Wolters Kluwer N.V. (WKL) Earnings Call Transcript & Summary

Ladies and gentlemen, I would like to welcome you to the Annual General Meeting of Shareholders of Wolters Kluwer. Good morning, good afternoon, and maybe good evening. The coronavirus has been with us for more than a year, and our top priority continues to be to protect the health and safety of our employees, customers, shareholders as well as the stakeholders participating in the event. This is why this is our second Annual General Meeting that we are holding in virtual format. This year, shareholders are able to participate in the meeting remotely, ask questions and vote live during the meeting. We appreciate that many of you took the opportunity to exercise their voting rights by way of electronic or written proxy. And some of your -- of our shareholders have submitted questions related to the agenda in advance. Thank you for that. [Operator Instructions] We will address these questions during the meeting, and we will, of course, make note of this in the minutes. Due to the public health measures and travel restrictions that are in place in the Netherlands, it has been decided that I'm the only member of the Supervisory Board physically present here in Alphen. The other members of the Supervisory Board, as well as Executive Board, are participating remotely. Our auditor, Mr. Savert of Deloitte accountants, and the company's notary, Ms. Leemrijse of the firm Allen & Overy are both joining the meeting today as well. Ms. Leemrijse is here in Alphen with me, while Ms. (sic) [ Mr. ] Savert is attending remotely. Given the circumstances, we will conduct the meeting in English, for which we kindly ask your understanding. We also kindly request shareholders who ask questions via the chat function to do so in the English language. We have complied with all statutory provisions and the provisions of our Articles of Association for convening this meeting by posting the meeting notice on our website on March 10 and announcing it by press release. The agenda with explanatory notes, including the proposed remuneration policy for the Executive Board and the 2020 annual report, were published in a timely manner as -- and have been deposited for inspection by shareholders in the prescribed manner. Shareholders who are registered in the company's shareholder register have been notified by letter to attend this meeting. Because these requirements of the Articles of Association have all been observed, resolutions can be validly adopted at this meeting. And as soon as the exact numbers of share present or represented is known, I will inform you. An audio recording will be made to correctly produce the short report of this meeting. Questions that were submitted prior to the meeting and any follow-up questions that may be raised during the meeting through the app will be read out loud by myself on behalf of the shareholder. And then, of course, we answer it. Let us now turn to the meeting agenda. And as usual, I would like to discuss agenda Items 2a, b, c and 3a together. To introduce these items, I would now like to give the floor to Ms. McKinstry, CEO and Chairman of the Executive Board. Nancy, please go ahead.

Thank you, Frans. Welcome, everyone, to our Annual General Meeting of Shareholders. Today, I'd like to focus on 2 topics: the first is a summary of our performance in 2020 and how we responded to the challenges posed by the coronavirus pandemic; and two, a look-forward to talk about our strategy in the coming years. Despite the challenges presented by the COVID-19 pandemic, the global team's agile response helped us deliver important strategic, financial and ESG results in 2020. In terms of our financial performance, we delivered 2% organic growth and an improved adjusted operating margin of 24.4% last year. This operating result, combined with a lower share count, drove a 7% increase in diluted adjusted EPS in constant currencies. Careful cash management helped us increase our adjusted free cash flow by 16% in constant currencies to EUR 907 million. We made 3 important strategic acquisitions during the year and still ended the year in a very strong financial position, with a leverage ratio of 1.7x. This performance allowed us to continue to deliver returns to investors. In fact, we paid out more than 70% of our adjusted free cash flow to our shareholders last year in the form of dividend and share buybacks. In terms of our performance on environmental, social and governance aspects, we made sure to sustain our investment in product development, which allowed us to enhance the value we deliver to our customers with our digital products. Among our most valued products are our expert solutions, which grew 6% organically and now account for 54% of our total revenues. We registered a record level of employee engagement in this extraordinary year. We updated our IT security, ethics and compliance training content and ensured that nearly all of our employees completed this course. And last but not least, we accelerated programs that help reduce our carbon emissions. The pandemic clearly challenged our growth trajectory, as you can see in the chart top left, which shows that organic revenue growth slowed from 4% to 2% last year. Without the team's agile response to supporting customers and employees, this revenue performance would not have been possible. Despite the top line challenge, we were able to continue to improve our adjusted operating profit margin. We quickly prepared and implemented plans that reduce costs while protecting investments in product, infrastructure and talent. This response, combined with the completion of the share buyback program, helped us sustain a track record of growing diluted adjusted EPS in constant currencies. Diligent cash management drove a significant improvement in our free cash flow margin last year as well. And finally, as you see in the bottom right-hand chart, we delivered a further improvement in our return on invested capital to 12.3%. We ended 2020 with a leverage ratio of 1.7x, leaving our balance sheet in a very strong position. Last month, we successfully placed a 500 million Eurobond, which provides financing at a very attractive rate for 7 years and further flattens and extends our debt maturity profile. We also delivered good results on several ESG fronts, and I'd like to highlight 2 topics today. Last year, and still today, almost 95% of our workforce has been working from home and communicating with colleagues, customers and suppliers in a virtual way. We care a great deal about the well-being and culture of our workforce. So we were quite pleased to see that in our annual employee survey, we registered a record level of employee engagement in this extraordinary year, more than 10 percentage points ahead of the high-performing norm. We attribute this positive result to our focus on the health and safety of our teams, a step-up in our internal communications efforts and our investment in technology, infrastructure and virtual collaboration tools. Not only were our teams more engaged than ever, we stayed productive and focused on customers, which enabled us to drive growth and margins while protecting jobs and investment. The second area I'd like to mention is our effort to reduce our impact on the environment and combat climate change. As a business that has migrated away from printed formats, and today has over 90% of its revenues coming from digital products and services, the impact of our activities on the environment is relatively low compared to other companies and industries. Our direct CO2 emissions relate to our consumption of energy in our offices and our data centers. Last year, we accelerated some of the programs we have that reduce our emissions and deliver efficiencies. We decommissioned 11 data centers last year by migrating applications to more energy-efficient cloud platforms. The freeze on travel last year helped reduce our travel-related carbon emissions per FTE by 72%. And going forward, we plan to support continued and increased use of virtual collaboration and events to help us minimize travel-related emissions even after the pandemic is behind us. And lastly, we reduced the environmental impact of our offices last year by closing several smaller sites and reducing our office footprint by 7% organically. Now let me turn to our proposed dividend distribution and our share buyback plans for 2021. In view of the 2020 performance and our strong balance sheet position, we are proposing to increase the total dividend for the financial year 2020 by 15% to EUR 1.36 per share. This will bring the final dividend to EUR 0.89 per share. This proposal is subject to your approval today. In February, we announced a share buyback of up to EUR 350 million during 2021, including repurchases to offset incentive share issuance. As of this week, we have completed around 40% of this year's buyback plan. In addition to cash returns, our shareholders have also seen an increase in the value of their Wolters Kluwer shares last year. This chart shows in blue the Wolters Kluwer share price since year-end 2014 compared to the Dutch AEX in orange and the Euro Stock Index in black and the MSCI Europe Commercial & Professional Service sector in red. While 2020 was a turbulent year for markets, Wolters Kluwer shares ended up the year 6%, beating the AEX and the Euro Stock indices. Over the 3-year period ended December 31, 2020, Wolters Kluwer shares increased 59% in value, nearly 4x the performance of the Amsterdam AEX index and nearly 20x the performance of the Euro Stock Index. The shares also performed well relative to the MSCI sector peers. And almost 4 months into this year, Wolters Kluwer shares are broadly keeping up with the market indices. Now I'd like to take a look ahead at where our strategy is taking us in the coming years. While the global pandemic shifted our growth trajectory from its original plan, it has reinforced and validated many aspects of our strategy. In the coming years, we will continue our evolution towards digital and expert solutions and to cloud-based software platforms. At the same time, we will continue to support this with investments in product innovation and internal systems, infrastructure and digital marketing. Our top priority continues to be to grow our expert solutions. Expert solutions are products that combine deep domain knowledge with technology, to deliver both content and workflow automation to improve outcomes and productivity for our customers. These products achieve not only high renewal rates but also high levels of customer satisfaction. Our second priority is to advance our deep domain expertise. We are working to transform our information products and services by enhancing their value through artificial intelligence, predictive analytic and deeper integration with customer workflows. With regard to our third priority, which is to drive operational agility, this past year really tested the organization. But I think the results showed that our teams truly embraced the challenges and the opportunities and showed a high degree of responsiveness. Now I'd like to take a closer look at one of our expert solutions. CCH Tagetik is a business that we acquired 4 years ago with a view to entering an attractive growth segment which is adjacent to the market that we serve in corporate solutions within Tax & Accounting. CCH Tagetik serves the office of the CFO. It offers a comprehensive, unified performance management platform for financial close, planning, forecasting and regulatory compliance. Today, it serves more than 1,200 global enterprises and thousands of users. CCH Tagetik enables finance personnel to spend less time managing and controlling processes and more time focused on strategy and driving business results. In 2020, CCH Tagetik delivered double-digit organic growth, driven by its cloud-based software. We continued adding resources to capitalize on the potential of this growth in the market and expanded our network of implementation partners. Investments in innovation yielded various promising new products in 2020. Most notable is the new Smart Now module, which we rolled out last year, that enables corporate finance teams to rapidly perform the scenario analyses necessitated by the pandemic. CCH Tagetik is today among our largest, fastest-growing cloud-based software platforms. In 2020, software solutions accounted for 41% of Wolters' total -- Wolters Kluwer's total revenues. And of this software, cloud-based software accounted for 28% and grew 19% in 2020. The pandemic has stimulated demand for cloud-based software and collaboration tools, as professionals have adapted to remote working conditions. Looking ahead, we expect cloud-based products to continue to see strong growth as our markets gradually migrate away from the on-premise applications and as new productivity solutions are adapted and launched into the marketplace. I'd like to highlight 2 of the acquisitions that we made last year that also helped to advance our position in the cloud. The first is XCM Solutions, which we acquired in September. This is a cloud-based productivity solution provider for professional tax and accounting firms in the U.S. This acquisition offers synergies with CCH Axcess, our cloud-based module software suite in North America. And in December, we completed the acquisition of eOriginal, which is the leader in digital lending solutions in North America. This acquisition will enable our Governance, Risk & Compliance division to extend into the fast-growing digital loan closing and storage adjacency. Both targets were strategic cloud software partners before we acquired them and offered synergies with our existing products. While their impact on earnings in the near term is immaterial, we expect both businesses to deliver a return on invested capital above 8% after tax within 3 to 5 years. Before I wrap up, I'd like to review the outlook we provided in February. The February statement indicated that we expect economic activity and spending patterns to be subdued for most of 2021, with a gradual recovery starting in the second half. We said that while the first half of 2021 faces a challenging comparable, we expect the full year of 2021 to show improvement in organic growth, supported by 3 of our divisions. We also expect to increase our adjusted operating profit margin into the range of 24.5% to 25%. We expect adjusted free cash flow to be between EUR 875 million and EUR 925 million in constant currencies. We expect return on invested capital of around 12%. And finally, we expect mid-single-digit growth in diluted adjusted EPS in constant currencies. In summary, our global team embraced the challenges of 2020, dedicating themselves to the needs of our customers while delivering on financial, strategic and ESG priorities. We managed the transition to work from home while remaining focused on product road maps and important infrastructure initiatives. Despite the challenges, we delivered 2% organic growth and improvements in margins, free cash flow and return on invested capital. The balance sheet remains in good shape, and we were pleased to be able to increase our returns to our shareholders. Our strategy has been reinforced by the pandemic, and you will see us move forward to scale our expert solutions, advance our information products and services and drive even greater operational agility. We ended the year in a good position from which to see improvement in 2021 as the global economy continues to recover. Thank you very much for your support as shareholders of Wolters Kluwer, and I now turn it back to the Chairman.

