t seek annual sharehlder apprval fr any standing authrities t make private placements. Such authrities shuld specify the maximum prprtin f issued capital that culd be placed privately and the maximum discunt that culd be applied, where relevant. Reincrpratin r change f dmicile Prpsals t mve dmicile frm ne cuntry t anther are frequently undertaken t gain prtectin frm takever, t avid certain regulatry requirements r t save csts. We will assess any changes t the cmpany s charter assciated with the reincrpratin and will nt nrmally supprt mves that will result in a significant verall reductin in sharehlder prtectins. Where sharehlder prtectins will nt be diminished and cst savings are the sle mtivatin and will be cnsiderable we will generally supprt such a prpsal. Related-party transactins In principle, cmpanies shuld refrain frm engaging in transactins with related parties such as their sharehlders, directrs, and management. If related-party transactins are entered int they shuld be cnducted n an arm s length basis, apprved by independent parties, such as nn-interested directrs and/r sharehlders, and further gverned by relevant crprate law r stck exchange listing requirements. BlackRck expects related-party transactins t be fully disclsed and explained. Disclsure shuld include, but nt be limited t, parties invlved, financial cnditins, details f the transactin, and justificatin frm the bard n the interest f the transactin. We may supprt reasnable annual mandates fr recurring related-party transactins subject t their nt adversely impacting minrity sharehlders. BlackRck will generally vte against substantial business transactins with nn-executive directrs as cnflicts f interests shuld be avided. Share repurchase BlackRck cnsiders share repurchase prgrammes t be generally supprtive f the share price and will usually apprve them. We will nrmally ppse such prpsals if the prprtin f issued share capital cvered by the authrity is excessive r if the intended purpse is unclear. We will nt supprt share repurchase prgrammes which allw fr share repurchases t be carried ut during a takever perid Prxy vting guidelines fr Eurpean, Middle Eastern and African securities