Executive Pay in Firing Line as Cevian Steps Up ESG Activism

(Bloomberg) -- Cevian Capital AB, an activist investor with sizable stakes in some of Europe’s biggest companies, will start using its clout to make sure executive pay levels are pegged to sustainability targets.

The new campaign is intended to address growing concerns that too many firms are touting environmental, social and governance goals without always living up to their promises.

“Several of our companies are not currently where they need to be, including larger ones such as ABB, CRH and Ericsson,” Cevian Managing Partner Christer Gardell told Bloomberg.

Cevian wants the matter to be put to shareholder votes in its portfolio companies at annual general meetings next year. Those companies that have yet to take ESG seriously need to “start,” while the rest need to “accelerate” strategies already in place, it said in a statement.

“Only a tiny share of companies meaningfully incorporate ESG targets into their incentive plans,” Gardell said. “That makes no sense.”

At Ericsson AB, where Cevian is the biggest investor with just under 6% of the shares, there’s no immediate plan to introduce ESG targets to the current bonus plans for the company’s top managers, a company spokesperson said by email on Wednesday.

“Ericsson’s focus on sustainability is embedded across operations and is becoming an ever more fundamental part of creating business value,” it said. “In our dialogue with our shareholders, sustainability is a key focus area frequently discussed.” It said this includes “consideration of including” ESG related targets “in the future variable compensation programs” for management.

Cevian says its strategy is designed to address the “box checking” that many companies have been using “to give the perception of progress when real advances are not being made.”

The investor plans to “hold companies and their directors to account” through a combination of voting on director elections and compensation plans. Cevian is also ready to put forward shareholder motions if needed.

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