Thank you, Nancy, for this comprehensive presentation. We have 2 more presentations before we go to Qs and As. Ms. Horan, Chair of the Selection and Remuneration Committee dealing with remuneration matters, will now introduce agenda Item 2c, the advisory vote on the remuneration report as included in the 2020 annual report. This agenda item is submitted to you for an advisory vote in accordance with the Dutch law. By voting, you can indicate whether you believe the report provides a clear and comprehensive overview of all remuneration awarded or due to individual members of the Executive Board and Supervisory Board in the last financial year. The report can be found on the Pages 76 to 95 in the 2020 annual report and is also separately posted on the company's website. I also refer you to Note 38 of the financial statements, which can be found on Page 187 of the annual report. Jeanette, the floor is yours.

Thank you, Frans. With regard to the agenda Item 2c, I will focus my comments on the performance and resulting payout for the last year, the financial year 2020. Later in this meeting, I'll be back to discuss the new Executive Board remuneration policy proposal, which will determine remuneration for the current and the next 3 financial years. First, I would like to remind shareholders that the payout over the financial year 2020 was still based on the existing remuneration policy that has been in place for a number of years. The remuneration payout was a function of the framework set out in that policy. In the remuneration report, we have disclosed the financial and nonfinancial targets that were set for the short-term and long-term incentives, and the achievements against those targets. The achievements of 2020 were very considerable, given the extraordinary circumstances caused by the global coronavirus pandemic. The Supervisory Board was impressed by how the Executive Board led the response to the challenge, a response which focused on the health and safety of all employees and customers globally and on providing the support and tools needed to keep delivering for customers. The high employee engagement score in 2020, which Nancy described earlier, is testament to the leadership provided during this pandemic. Without a doubt, the engagement, motivation and culture of Wolters Kluwer's global workforce was critical to delivering 2% organic revenue growth for the year. The Supervisory Board also noticed management's well-prepared initiatives to control costs as certain revenues came under pressure last year. This capital expense management allowed the company to fully preserve investment in products and IT infrastructure and even accelerate certain investments, such as cloud-related development and innovation. Expense management, combined with a strong balance sheet position, allowed the company to protect jobs and maintain or increase employee pay. It also allowed the company to increase the cash returns to you, our shareholders. Looking at the short-term incentive measures. While 2020 revenues were below target due to the impact of the pandemic on organic revenue growth, the adjusted net profit target was substantially achieved, and the free cash flow target was exceeded. With regard to the long-term incentive measures, Wolters Kluwer delivered very good performance in terms of absolute total shareholder return and diluted EPS growth. As you can see from the chart, the TSR performance placed Wolters Kluwer in fourth position when compared to the TSR peers, thereby exceeding the on-target level of the payout. On the diluted EPS measure, the organization delivered a normalized 3-year compound annual growth rate in constant currencies of 11.1%. This performance exceeded the target of 10.4%, resulting in above-target payout for the EPS-related shares. In concluding my comments on agenda Item 2c, I'd like to make mention that we made efforts to enhance the remuneration report in response to feedback from shareholders. I hope you agree that the 2020 remuneration report not only provides better disclosure of the achievements against short-term and long-term targets, but also now provides a better explanation of how management remuneration is linked to the company's strategic and financial goals and how we ensure the targets we set are appropriately stretched. With that, I'd like to turn the proceedings back to the Chairman.

Thank you, Jeanette. We now go to the third presentation. The financial statements for the year 2020 have been audited by, of course, the independent external auditor, Deloitte. And their opinion can be found on the Pages 201 to 209 of the annual report. I would now like to invite Bas Savert, partner at Deloitte, to give a brief overview on the audit work performed by his firm. Bas, who's joining us today remotely, the floor is yours.

