Breakdown of the FRR s portfolio within the context of general meetings in 2016

As an institutional investor, the FRR is invested in the world s leading markets, and therefore attends local issuers general assemblies in the portfolio s 36 countries. Governance practices for small and mid-cap companies are different from those for large caps. This diversification of investments automatically makes it harder to compare one company with another, for exam- ple regarding the composition and diversifica- tion of the board of directors. Various trends may therefore be taken into account: at an over- all portfolio level, where they are not very sug- gestive but reflect macro trends likely to be shared by the markets; and locally, where they are more similar.

Different trends appear if we look at the situa- tion from a small or large-cap perspective. Disa- greement over small caps is often clearer. This is because they are often less transparent, espe- cially for determining the performance criteria that will unlock variable remuneration (award of stock options or bonus shares). This category of resolutions also happens to be the most dis- puted. Resolutions concerning limits on capital increases are hotly debated as small and mid- cap companies often want more flexibility. Also, regulated agreements between companies and any holding structures may seem opaque, and prompt a no vote from investors. Yet small and mid-cap companies are increasingly taking gov- ernance standards into account.

Some countries, such as Germany, have seen votes against pay rises become much more commonplace, with a rejection rate close to that of 2010.

Unlike small and mid caps, the average approval rate for large caps say-on-pay resolutions was up in 2016 (CAC 40 index).

With the amendment to the Sapin 2 act aimed at limiting director pay, voting by shareholders attending the general meeting will now be bind- ing on the board of directors. This constitutes real progress and a proper restraining influence by shareholders. We will just have to see how things pan out in 2017.

The incorporation of environmental issues also seems to be taking root, and companies are showing an increasing tendency to highlight their environmental and social responsibility. The integration of these new issues into a com- pany s global strategy reflects the beginnings of

performance based on more long-term criteria, perhaps showing greater awareness of the risks associated with ecological and energy transi- tion. This is another positive move worth highlighting.

The tendency towards greater equality on boards of directors also continues. Although the FRR supports this, it has not forgotten that a board of directors must be staffed by compe- tent, available directors.