zRating Study 2021

Sep 1, 2021 | Proxy Voting, Publications

Zurich, 16 September 2021 – According to the new zRating study by Inrate, Lonza has the best corporate governance in Switzerland. Swisscom comes second and Orior is back on the podium. The biggest improvements were seen at Meier Tobler, Poenina, Coltene, SIG Combibloc and Swissquote.

The zRating study has been published for the thirteenth time since 2009. Inrate evaluates the corporate governance of Swiss public companies with a scoring model using 65 quantitative and qualitative criteria. In 2021, 171 listed Swiss companies were analysed based on their articles of incorporation, annual reports and decisions taken at general meetings (AGMs). A maximum of 100 points can be achieved in the four categories «Shareholders and capital structure», «Shareholders’ participation rights», «Composition of Board of Directors (BoD)/Board of Management (BoM) and information policy» and «Compensation and participation models BoD/BoM». Inrate identifies potential corporate risks from the perspective of corporate governance that could affect the value of the company and therefore have a negative impact on minority shareholders.

In addition to the rating, in the study we look back at developments in corporate governance, present statistics on the voting results and voting recommendations of the past AGM season and discuss key themes. This year’s key themes focused on sustainability.

Second AGM season impacted by the coronavirus pandemic
The AGM season 2021 was again rather quiet. Except for the AGM of EMS Chemie, all AGMs were held without an audience. As in the previous year, the attendance rate hardly suffered from the prohibition of public participation and once again shareholders representing around 70 % of the share capital submitted their votes (2021: 70 %; 2020: 67 %; 2019: 67 %). However, practice also shows that the exchange with small shareholders is not necessarily highly valued. At 50 % of the companies, the AGM was reduced to count the votes without including the shareholders’ participation (previous year: 88 %). Nevertheless, it must be noted that 47 % of the companies allowed questions to be addressed to the BoD (previous year: 7 %). Generally, the questions could be sent to the BoD in advance by email. Interroll, Leclanché and Sika are exemplary exceptions, which allowed shareholders to ask questions live at the AGM. Furthermore, 15 % of the companies provided a livestream or video message to reduce the feeling of “anonymity” (previous year: 7 %). At none of the AGMs was it possible to vote live.

Digitalisation and new company regulations will allow AGMs to be held not only physically, but also virtually and even in several locations. The technical setup must offer every shareholder participation rights. Christophe Volonté, Deputy CEO and Head of Active Ownership at Inrate, comments: «In order to get a good reflection of society, the corporate leaders should be confronted with the opinion of the small shareholders at the AGMs. This is particularly important to involve them in the sustainability strategy».

It is also worth noting that there have been no shareholder proposals this season. Corona seems to have put activist investors into a certain lethargy. Discussions about executive salaries did not make much of a stir either. The CEO median salary has hardly changed compared to the previous year (2021: CHF 1’300’106, 2020: CHF 1’296’750) and is slightly lower than before the Corona virus pandemic (2019: CHF 1’376’625). It is worth mentioning that Credit Suisse once again withdrew remuneration proposals shortly before the AGM. These are certainly signs that the rights of shareholders have brought about a certain degree of discipline thanks to the «rip-off» initiative. At companies that paid out high remuneration despite Corona’s influence, such as Dufry (CHF 5.7 million) and Valora (CHF 2.4 million), the remuneration reports were approved by shareholders with relatively low approval rates (63.7 % and 55.6 % respectively).

Improvements in corporate governance
The highest scores are achieved by Lonza and Swisscom (both 81 points). Lonza achieves first place due to its higher score in the category «Shareholders’ participation rights». The two companies were already on the podium in the previous year and were able to improve one rank after the delisting of Sunrise. Lonza has been in the top ranks since 2009. The last time Orior was among the top three was in 2014. The food company has improved its corporate governance, especially in the areas of «Composition of BoD/BoM and information policy» and «Compensation and participation models BoD/BoM». Orior thus climbed 11 ranks compared to the previous year. Meier Tobler (+15 points), Poenina (+13 points), Coltene (+12 points), SIG Combibloc (+10 points) and Swissquote (+9 points) also improved their scores. These companies have improved through changes to the articles of incorporation (e.g., limiting the size of the board and third-party mandates) and practices (e.g., closing competence gaps on the BoD, improving the compensation system, disclosing information on meeting attendance).

Sustainability as an inherent part of the strategy
Corporate communication is increasingly oriented towards sustainability topics. Transparency is the basis of good corporate governance. Company outsiders should be provided with a consistent picture of a company’s business conduct in economic terms as well as in relation to corporate governance, the environment and society. Inrate advocates that credible and trustworthy sustainability reporting should set out how a company’s products and services can satisfy societal and environmental demands. Sustainability must be an inherent part of the company’s strategy; corresponding goals must be formulated, and management must be measured against them. This could reduce the risk of «greenwashing» and the isolation of management from shareholder pressure. «A convincing corporate governance is the foundation on top of which a good sustainability strategy can be implemented», says Volonté.

The zRating study 2021 can be ordered here

About Inrate
Inrate AG is the independent Swiss sustainability rating agency. Since 1990, it has been helping clients develop and successfully implement innovative sustainability solutions with profound sustainability knowledge and research solutions. Our ratings measure the impact a company’s behaviour and products have on society and the environment, as well as its willingness and ability to tackle the challenges it faces. Inrate also offers active ownership services. Since 2011, we have been actively involved in improving corporate governance in Switzerland. Institutional investors are supported in exercising their shareholder rights with detailed corporate governance research («zRating») and proxy voting reports. In addition, Inrate offers the opportunity to participate in the engagement process on sustainability issues through membership in the «Responsible Shareholder Group» (RSG).

To the press release

To the presentation (in German)