Thank you, Chairman. Good afternoon. My name is Bas Savert. And on behalf of Deloitte, I was responsible for the audit of the financial statements 2020. And today, I will briefly discuss our audit approach. We issued an auditor's report on the 23rd of February 2021, and this report is included in the annual report, starting on Page 201. And I would like to refer to this full report, if you want to read about the responsibilities of management and of the auditor and -- with respect to the financial statements and the other information that is included in the annual report. This was my first year as a signing partner at Wolters Kluwer. The previous partner rotated following the maximum 5 years term, which is, under Dutch and European rules, the time that you can sign [ list at the ] clients. And as a consequence, we spent additional time on working at the transition and ensuring that the necessary steps were taken to transfer knowledge. And it's important to mention that many of the other team members remained unchanged this year. During the year, we had frequent contact with management and with the Audit Committee. With the Audit Committee, we discussed, amongst others, the audit plan, the management letter and the year-end report. And our audit was largely consistent with the previous years, although we obviously focused on certain specific developments like COVID-19. The group materiality was the same. It's based on profitability, and it remains at a level of EUR 50 million. And for consolidation purposes, we allocated a lower materiality to the audits of local companies. It was not higher than EUR 19.2 million. And furthermore, based on qualitative considerations in certain areas, we even further reduced the materiality based on our own judgment. The audit scope of the group audit was designed to reach a sufficient coverage. Overall, if you look at the full audit scopes and the specified audit procedures, we reached 81% coverage when you look at revenue and 90% if you take total assets into consideration. For companies that were not in full audit scope, analytical and other review procedures were performed at the group level. The key audit matters that we describe in our opinion are -- they also describe how they have been affected by COVID-19. So we considered COVID-19 in assessing management's estimates, for example, those used in the impairment review. And we've also considered if there are relevant changes with respect to controls. Furthermore, the audit itself was also impacted by COVID. We had to work remotely for the full year, as we couldn't visit our local teams and the local management of the companies, so that had its effects. However, we were able to introduce different type of toolings, including video conferencing and tools to access remotely the files of our component auditors, which enabled us to stay sufficiently involved in their audit work. Reading the opinion, you will also see a new key audit matter that we added, which is related to acquisitions. So as described by management, there were 2 more significant acquisitions during the year. They were in the fourth quarter, XCM and eOriginal, and we specifically focused on the purchase price allocation of those acquisitions using our specialists. Besides the audit matters, we also looked at other areas, such as fraud and compliance risks. These matters and also other details are included in the full report, which is again included in the annual report, starting on Page 201. And with that, I would like to conclude this summarized overview of the audit. I'm happy to answer any questions you may have related to the audit, and I thank you for your attention.

Thank you, Bas. Now we would like to take the questions relating to the agenda Items 2a, b, c and 3a. We will start with questions that were provided by shareholders in advance of the meeting, and then we will take follow-up questions submitted in the meeting. And these questions -- we have, in total, received 17 questions and 15 questions are related to these agenda items, which we are now going to discuss. We have received 10 questions from the VEB, from Mr. Erik Van den Hooding. We have received 2 questions from Andrea van den Heuvel on behalf of Achmea Investment Management as well as on behalf of ROBECO and APG Asset Management. And we have received 3 questions from [ Elizabeth Hannecot ] on behalf of VBDO. I will now take these 15 questions at this point. I will read them out. And then we -- I will allocate the questions for answering. The first question from the VEB goes as follows: Wolters Kluwer's higher-value products, such as its medical decision-making tools and Tax & Accounting software, carry healthy adjusted operating margins. And now the question: are there currently potential disruptors Wolters Kluwer is aware of that are attracted to these high-margin areas? Nancy, would you like to answer this question?

Thank you, Frans. So as you know, the group adjusted operating profit for Wolters Kluwer in 2020 was 24.4%. And our expert solution products, when they are at scale, generally do have higher margins than the overall group average. So it is an attractive market. It's a big part of why our strategy is focused very much on growing our expert solutions. With regard to disruptors, as long as Kevin and I have been in the industry, there's always been attempts to disrupt the business as well, either through new technologies or start-ups. And the way that we have maintained our competitive edge is through continuous innovation and more or less trying to disrupt ourselves. So we don't see that there's really any threat that we can see on the horizon from disruption. And particularly, that's true with expert solutions that have very high retention rates. Thank you.

Thank you, Nancy. We now come to the second question of the VEB. The Legal & Regulatory division has been a multiyear drag on Wolters Kluwer's performance, lowest organic growth and operating margin. And now the question: what is the current adjusted operating margin of the digital activities within the Legal & Regulatory division? That's again a question for Nancy.

Thank you. I think just it's important to answer the question in the context of the performance of Legal & Regulatory over the longer term. And you can see that it's actually improved its organic growth rate quite substantially. It had been declining 5% to 6%. In 2019, it grew 3%. In 2020, it was clearly impacted by the pandemic, in part because it still has about 25% of its revenues coming from print, and print was hard-hit in the pandemic. However, if you look at the 2020 growth in digital products, they grew 5% organically. So as we continue to shift the portfolio within Legal & Regulatory towards digital products and services, the -- that will support higher levels of organic growth, and that will impact also the margins. So while the margins were 11% last year, what you see is that includes a lot of restructuring and other investments. And so again, as we shift past some of those onetime investments and we see stronger growth in digital and less of a weight from print, you should see the overall margin from Legal & Regulatory improve.

Thank you, Nancy. We now come to question 3 of the VEB. Last year, during the AGM, Wolters Kluwer explained that the adjusted operating margin of L&R will never be as high as the other divisions due to the fragmented nature of the legal information markets in Europe. And now the question: Could Wolters Kluwer give an estimate of the potential margin improvement over the next few years? Nancy, again for you.

Yes. So the European market is, of course, fragmented in part because legal and taxes, by definition, locally run by jurisdictions, right, in terms of changes in tax and legal regulatory frameworks. And so we've been working for many years not only to get the transformation of digital to take hold within legal and regulatory, but also to rightsize the cost base. So as the portfolio within L&R becomes more digital, we fully expect that the margins will improve, and we should begin to set ourselves on a path to margins reaching sort of in the high teens, is what we would expect over sort of the medium term. Thank you, Frans.

Question 4. Kevin, that's a question for you. The leverage ratio lying substantially below 2.5% EBITDA has been a recurring theme at the previous AGMs. What action do you foresee to reach the leverage targets over time? Kevin?

Thank you, Frans. Our net debt-to-EBITDA leverage ratio was 1.7x at the end of 2020. As we moved into the uncertainty of a global pandemic, we were pleased to have such a strong balance sheet as we navigated through this situation. Now our target net debt-to-EBITDA of 2.5x is not necessarily a short-term target that we're looking to achieve on the short term. It is a signal to the market of the degree of leverage that we are comfortable operating with. This is informed by the fact that most of our business is recurring in nature and that we have a high conversion of cash throughout the business. So this is the level that we would certainly be comfortable at. Now it is worth mentioning that the strength of our balance sheet does allow us to invest in the business organically to make select bolt-on acquisitions and to improve our dividend payments and to continue with a share buyback program to our shareholders. So Frans, I will turn it back to you.

Thank you, Kevin. That's clear. Question 5 of the VEB: the returns of the Legal & Regulatory division trail larger customers -- sorry, competitors like RELX and Thomson Reuters. Are there -- question: are there possibilities to improve the market position by making larger acquisitions, given the available financial headroom? That's a question for Nancy.

