Re agenda item 7: Approval of the remuneration report
The Association of Ethical Shareholders Germany proposes that the remuneration report be rejected.
Rationale:
Leadership at DHL will be rewarded for performance related to employee engagement despite significant labour disputes that are creating material risk to shareholders.
Workers from Unite the Union at DHL Aviation in the UK are currently in a dispute over pay. This dispute has been needlessly escalated by DHL Aviation (UK) management who have victimised trade union representatives and imposed the pay offer rather than negotiate a settlement. One Unite representative has been dismissed and another suspended on bogus charges. A further Unite member at an adjacent DHL warehouse has also been disciplined for supporting workers on the picket line. DHL has even stopped one worker from running the London marathon.
These actions are a violation of Principle 3 of the UN Global Company to which DHL is a signatory. They are also a violation of ILO Convention 98: “Right to Organise and Collective Bargaining Convention” which DHL claims to adhere to.
Actions in the UK come in the aftermath of significant disputes at key DHL Express hubs in Leipzig and in Miami. DHL Express is the division which generates 50% of group profits and a third major dispute in 12 months raises questions over governance and the management of the workforce at DHL.
The remuneration report proposes to reward senior management bonuses based in no small part on ESG standards being met across the business. The ‘social’ element of this award is based solely on the employee engagement score. The use of such metrics within executive pay has been the subject of criticism by corporate governance advisers as lacking credibility. Criticisms include a lack of rigour in terms of survey methods and scoring.
The target employee engagement score used in the DHL remuneration policy for 2023 is 80%, despite the company reporting a score above this level in the previous three years 2020 (83%), 2021 (84%) and 2022 (83%). Despite no improvement in the score in 2023 compared to the previous three years the social target within the non-financial criteria has been determined to have been met.
This is despite strike action in both Germany and the US during 2023 prior to the Unite dispute in the UK. This underlines the crudity of the metric which nonetheless accounts for a third of the total weighting for non-financial factors. The leadership of DHL Group is being rewarded for its performance in employee engagement even as members of its own workforce take industrial action at key sites of profit for the Group. This raises questions over the oversight of remuneration at the company and a lack of understanding of actual workforce conditions, both of which point to wider governance challenges. A true demonstration of employee engagement would be for the leadership of DHL Group to take the necessary action to ensure local management ends its victimisation of Unite members and negotiate a resolution to the dispute.
The German Corporate Governance Code states that remuneration determinations should take account of both workforce pay and extraordinary developments, including when deciding if variable remuneration is justified. In this instance the supervisory board could have determined that ongoing pay disputes were both an extraordinary development and a more meaningful expression of employee sentiment than a simplistic survey score and adjusted the bonus award accordingly.
Given both the continuing industrial relations dispute and the fundamental weakness in the approach to assessing ‘social’ performance shareholders should oppose the remuneration report.
