CSR best practices: corporate governance and executive compensation in listed companies

A large part of the report published in December 2022 by the institution is devoted to the consideration of corporate social responsibility (CSR) by the boards and committees of 50 French companies [1].

Considering that the board of directors has a major role to play in CSR, the AMF notes that listed companies are increasingly communicating on the integration of this theme in their governance. However, the regulator considers that the reality is more contrasted: many companies are much less committed to the subject than the good students, whose practices can serve as an example.

As you prepare for the 2023 general meetings, Positivéco offers you a summary of the best practices identified by the AMF.

Most companies in the sample analyzed by the AMF (87%) communicate on the CSR skills of their directors.

The report highlights several good practices to improve the relevance of this communication:

• Publish an individualized presentation of directors’ skills and the percentage of directors involved for each skill
• Define skills requirements for directors based on committees and communicate the level of satisfaction achieved
• In the case of “CSR skills”, specify whether the director is competent in social, environmental, climate and/or governance matters

The AMF also considers that the proportion of companies detailing their directors’ CSR training is still low (48%) and proposes relevant initiatives:

• Provide for regular training on topics relevant to the company especially in CSR, and detail the content of this training
• Develop a training program for newly appointed directors

Some of the companies studied by the AMF have appointed a director as a “reference” on a CSR topic.

This action is one of the approaches highlighted in the report:

• Appoint a CSR representative (the Chairman of the CSR Committee, if one exists) within the Board of Directors to lead the Board in its work in this area, particularly on the environment and climate change
• Organize one or more specific discussion points of the Board or the CSR Committee dedicated to the climate or environmental issue
• In the case where several privileged CSR interlocutors are presented, clarify and articulate the roles of each

Most of the companies examined having set up a “CSR committee”, the AMF has identified several associated good practices:

• Question the Board’s handling of CSR and the relevance of creating or appointing a CSR committee, and justify the decision resulting from the discussions
• Examine the relationship between the various committees’ CSR missions and report on them in the universal registration document
• Present the distribution of the work of the committees in a synthetic, schematic and pedagogical way
• Accurately report on climate-related work
• Organize collaboration between the Audit Committee and the CSR Committee to analyze non-financial risks (a joint meeting or joint work on risks, for example)
• Clarify the respective roles of the audit committee and the CSR committee with respect to the non-financial performance statement (DPEF). With the entry into force of the CSRD, the audit committee (or the body performing its functions) will have to ensure the relevance and integrity of the information provided to the board on CSR.
• Involve the CSR Committee in evaluating the CSR performance of executives
• Identify and report on priority skills in future director appointments, and provide an explanation if appointments are not consistent with stated priorities

The AMF report draws the attention of directors to the risk of providing insufficiently clear or detailed information on executive compensation policy, particularly on the presentation of performance criteria. The AMF recommends increased transparency:

• Present operational and strategy-related performance criteria
• In the remuneration policy and in the remuneration report:
  • Specify the relative weighting of each performance criterion and each significant sub-criterion
  • Justify, if necessary, how the publication of the performance criteria is likely to be prejudicial to the company
• For the selection of CSR criteria and the determination of CSR performance:
  • Indicate how they relate to the strategy
  • Use a quantifiable indicator or, failing that, a measurable qualitative indicator
  • Have a tool for collecting information related to this indicator
  • Use well-defined DPEF indicators to link to the materiality matrix presented in the DPEF
  • Define the perimeter on which the indicator is set
  • Have these indicators reviewed by the Statutory Auditors and/or the ITO
  • Simplify the indicators

The AMF also mentions climate resolutions, a minority phenomenon whose report shows an increase over the last few years. The AMF’s review found two draft climate resolutions in 2020, compared with three in 2021 and 11 in 2022. Presented at the initiative of companies, these resolutions aiming to validate their climate strategy with their shareholders are also called Say on Climate resolutions. According to the regulator, the obvious disparity in the scope and ambition of these resolutions underscores the lack of market practice on the subject.

In March 2023, the AMF’s Climate and Sustainable Finance Commission (CFDD) therefore published its position on climate resolutions. This publication takes note of the growing demand from investors on the subject, for whom “the strategy must be relevant, aligned with the objectives of the Paris Agreement and give a detailed account of the concrete objectives and the different levers of action to achieve them”. The commission also underlines the difficulty of filing resolutions in France and pleads for changes in the regulatory and legislative framework in order to avoid the refusal of climate resolutions submitted by shareholders.

• For climate resolutions filed by shareholders, the CFDD calls for the systematical acceptance of their inclusion to the agenda of the general meeting, the increase of AMF powers in case of refusal of inclusion and, in the meantime, the facilitation of the referral to the commercial court.
• For Say on Climate resolutions at the initiative of companies, the commission supports the evolution of legal and normative frameworks to make these climate resolutions mandatory and supervised with a frequency of at least every 3 years, particularly for companies subject to the European CSRD directive.

Notes and references

[1] Study based on the top 50 French companies of the SBF 120 whose shares are admitted to trading on the regulated market of Euronext Paris and whose annual general meeting was held between the beginning of January and the end of July 2022.

At Positivéco, we see new national and international CSR regulations as vectors for positive growth.

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