Yes. The 2 competitors that you mentioned are the largest players in the U.S., and they have substantial scale there. We are a complementary competitor to those positions in the U.S. and have a relatively small business there. So we really are the leading player in Europe. And that has been our focus in terms of transforming the business digitally. So we do not intend to make any large acquisitions that would strengthen the position in the U.S. to try and compete differently with RELX and Thomson. Our strategy is really focused on driving strong digital growth, which we have been doing in the Legal & Regulatory portfolio, and investing in our software and our environmental health and safety business. And we believe, over time, that will improve the overall portfolio of Legal & Regulatory. Thank you, Frans.

Thanks, Nancy. That's very clear. Question #6: Wolters Kluwer in previous years has almost structurally delivered financial results above the upper bandwidth of the full year outlook, specifically adjusted free cash flow. The visibility of revenue is high given the large proportion of recurring income. The question is: is Wolters Kluwer too conservative in its full year outlook? Kevin, that's for you.

Thanks, Frans. We typically give guidance each year for the year ahead around operating adjusted profit margin, adjusted free cash flow, return on invested capital and adjusted EPS growth. We typically give a range for these guidance areas. And over the past 10 years, we have delivered in line with these guidance ranges. Sometimes, we're at the low end of the guidance ranges, sometimes we're at the upper end, but generally in line with the range. Now 2020 was an unusual year. Earlier in the year, we suspended guidance due to the uncertainty that we were all experiencing around the global pandemic. For 2021, we've reinstated guidance. COVID is still with us, but we feel that it is prudent to give guidance to the market based on the recovery that we see happening. We will update this guidance as we move through the year. So at the early stage of this year, we believe the guidance we've given you is prudent, and we do expect to deliver on that guidance. Thank you, Frans.

Thank you. The next question: Last year, adjusted free cash flow was positively impacted by the inflow of working capital resulting from COVID-19. The question from the VEB in this regard is: how much headwind does Wolters Kluwer expect from the working capital unwind this year? Kevin, again, for you.

Thank you, Frans. Last year was certainly an extraordinary year, as I mentioned. And Nancy in her opening comments did discuss the impact the pandemic had on our global revenue growth rates. Of course, in the midst of all this uncertainty, we paid a lot of attention to managing working capital, as you can imagine. We do not expect significant headwinds as we move into 2021. In fact, we have given guidance on free cash flow of a cash conversion ratio between 95% and 100%, which is a slight uptick from the guidance we've given in the past. So hopefully, this is clear with what we expect on cash flow moving forward. Thank you, Frans.

Thank you, Kevin. Question 8: Wolters Kluwer's at-target level of the adjusted free cash flow STI target is equal to the realized results for 2019 and the lower end of the bandwidth of the full year outlook for 2020. The question now is: for what reasons does Wolters Kluwer believe that the at-target level was ambitious enough? That's a question for the Chair of the Remuneration Committee. Jeanette, could you please answer that?

Yes. Certainly, Frans. So the step target for adjusted free cash flow, as disclosed in the remuneration report, was EUR 806 million in reporting currencies. Now when we set the target and when we give guidance, they are all set in constant currencies. And so with the fact that more than 60% of the company's revenue is generated in North America, and therefore in U.S. dollars, we -- the impact of exchange rate fluctuations has a material impact on that, which is one of the reasons why you see the difference between the constant currency target and the as-reported reporting currency final result. The other impact that we have in setting the target is we look at any major one-off cash flow items that might have happened in the previous year, and we normalize for that. So when you take into account both the impacts of currency and onetime items, the target was actually an adjusted free cash flow increase of about 6%. And given that we were -- our goal was to drive top line revenue by 4% and driving incremental margin improvement, I think delivering 5% to 6% growth in free cash flow is actually an ambitious target, and I think it's very appropriate for the company. Now of course, the pandemic kind of made changes in all of our plans. And we did suspend the guidance for 2020. And as you saw in the earlier report from Nancy, revenue growth did slow considerably. But I think that the company responded very well with respect to managing costs and working on the currency conversions to deliver the final result.

Thank you, Jeanette. Question #9: by using adjusted figures, Wolters Kluwer's executive compensation is no longer affected for both STP and LTIP by M&A decisions. And the question to the Supervisory Board by VEB is: is the Supervisory Board prepared to promise that it will make use of its discretion to lower payments in the event of material goodwill impairments? Jeanette, that's a question for you.

Yes. Thanks, Frans. First of all, I'd like to reinsure -- reassure everybody that M&A decisions absolutely do affect compensation. When we set our strategic targets, we look at the anticipated business plan and the increase in revenue, et cetera, that all get baked into our targets. So the M&A decisions absolutely do affect compensation. However, having said that, a change to adjusted free cash flow does have -- excuse me, I'm sorry, adjusted EPS, does actually take out things like, as you say, material goodwill impairments from that result. Now every year, the remuneration committee does review a number of elements actually to determine if we should use discretion to either increase or decrease the proposed payouts, and we will absolutely continue to do that. And the impact of any material goodwill impairments will certainly be a consideration in those discussions.

Thank you, Jeanette. Question #10: in Wolters Kluwer's annual report, and we talk about Note 18 now, it is stated that the perpetual growth rate used for the goodwill calculation is consistent with the long-term average market growth rate. The weighted average long-term growth rate was significantly reduced versus the previously reported years. Can Deloitte give some background on this deviation? I think this is a rather technical question, but I prefer that actually the CFO, Kevin, answers this question. Kevin, over to you.

Thank you, Frans. The long-term average growth rate did indeed decline compared to the prior year. Note that these growth rates disclosed in the annual report are used in context in our impairment testing each year. The perpetual growth rate in principle is linked and capped to our long-term inflationary outlooks. In 2020, the risk-free interest rates were sometimes lower and the inflation outlook has a risk-free interest rate. And it did indeed decline further in 2020, especially in the United States. Now as we've disclosed in Note 18 on Page 141 of the annual report, you can see, for example, that the risk-free rate in the U.S. declined from 2.5% in '19 to 1.4% in 2020. So Frans, back to you.

Thank you, Kevin. We now come to -- let me see, 2 questions from Ms. van den Heuvel, as I said before, representing Achmea Investment Management and ROBECO and IBG. The first question goes as follows: according to the 2020 Materiality Assessment -- which by the way, you can find on Page 19 -- the graph of Page 19 in the annual report -- according to the 2020 Materiality Assessment, executive compensation is seen as a material topic for the company. Can you elaborate on the analysis that brought this element in the materiality matrix? Yes, of course, we can. [Audio Gap]

Yes. Yes. Thank you, Frans. First of all, I'd like to stress that the results of the materiality analysis shows that executive compensation was not ranked as a topic of high importance by stakeholders. In fact, it was ranked in the middle by the stakeholder group. For shareholders, in fact, the most important topics by far in our materiality survey were employee engagement, continuing to be able to attract and retain talent, and the second topic was cybersecurity and data privacy. So those were clearly ranked much more importantly than executive comp. Thank you, Frans.

