Welcome to Most Significant Votes! A weekly update from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlighting the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable.
Spain’s Repsol (AGM 6th May) was the latest of the large integrated oil companies to hold its AGM, including an advisory vote on its climate strategy. This faced opposition from 17% of shareholders, far from a strong endorsement. This perhaps reflects a relatively downbeat assessment of the company against the Climate Action 100+ (CA100+) benchmark, notably that its medium-term greenhouse gas emission targets don’t cover Scope 3 emissions; nor does its 2050 net-zero target. Given the emissions profile of the industry, this is some omission. On the same day, a shareholder resolution was proposed at the US’s Occidental Petroleum, calling for quantitative emissions targets consistent with the Paris Agreement and garnering 17% support. A similar proposal at US rival ConocoPhillips (AGM 9th May) was rather more successful, with 42% of shareholders pressing for emissions targets across Scopes 1, 2 and 3. Still more remarkable was a vote regarding stranded assets at Dominion Energy (AGM 11th May), which gained support from 80% of shareholders.
Others in the sector holding meetings this week included Norway’s Equinor and the UK’s BP (both of which earn a – somewhat – cleaner bill of health from CA100+). Equinor (AGM 11th May) faced no fewer than nine shareholder resolutions, some from individual shareholders making calls for specific strategic changes, including immediate switches to investment plans. It’s perhaps unsurprising that these gained little support. More surprising was the shareholder reaction to two resolutions, one calling on the company to have targets for Scopes 1-3 emissions that will help achieve no more than 2°Cwarming, and one calling for targets and emissions reductions consistent with 1.5°C. That these achieved only 4% and 2% headline support might suggest that net-zero ambitions are less well embedded into investor voting decision-making than they might be. In contrast, Equinor’s own climate plan gained resounding support, with 97% of shareholders backing it, in spite of its obvious deficiencies of having absolute reduction targets for only Scopes 1 and 2 emissions and focusing on emissions intensity in relation to Scope 3 reductions. It’s worth noting though, that given the Norwegian state’s holding in the company, these 4%, 2% and 3% headline votes against management recommendations look more like 30%, 15% and 23% of the free float. BP (AGM 12th May) faced opposition from 15% of shareholders to the approval of its net-zero report, with 11% voting against. Investors are clearly concluding that it has much more work to do to demonstrate delivery of its climate change ambitions.
French power generator EDF (AGM 12th May) put its climate transition plan up for shareholder approval, gaining overwhelming support. The reported 99% support for the resolution does in part reflect the French state’s more than 80% shareholding. Still, the vast majority of independent shareholders appear to have supported the resolution. In contrast, German carmaker Volkswagen (AGM 12th May) had barred a shareholder resolution proposed regarding lobbying and its alignment with climate change goals, so it was not put up for vote. Some of that resolution’s proponents urged opposition to the discharge of the management and supervisory boards, but the votes in favour of these were overwhelming (the company reports only 0.002% opposition) – though note that the company is tightly held and the votes are also gerrymandered, so only 9.7% of votes are in free float.
On remuneration, investors at US pharma business AbbVie (AGM 6th May) passed a shareholder resolution (just! – the vote was 50.4%/49.6%) calling for shareholder approval of any executive pay package that includes severance or termination payments worth three or more times base salary and bonus. A similar resolution at consumer goods giant Colgate Palmolive on the same day was defeated, though it gained support from 43% of shareholders. To put these in context, AbbVie’s chair and CEO Richard Gonzalez was paid a salary of $1.7 million in 2021, with $4.9 million in short-term incentives and $15.7 million in long-term incentives; Colgate’s chair and CEO Noel Wallace enjoys a salary of $1.3 million, and received $2.6 million in short-term, and $10.9 million in longer-term incentives. The companies’ votes on executive pay faced 10% and 9% opposition, respectively.
The fiercest reaction on pay of the week was at serviced office business IWG (AGM 10th May). 27% of shareholders opposed the remuneration report, objecting to decisions partway through the year to reduce management incentive targets which led to substantial payouts that many didn’t feel were appropriately aligned with the investor experience. The anger was such that all members of the remuneration committee received votes against of more than 7%, and the committee chair Nina Henderson more than 8%. When you take into account that the founder and CEO Mark Dixon holds around 30% of the shares, these votes are even more striking – over 40% of the free float seem to have opposed the remuneration report.
US-based hotel business Marriott International (AGM 6th May) faced an unusual shareholder resolution urging fair pay for its staff – complaining that pay is ‘inadequate, unequal and racially disparate’. This gained 10% support from investors, perhaps unusually high for a proposal that might lead to short-term pressure on profits. The company reports a ratio between the pay of its CEO ($18.5 million) and its median employee ($36,500) of more than 1:500. A similar resolution at Tractor Supply (AGM 11th May) was marginally more successful, with 15% of shareholders backing it. Its CEO was paid $11 million and the company’s pay ratio is 1:383. A shareholder resolution seeking a report on lobbying activities – an area of increasing concern for investors – at Uber (AGM 9th May) garnered 45% support.
Clearly, some investors are more strict in their application of the European maximum limit for audit firm tenure (20 years, if you’re wondering) than UK insurer Direct Line (AGM 10th May). While the company enjoys a transitional extension, the fact that Deloitte has audited the company since 2000 (then as a subsidiary of RBS and continuing since its independent listing in 2012) seems to have been enough to lead 3% of shareholders to oppose the firm’s reappointment. The fact that the company has now launched a tender process in which Deloitte will not be permitted to participate for a new auditor from calendar 2024 doesn’t seem to have been enough to assuage investor concerns. A still more striking vote on the auditor occurred at National Express (AGM 11th May), where 15% of shareholders opposed the reappointment of Deloitte and 12% opposed the auditor’s fees. ISS recommended in favour on these votes and, while I haven’t been able to confirm reasons, it may be related to the audit firm’s failures at sector peer Govia Thameslink.
New Aviva non-executive director Shonaid Jemmett-Paige faced a fairly bruising welcome from shareholders, with 13% opposing her appointment (AGM 9th May). This appears to have been because she was perceived as too busy to give sufficient attention to the role, as she chairs two relatively small public companies, is senior independent director at a fintech banking business and a non-exec on two much larger PLCs (though is stepping down from one of these). I hope this is the reaon rather than the overt sexism that was on display from a few male private shareholders at the AGM, who were rightly called out by chair George Culmer for their wholly inappropriate, even bizarre, comments. Culmer said that he was flabbergasted, as are many others who’ve read reports of what was said. Meanwhile, the company earned 96% support for the resolution on its climate report.