As you are aware from our previous editions of Arcus, our Panvesting process upends the traditional investment process by starting with a Governance and Sustainability Audit. To highlight an example of how we think about Governance and Sustainability, I am proud to present to you a podcast by Panarchy Partner’s Co-Founder Christian Derold and our Chief Operating Officer, Ben Yeoh.
Christian and Ben have successfully narrowed down one aspect of the no doubt very broad topic of governance within organisations. They succinctly discuss how proper and well thought out incentives are the key to good governance and a must have for sustainable returns and progress on all forms of capital: human, social, environmental and financial.
Before I invite you to listen to what they have to say, I felt it appropriate to share some facts about our own portfolio when it comes to governance and incentives. We dare not suggest perfection and the below is merely a narrow snap-shot of our work. Please remember that we collect this data not as a mechanical justification for the companies we hold but as a basis and a starting point for thorough, ongoing engagement with company management.
100% of our portfolio companies have at least 40% independent board members, 83% have at least 50%
70% of our companies have at least 30% female directors on their boards
On average our companies’ CEOs have 23% of their salary package fixed, 73% of their variable package is performance based and 53% of their package is in LT incentive schemes. We love to scrutinize the goals and quality of the performance based compensation component, in particular performance that relates to non-financial capital
96% of our companies have a vesting period of at least 3 years or more
44% of our companies have non-financial capital KPIs as well as financial targets in their CEO’s incentive scheme
Sustainability progress index, return on social investments, customer success & satisfaction, product innovation, responsible business conduct, environmental targets are just some non financial KPIs we are monitoring our companies’ remuneration schemes on. While some of these KPIs may sound vague, we make sure we understand through engagement how meaningful, well-intended and transparent each company conducts itself.
Armed with these facts and much more granular information on our portfolio companies’ incentive schemes, the team at Panarchy Partners sees ongoing engagement as the best way to improve on this key and crucial feature of governance that is incentives.
Now without further ado, I present “Governance, Incentives and Sustainability” by Christian and Ben.