expense of the company and its investors; and – Performance measurement over timescales sufficient to determine that value has in fact been added for the company and its shareholders (for long-term awards we expect a minimum performance period of three years, but we encourage companies to consider a five-year performance period or introduce an additional holding period). AllianzGI expects large-cap companies in Europe to integrate social, environmental and governance metrics into their remuneration policies based on their respective materiality analysis. AllianzGI generally votes against remuneration policies of those European large-cap companies that have not included ESG KPIs in their remuneration policies. For companies in other regions and smaller companies AllianzGI encourages the integration of ESG factors in remuneration policies where material and appropriate. When it comes to performance-based share incentive schemes, we currently observe two main approaches: – First and most common approach is for companies to make annual share awards to executives at a level set under the policy, and measure performance against pre- determined KPIs and targets at the end of the performance period; – Second approach is to determine the size of the long-term award on the basis of an annual performance assessment and apply a deferral period to ensure alignment between executives and shareholders over an extended period of time. We have seen both approaches used effectively to the benefit of the company and shareholders. However, where the initial performance assessment covers a period of one year only, we expect application of objective and transparent performance measures to determine the size of the award, as well as a secondary assessment on vesting to ensure that the management’s strategy has delivered sustainable value creation it was meant to achieve. This secondary assessment can be made against share-price performance, total shareholder returns, return on capital employed, return on equity or any other performance metrics that best reflect long-term sustainable value creation. We understand that for short-term performance awards, such as annual bonus schemes, disclosure of targets under operational and financial KPIs may be commercially sensitive and, therefore, undesirable. However, we expect all companies to disclose such targets retrospectively, as part of the annual report and/or results presentation for the year for which the bonus was paid. Any non-disclosure of bonus targets should be explained and justified by the company. AllianzGI does not support retrospective amendments to the terms of incentive schemes without a prior shareholder approval. We will vote against incentive plans that may be materially altered (eg, cancellation and re-issue, re-testing, re-pricing or backdating of options) without shareholder approval, allow management significant discretion in granting certain awards, or are otherwise inconsistent with the interests of shareholders. In light of current economic conditions, in particular high inflation rates in many countries, AllianzGI will carefully evaluate generous pay packages taking into account pay increases of the wider workforce and consider whether companies received direct state aid, underwent significant layoffs and/or restructuring or cut dividends. We generally vote against if we consider pay packages overly generous taking these aspects into account. AllianzGI may not support equity award plans that are too dilutive (eg, >10% of the issued share capital in 10 years for executive and all-employee plans) and expensive to existing shareholders. AllianzGI encourages the introduction of a clawback policy comprising both compliance- and result-related clauses and the inclusion of appropriate clawback provisions under the terms of incentive plans. AllianzGI pays close attention to perquisites, including pension arrangements, and will vote against if deemed excessive. We expect executive pension arrangements to be in line with those offered to company employees, and will only support additional pension schemes for executive directors (in markets where this is allowed by law) where, on retirement, an executive does not also benefit from generous severance payments and/or compensation under a “non-compete clause”. AllianzGI does not approve of the inclusion of variable pay in the pension calculation or crediting additional years of service to executive directors as a benefit. We will not support transaction bonuses and retrospective ex-gratia payments, and will not approve financial assistance to directors, officers or related persons without clear explanation and robust justification from the company. We will only approve a one-off special payment/award where the company can demonstrate truly exceptional circumstances and significant additional value creation. AllianzGI believes that severance payments to executives should be set at a reasonable level. Ideally, severance pay should not exceed one year’s fixed salary and benefits or minimum legal requirements in the markets where these are higher than 12 months’ fixed pay. Where appropriate, payments to former executives should be subject to performance targets. All incentive awards should be time pro-rated and tested for performance, including in the event of an early termination due to the change in control. Termination payments following a change in control should only be available in the event of a loss of job or substantial diminution of duties, and should be Global Corporate Governance Guidelines 17