Thank you, Nancy. The second question on behalf of Ms. van den Heuvel goes as follows: we think it is a loss that shareholders cannot address the virtual meeting and have no possibility to ask questions verbally. Can you commit that for any future virtual meeting shareholders will be given the opportunity to address the virtual meeting and ask questions verbally? I guess that's a question for me. This year, for the first time, shareholders can vote live online and ask questions via chat. That was not the case last year. And we are using the Computershare online platform, the ABN AMRO e-voting application and the company webcast live streaming platform. The technology platform you're using does not currently allow a Zoom-like interactive verbal Q&A discussion, as we need to restrict questions in voting to registered shareholders only. However, we will evaluate this general meeting and also follow with interest the experiences and -- of other companies who offer my -- potentially in-person interaction via the phone or Microsoft Teams. This year, for the first time, you can vote online and ask questions, but we will certainly look at improvements for next year. That brings me to the first question of the VBDO, Ms. [ Hannecot ], and that goes as follows: the VBDO is very much pleased to hear about Wolters Kluwer's 2021-2023 Engage Sustainability strategy to be rolled out in the year -- in this year. The strategy is set to focus on 6 areas, amongst which diversity and inclusion and its environmental footprint. According to Wolters Kluwer, this strategy will be rolled out in 2021 and will include a set of goals, targets and actions on which Wolters Kluwer will report in the next annual report. VBDO is eager to follow Wolters Kluwer's progress in determining and achieving goals related to the Engage strategy and asks the following questions, now 3 questions: A, could Wolters Kluwer commit to setting separate targets for all 6 areas, report on the baseline situation in 2021 and on progress made in the following years? That's the first one, Nancy. The second one: one of the Engage strategy areas focuses on having a smaller environmental footprint. Could Wolters Kluwer under the Engage Sustainability strategy commit to include short-, medium- and long-term targets contributing to net-zero carbon emissions? And the third one and last, VBDO values following the progress of Wolters Kluwer regarding carbon-related assets and climate-related risks through the TCFD recommendations. Could Wolters Kluwer commit to fully implement the TCFD recommendations in its reporting mechanisms? Nancy, that's 3 questions for you.

Great. Thank you, Frans. So first, in 2020, we held extensive conversations with our shareholders on how to expand the ESG measures for use in the Executive Board compensation. And then we narrowed that down to 6 measures, which are discussed in both the 2020 remuneration report and our remuneration policy. Targets for these 6 measures have been set for the year 2021. And we'll report on them retrospectively in our 2021 annual report, alongside where we will show you the achievement against the benchmark. And these measures will -- are closely aligned to what we believe are the most material aspects of ESG for Wolters Kluwer. Our new Engage strategy around sustainability is broader than just the 6 ESG measures, and it includes things that we do for community and product impact that -- and we set specific goals around those. As we begin to work against these 6 objectives, we'll continue to review whether it makes sense to expand or to contract the number of targets that we have from a compensation perspective. On the second question around the carbon footprint, I'd like to reiterate that we are very committed to continuing to reduce our environmental impact, but we are a very environmentally friendly company. So we don't yet today. We have not yet committed to a net-zero status, but we continue to discuss that, and we will come back as we make progress overall within the Engage strategy. And then on your third question, we are currently evaluating the TCFD recommendations and are monitoring developments around the IFRS requirements as well. And we can't commit at this time, but we will continue to assess and come back to you as we better understand how to report and -- on these types of measures. Thank you, Frans.

The second question of the VBDO: Wolters Kluwer assesses its supply chain risks through third-party assessment and identifies high-risk regions and suppliers. VBDO values relevant KPIs set by Wolters Kluwer regarding its risk management in the supply chain. However, VBDO still sees improvement areas in the reporting process; e.g. by providing insights in Wolters Kluwer's supply chain and the risk and vulnerable groups therein, especially in the context of upcoming EU regulation on due diligence in supply chains. VBDO sees potential risks in the supply chain of minerals needed for hardware used in cloud services. The question goes: does Wolters Kluwer engage with its suppliers of cloud services on human rights impacts deeper down the supply chain? Additionally, could Wolters Kluwer commit to reporting quantitatively and qualitatively on how the company engages with negatively evaluated suppliers on -- and the number of percentage of contracts terminated? Nancy, for you.

Yes. So we -- the way that we operate is that the suppliers that are managed through our centralized supplier database receive a level of due diligence in terms of questionnaires that they have to comply with that talk about various aspects of management, including human rights. And so part of that is we ask them to commit to our human rights and environmental standards that are set out in our supplier code of conduct. So that includes -- any of our cloud-based suppliers are part of that central database and any supplier that has -- doesn't comply with the questionnaire or clearly doesn't comply with our policies, those suppliers would be terminated over time. And that's the way that we have been managing that, as you would expect, since most of our products are built in the countries in which we operate. Human rights is not a major concern, but it's certainly one that we take very seriously. And so we do monitor our suppliers quite aggressively in this area. Thank you, Frans.

Thank you, Nancy. The third question of VBDO: VBDO wants to congratulate Wolters Kluwer with first being named on the Forbes list of America's Best Employers for Diversity and America's Best Employers for Women in 2020 and the Financial Times list of European diversity. VBDO observes that Wolters Kluwer has an ambition to cultivate a diverse and inclusive culture. So far, Wolters Kluwer has not implemented mechanisms to translate its diversity ambition into actual deeds. And the question is, when does Wolters Kluwer expect to have translated its diversity ambition into an implementation plan and into tangible results and to be able to start reporting on the outcomes in -- for instance, regarding inclusivity scores. Nancy?

Great. Thank you, Frans. Gender diversity representation in our workforce today is strong, as you can see from the data that we do disclose, but we still see opportunities to improve overall diversity at Wolters Kluwer. And as committed within our Executive Board's short-term incentive goals for 2021, we've established a Global Diversity, Equity and Inclusion Committee. And we're enhancing our strategy to expand the diversity within the organization, and we plan to share the results of that plan in next year's annual report. And then we will further evaluate disclosing other kinds of targets around ethnicity statistics as it makes sense. So diversity is a very, very important topic at Wolters Kluwer and one that we will continue to advance on. Thank you, Frans.

We have now had...

Frans, I think you're on mute.

Yes, we have now had 15 questions, and I have seen that there are 1, 2, 3, 4 questions, follow-up questions, which I will now go through. And I will take the order as they came in. Nancy, the first one is for you. Both Wolters Kluwer and listed peer RELX are active in the legal market. The latter has an adjusted operating margin of 20%, which is 13% of revenue from print. Can we take profitability hints from the differences in the margin and percentage of print between Wolters Kluwer and RELX? Or are the underlying differences too large? Nancy, for you.

Yes. Clearly, the printed book products are at least profitable parts of what we do at Wolters Kluwer. Our expert solutions, when they are at scale, are the most profitable, right? And then the other products that we have sort of fall within that range. So the margin within our legal and regulatory business reflects the fact that it still has about 25% print, a big chunk of that coming from books, and the fact that we've been restructuring to rightsize the cost base over several years, and there's some onetime investments in those numbers. So as I said earlier, we fully believe that as we progress on both organic growth and the mix shift from print to digital that we will begin to see improvements in margins, and we are aiming for sort of the high-teens. We do have an element of fragmentation in Europe that does create additional cost for us, but we believe that the high-teens are achievable over the medium term for the business.

Thank you, Nancy. That was a follow-up question by the VEB. And we have now 3 follow-up questions from Achmea. The first one. As an answer to my first question, it is stated that other subjects are ranked as higher material topics, and this is on the Page 19 of the annual report, the materiality matrix. We would appreciate an answer on the question, which asked for some explanation on the analysis that resulted in the fact that executive compensation is seen as a material topic. Thank you very much in advance. Yes, I think we have come up with these -- the company has come up with these 25 items. And yes, it is clear to everybody that executive compensation in the Netherlands is an item which has come up. And also, you know that in the shareholders' meeting last year, we did not get to the 75% in respect to executive compensation policy. So that's why very simple. Andrea, this is on the list of 25. Having been ranked, it came out in the top 5 -- in the lowest 5 of the 25. I have it here in front of me. I come to the next question from you, Andrea, which is referring to question 1 of the VBDO. Do I understand correctly that Wolters Kluwer indeed commits to setting these targets per area of the ENGAGE strategy, including a baseline situation? Nancy?

Yes, yes, yes. We will -- we've set targets on 6 measures that make up the ESG targets that are again incorporated into the executive compensation for the short-term plan. And in our 2021 report, we will disclose the results against the targets for 2021, but also show you the baseline so you know where we started from. And then as I said, we will continue to evaluate those 6 targets, and we may adjust those as we fully implement the ENGAGE strategy.

Thank you. Of course, I -- these questions are from [ Elizabeth Hannecot ] of the VBDO. The next -- last question, which we have received is -- and that goes back, Nancy, to the TCFD recommendations. Could you please inform us of specific planning for completing the implementation of the TCFD recommendations, if any?

Yes. So we will be assessing that in 2021 and come back in the annual report again of 2021 with some commentary on it and be able to indicate what our plans are with that. So we're still reviewing that today. And again, that's part of this whole extension of our ENGAGE strategy. Thank you, Frans.

Thank you. And Nancy, a follow-up question on the third question of VBDO, which was regard to the diversity subject. Could you please provide insight in the time frame for having implemented the ambitions in the area of D&I?

Yes. So some of those -- some of the goals that we have were already well along on implementation. We've set some specific sort of internal targets in areas around diversity. Others are multiyear program. I think one of the things I'm very encouraged by is that we've done a lot of engagement with employees. So we have this global committee, and then we've done a lot of sort of business unit level of engagement to better understand what's on employees' minds, and we're making good progress already in 2021, addressing any of the issues that they have. And more importantly, making progress both with internal promotions and external hiring that give us even a greater diversity, particularly in the area of technology, where we still have some room to go to get to where we want to be from a diverse employee population.

Thank you, Nancy. I see that there are no further questions of shareholders participating remotely on these agenda items. But -- and before we proceed to vote, I will pass on the notary's formal observations. And according to the registration list, 2,774 shareholders are present or represented who can jointly cast 206,753,355 votes, representing 79.08% of the issued and outstanding share capital. And before the meeting, 2,768 shareholders have submitted a total of 206,741,465 votes to the notary by proxy. I now propose to acknowledge the report of the Executive Board and the report of the Supervisory Board for the record. Item -- agenda item 2c, the remuneration report, is included in the 2020 annual report, will now be submitted to you for an advisory vote. I would like the voting operator to activate the voting system for agenda item 2c, please, and the voting is now open. After each vote, we will share the voting results. These results are based on the votes cast by written or electronic proxies holding voting instructions to the notary, Ms. Joyce Leemrijse of Allen & Overy mentioned before, as well as on the votes that are cast live during this meeting today by you participating remotely. And you are asked to approve the 2020 remuneration report. You can vote in favor of the proposal. You can vote against the proposal or abstain. Please submit your votes as voting is now open for shareholders participating online. [Voting]

And the voting agenda item 2c is now closed. And I will wait for some 40 seconds for technical reasons so that we take into account any delay in transmission. Yes. There is the vote. 95.98% of the votes have been cast in favor of this agenda item. And therefore, the 2020 remuneration report has been approved. 4% is against. This brings me to conclude that the majority of the shareholders are of the opinion that the remuneration provides an adequately clear and comprehensive overview of all remuneration awarded or due to individual members of the Executive Board and Supervisory Board in 2020. Thank you for the voting. I now propose putting agenda item 3a, the proposal to adopt the 2020 financial statements to the vote. Would the voting operator activate the system, please? And I declare the voting open. [Voting]

Ladies and gentlemen, voting on agenda item 3a has now closed, and I will wait again briefly so that we can take into account any delay in transmission of these results. Yes, there is the outcome. 100% of the votes have been cast in favor of this proposal. It's a rounded figure. I hereby conclude that the 2020 financial statements have been adopted. On behalf of the entire Supervisory Board, I would like to express our appreciation to the Executive Board and all employees for the management pursuit and work performed in the year. We now move on to agenda item 3b, the dividend policy, and agenda item 3c, the proposal to pay a dividend of EUR 1.36 per ordinary share. The company has a progressive dividend policy. This means we aim to pay a higher dividend per share in euros each year compared to the previous year. The annual increase depends on factors such as financial performance, market conditions and the need for financial flexibility. It is also part of our policy to pay an interim dividend after the first 6 months of each year. As in prior years, the Supervisory Board has carefully reviewed the financial situation of the company, particularly in the light of the coronavirus situation and feels confident that the company can indeed pay out the dividend as planned without liquidity risks. And in this respect, I refer to the presentation of Nancy McKinstry. In line with the progressive dividend policy, we now propose a total cash dividend of EUR 1.36 per ordinary share for the year 2020. This represents an increase of EUR 0.18 compared with last year and amounts to around a percentage of an increase of 15%. Since an interim dividend of EUR 0.47 was already paid last year in September, the final dividend payable in May will amount to EUR 0.89. And upon your approval of the dividend proposal for 2020, this will be the 15th consecutive year in which the company will pay a higher dividend under its progressive dividend policy. For more than 30 consecutive years, the company has either paid a higher dividend or the same dividend as in the previous year. As in the past years, the interim dividend for the upcoming year has been increased, set at 40% of the prior year's total dividend. I would now like to address any questions about the dividend policy and the proposed dividend of EUR 1.36 for 2020. And I see we have not received any questions in advance of the meeting related to this agenda item, but I would like to open the voting already. And I will look and I will see whether any follow-up questions on this subject. The voting is open. And there are no follow-up questions during the meeting on this subject. So this item is up for voting. I will wait a few minutes -- a few seconds. [Voting]

And this agenda, the voting on this agenda item 3c, dividend, has now closed. And I'll again wait for the 40 seconds, and you will hear some music, I hope. Yes, there is the outcome. 99.45% of the votes have been cast in favor of the proposal. I hereby conclude that the meeting has resolved to pay a total dividend of EUR 1.36 per ordinary share, resulting in a final dividend of EUR 0.89 per ordinary share. Thank you for that voting result. That brings me to the next item on the agenda, which is the agenda item 4, the proposal to release the members of the Executive Board and the members of the Supervisory Board from liability are, of course, separate agenda items. And I will deal with the voting, therefore, separately. While we discuss the questions, any questions on this agenda item, I would like the voting operator to activate the voting system already. Voting is open. We have not received -- let me see. We have not received any questions about these agenda items in advance of the meeting. And I'm looking at any questions during the meeting. No, there have been no further questions related to this item from shareholders participating remotely. I see no further questions. So this is your last opportunity to vote. [Voting]

Ladies and gentlemen, the voting on agenda item 4a is now closed. And I will wait again for half a minute or so before we have the results. Yes, yes, we have the results. 99.06% of the votes have been cast in favor of this proposal. Therefore, the proposal has been adopted. I hereby conclude that the meeting has released the members of the Executive Board from liability for the exercise of their duties. And I now put agenda item 4b, releasing the members of the Supervisory Board from liability for the exercise of their duties to the vote. Would the voting operator activate the system, please? [Voting]

And the voting on this item 4b has now closed, and we will, well, again, wait for half a minute for the results. Yes, we have the outcome, 99.06% of the votes have been cast in favor of this proposal. And therefore, the proposal has been adopted. Thank you for that. I hereby confirm that the meeting has released the members of the Supervisory Board from liability for the exercise of their duties. And that brings us to the composition of the Supervisory Board. As you could read in the explanatory notes to the agenda, the first term of office of Ann Ziegler and myself expires today. Ann and I are available for reappointment. I will be available for an additional period of 1 year, while Ann will be available for an additional period of 4 years. During this additional year, before I retire from the Supervisory Board, I would be pleased to continue serving Wolters Kluwer as Chair of the Supervisory Board and as Chair of the Selection and Remuneration Committee dealing with selection and appointment matters. Ann Ziegler is Vice Chair of the Supervisory Board and member of the Selection and Remuneration Committee, and she brings extensive financial management experience and in-depth knowledge of technology solutions to the table. You will be able to read more about the background of Ms. Ziegler and myself in the explanatory notes to the agenda and in the more detailed resumes that were made available and which are also available on the company's website. Before we go to vote on these items, I would like to say that you may have read in the media that Chris Vogelzang has resigned as CEO of Danske Bank. And Chris is a valued member of our Supervisory Board. This resignation follows a decision by the Dutch authorities to name him and 2 other former ABN AMRO Board members suspects in connection with investigations of potential violations of Dutch legislation relating to the prevention of money laundering at ABN AMRO. In this respect, and prior to the meeting, Ms. Angela van den Heuvel (sic) [ Angela van den Heuvel ] representing Achmea, submitted the following question to the Supervisory Board on Mr. Vogelzang. And the question is, will Chris Vogelzang resign from the Supervisory Board given the announcement of Danske Bank and the investigation into his role at his former employer, ABN AMRO? I will answer that question. The Supervisory Board has decided that neither the announcement by Danske Bank nor the investigation of the Dutch authorities into ABN AMRO change the role of Mr. Vogelzang on our Board, on our Supervisory Board. Mr. Vogelzang is an excellent Supervisory Board member. And at this point, we have no reason to make changes to his membership. I would like to stress that Mr. Vogelzang is a suspect but has not been charged, let alone convicted. And let me now hand over to our Vice Chairman, Ann Ziegler, to discuss agenda item 5a.

Thank you, Frans. After this brief introduction to the composition of the Supervisory Board by Frans, I now would like to open the discussion on agenda item 5a, the reappointment of Frans Cremers as a member of the Supervisory Board as from today, April 22, 2021, for additional period of 1 year, ending after the Annual General Meeting in 2022. As before, first, any questions will be answered about Frans' appointment. As there have been no questions provided by shareholders in advance of the meeting, we will go to questions submitted via the app by shareholders participating remotely. Meanwhile, I would like the voting operator to activate the voting system, please. Voting is now open. Now back to Frans who will address any questions.

And there are no questions. So we will proceed. This is, of course, then your last opportunity to submit your vote on this agenda item. And the voting has now -- is now closed, and I've asked the -- because it concerns myself, I've asked the notary to share the results with us. And we'll wait for half a minute before we know the results.

The results are available. I see that 98.79% voted in favor of this proposal. And I hereby confirm that the meeting has reappointed Frans Cremers as member of the Supervisory Board until the Annual General Meeting of 2022. Congratulations, Frans.

Thank you. I'll then conclude the same. I would like to thank all shareholders for their confidence and trust in me. Then we go to item 5b, and we can now take questions on this item, the reappointment of Ms. Ann Ziegler, as member of the Supervisory Board as from today for a second 4-year period ending after the AGM in 2025. There have been no questions in advance of the meeting. And let me see, there have been no questions coming in on this subject during the meeting. So the voting is open on this item. And we'll await the results. [Voting]

Voting is closed. And the votes are in. That was a long half minute for you, Ann. But 99.81% of the votes have been cast in favor of this proposal. I hereby conclude that the meeting has reappointed Ann Ziegler as member of the Supervisory Board as from today for a period of 4 years. Ann will continue to be the Vice Chair of the Supervisory Board. Congratulations, Ann. We now come to agenda item 6, the reappointment of Kevin Entricken as member of the Executive Board as from today for a third 4-year period ending after the AGM in 2025. The Supervisory Board is pleased that Mr. Entricken is available for reappointment, given his knowledge and experience in financial and economic aspects of international businesses and the way he currently fulfills his role as member of the Executive Board and Chief Financial Officer of Wolters Kluwer. I would like to answer any questions about Mr. Entricken's reappointment. We have not received any questions in advance of the meeting. And let me see. There are no questions related -- of the shareholders participating remotely. So voting is open, please. [Voting]

And the voting is now closed. And we will wait again for half a minute. The voting results are in. 99.99% of the votes have been cast in favor of this proposal. Congratulations, Kevin. I hereby conclude that the meeting has reappointed Kevin Entricken as member of the Executive Board as from today for a period of 4 years. Well, that brings us to agenda item 7, the proposal to adopt the new remuneration policy for the Executive Board. Again, Ms. Horan, Chairman of the Selection and Remuneration Committee dealing with remuneration matters, will give a brief introduction to this agenda item, and then we have a few questions related to this item.

Thank you, Frans. I'd like to discuss the remuneration policy proposal, which if approved by shareholders today, will determine Executive Board remuneration for the current and following 3 years. As you may recall, the remuneration policy we proposed a year ago was supported by less than 75% of the votes cast in the meeting, and which, therefore, not adopted. In response to this outcome, we conducted the most comprehensive stakeholder engagement process the company has ever done in order to design a policy that would garner broad support from our diffuse and diverse global shareholder base. We held over 100 meetings with shareholders, representing some 57% of our issued share capital. In addition, we organized multiple engagement sessions with the Works Council in the Netherlands, proxy advisers and shareholder organizations. The results of this busy year is a comprehensive package of changes to Executive Board remuneration, which we believe delivers nearly all the amendments desired by our shareholders. The slide summarizes the most substantial changes, and let me recap them for you. First, we've increased the weighting of European companies in our remuneration peer group from 50% to 60% by adding 5 European companies that meet our selection criteria. As a global company, operating in a competitive market with both European and U.S. competitors, we believe it is imperative that our remuneration policy allows us to attract and retain the best talent in the world. Therefore, we believe that our remuneration peer group must continue to include our North American peers. By adding new European peers, we respect our position as a European-headquartered company. Second, for the short-term incentive plan, we are introducing a predefined list of financial measures from which the Supervisory Board can select annually. The current policy gives the Board unlimited flexibility, so predefining these STIP measures should be welcomed by shareholders. Third, also for the short-term incentive plan, we are increasing the weight of nonfinancial or ESG measures from 5% in 2020 to 10% in 2021 and setting a maximum of 20% under the policy. For 2021, we are using 6 strategically relevant ESG-oriented nonfinancial measures, and we have set 1 year targets for management to deliver upon in order to achieve on target payout. Fourth, for the long-term incentive plan, we are proposing a number of changes. First, replacing diluted EPS by diluted adjusted EPS and reducing this weighting from 50% to 30%; introducing ROIC as a measure for the first time at a weighting of 20%; and the remaining 50% continues to be linked to the total shareholder return, a performance measure supported by many investors around the world. Second, we are also proposing to introduce formal minimum share ownership requirements: 3x base salary for the CEO and 2x base salary for other Executive Board members. And finally, for the long-term incentive plan, we are proposing to introduce a 2-year holding period post the 3-year vesting cycle of the performance shares. And fifth, in response to feedback from some shareholders around quantum, the Supervisory Board has agreed with the CEO to reduce our LTIP target from 285% of base salary to 240% of base salary over a 2- year period. This will effectively reduce the CEO's target remuneration by approximately 10%. And finally, in agreement with the CEO, it has been decided that there will be no salary increase for the CEO for 2021. Going forward, if any changes are made to the CEO's base salary, they will be aligned to the average salary increase for all employees globally at Wolters Kluwer. In addition to the substantive package of changes to remuneration and the improvements in transparency already made in the past few years, we have also now committed to disclosing long-term incentive targets on a forward-looking basis, starting with the 2021 annual report, assuming that this policy is adopted. In closing, I would like to thank shareholders for their constructive feedback over the past 18 months and for supporting this new policy. I would now like to hand back to the Chairman to moderate questions, should there be any.

Thank you, Jeanette. I would now like to cover questions about this proposal. We have received 1 comment from the VEB and 1 question from Achmea. And let me start with the VEB comment. And maybe Jeanette, you would like to comment on that as well. European Investors-VEB notes that the amended remuneration policy is an improvement. We consider the transparency of the remuneration report, the reduction of the maximum condition LTIP award, the increase of European companies in the peer group and the introduction of ROIC as an LTIP measure as positive developments. Despite the proposed changes, European Investors-VEB continues to believe that the remuneration at Wolters Kluwer is too high given the size of the company. We also doubt if the targets for performance-based payments are ambitious enough. VEB, therefore, abstains from voting. Jeanette, although it's not a question, any comments from you?

Yes. Thank you, Frans. First of all, to VEB, thank you very much for the comment and for the recognition of the very positive shareholder-friendly changes that we proposed in the remuneration policy. It's been a lot of work this year to garner the feedback from a number of shareholders, and we very much appreciate that, and we appreciate the recognition. With respect to the CEO pay quantum, though, we benchmark to the medium range of our peer group. And as you see, we've adjusted the peer group to make it more European-weighted. And we select the peers based on criteria that are and do include the size of the company and the industry, et cetera. So we try to make sure that they are very relevant. And today, we do align our target pay to the medium range of this peer group. And as we discussed, we are not proposing to increase the CEO's base salary for 2021, and we are kind of reducing the LTIP target, as you mentioned in your comments. But the other thing I really would like to point out, though, is that the realized pay or the actual remuneration that you see in the remuneration report, really reflects the substantial increase in the share price over the 3-year performance period. We've outperformed the AEX index every year since 2017. And with the increases in the share price, that is what drives the significantly high quantum. And of course, that appreciation and the share price benefits all of our stakeholders equally. And your last comment with respect to the target setting, we do follow a very deliberative process, which starts with the discussion with the full Supervisory Board of the strategic plans and strategic aspirations of the company. We look at things like market conditions, the competitive landscapes as well as the past performance of the company. And what we see, our business results over the last few years compared to our peers and the AEX, really an affirmation of the process and the stretching the targets that we've set. And we'll continue to use this same process and make sure that we are appropriately incentivizing management to really reach high and achieve those stretch goals. So thank you very much for the comments. I really appreciate it. Thank you, Frans.

Yes. Jeanette, there's 1 more question from Ms. van den Heuvel represented Achmea. It's more of a technical question, but important question, it's about fair value and so on. Of course, the voting is open still. And the question goes as follows: We welcome the changes that have been made to the remuneration policy of the dialogue Wolters Kluwer has been -- has had with its different stakeholders. One remaining point of feedback is in relation to the share price discount in relation to the ground of performance shares. Wolters Kluwer is, as far as we know, together with Randstad, one of the few companies in the AEX that uses a discount. Will this be reconsidered with the next update of the remuneration policy? Jeanette?

Yes. Thank you. This is the -- as you say, it's a somewhat technical point, but it's a very good question. And we do still use fair value. And certainly, you're correct in the Netherlands that we are 1 of just 2 companies still using this. But globally, it is used by many different companies. However, having said that, I just mentioned in my prior comments about the peer group and our aspiration to set our target there, the median of the peer group. And when we do that analysis, we do actually neutralize the discount so that we make sure that our analysis is actually an apples-to-apples comparison and that we set the target based on the median in that way. Now 10 years ago, most of the AEX companies did use fair value methodology. And as some of them have moved away from it, it has been a market practice that they provide offsetting increases in other elements of the pay as the number of conditional shares that would be granted to the CEO or the Executive Board would be less. And given all of the significant discussions that we've had on CEO pay quantum, we really don't feel this is the appropriate time for us to consider, for example, raising base salary or STIP target or even going back to increasing the percentage of pay for the LTIP target. So we really feel that at this point in time, our best course of action is to stay with our current policy and stay where we are. But having said that, we not only benchmark the specifics of the pay to make sure that we're aligned with industry norms and market practice. We do also look at what's happening in market practice, both in the Netherlands and the rest of Europe and globally. And when we come back for our next revision of our remuneration policy, we will again take a look at what is the prevailing practice, and we'll make any decisions at that point in time. Thank you, Frans.

Yes, indeed. I mean those are the 2 questions, the 2 items, which were sent to us in advance of the meeting. I'm looking at the computer to see were there any questions now. No, there are no further questions. So this is the last moment that you can vote. I'll wait a few seconds. [Voting]

And I close the voting now. And we'll wait again for over a minute to see the results. Yes, we have the results. I see that 97% of the votes have been cast in favor of this proposal. I consider that an excellent result. Thank you, shareholders, for that. And in contrast to other European countries, where a simple majority vote is required for adoption, as you know, in the Netherlands, this voting item requires 75%, and that we have achieved by far. Therefore, I conclude that the meeting has adopted the proposed remuneration policy for the members of the Executive Board. Well, so we come to the last few items of the agenda, which is the items 8, 9 and 10 together. These are the normal annual authorizations given to the Executive Board that return each year. Under agenda item 8a, it is proposed to extend the Executive Board's authority to issue shares and/or grant rights to subscribe for shares for 18 months as of today, up to a maximum of 10% of the share capital issued as of today. Item 8b concern the proposal to extend the Executive Board's authority to restrict or exclude the preemption rights of ordinary shares up to a maximum of 10% of the share capital issued as of today. Under agenda item 9, it is proposed that the Executive Board be authorized for 18 months to acquire shares in the company up to a maximum of 10% of the share capital, again, issued as of today. And lastly, agenda item 10 requests a resolution for the Executive Board, if it so wishes, to cancel ordinary shares in the company's share capital that the company has purchased or will purchase on the basis of agenda item 9, up to a maximum of 10% of the share capital, again, issued as of today. For your information, in September 2020, the company completed a reduction in share capital by canceling 5.5 million ordinary shares that were held in treasury. And the precise wording of the resolution can be found in the agenda with its accompanying explanatory notes. I would now like to handle any questions. We have not received any questions in advance of the meeting, and I see that there are no questions of shareholders participating remotely. The voting on agenda item 8a is now open. [Voting]

And the voting on agenda item 8a has now closed, and we'll wait again for the results. And we have the results. 98.48% of the votes have been cast in favor of this proposal. I hereby conclude that the extended authority of the Executive Board to issue shares and/or grant rights to subscribe for shares as requested in agenda item 8a has been adopted in accordance with the proposal. And therefore, I would now like to put agenda item 8b, extending the authority of the Executive Board to restrict or exclude the statutory preemption right, to the vote. Would the voter operator, please, activate the system? [Voting]

The voting on agenda item 8b has now been closed, and we'll wait for the results. Yes. And we have the results. 98.13% of the votes have been cast in favor of this proposal. I hereby conclude that the extended authority of the Executive Board to restrict or exclude the statutory preemption right, as requested in agenda item 8b, has been adopted in accordance with the proposal. 2 more to go. I would now like to put agenda item 9, extending the authority of the Executive Board to acquire shares in the company, to the vote. Would the voting operator activate the system, please? [Voting]

A few more seconds for voting. Ladies and gentlemen, voting on agenda item 9 has now been closed. We will wait for the results. Yes. The results are in. 99.43% of the votes have been cast in favor of this proposal. I hereby conclude that the authority of the Executive Board to acquire shares in the company as requested in agenda item 9 has been adopted in accordance with the proposal. I now would like to put agenda item 10, the cancellation of ordinary shares to the vote. Would the voting operator activate the system, please? And voting is now open. [Voting]

And the voting is now closed. We will wait for the results. And the votes are in. And I see that 100%, rounded, of the votes have been cast in favor of this proposal. I hereby conclude that the cancellation of shares as requested in agenda item 10 has been adopted in accordance with the proposal. And that brings us to agenda item 11, any other business. Given that shareholders have attended remotely today, I will proceed to the any other business section, but there are no questions received in advance of the meeting in -- on this agenda item. And I'm looking to see whether there are any questions which have come up during the meeting. And I see that there are no questions having coming in on this -- any other business item during the meeting. Therefore, I will now proceed to item 12 of the agenda, the closing. Ladies and gentlemen, your online participation and input today has been greatly appreciated. I wish you all good health in these extraordinary times. Stay safe. Thank you, and goodbye, and I hope that we will meet in person again next year. Thank you very much.