Most Significant Votes (w/e 14th April 2023)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Apr, 14, 2023)
|   10 mins

Welcome back to Most Significant Votes. Once again, Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlights the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable. This run coincides with the Northern Hemisphere voting season.

Banks have become a focus for attention once again for all the wrong reasons. At the heart of the latest storm is Credit Suisse (AGM 4th April), soon to be swallowed by local Swiss rival UBS. At its last ever AGM, the 167-year-old bank suffered a bruising. That was even after withdrawing multiple resolutions to try to draw the sting of investors’ reproach, including the formal vote to discharge the board, the candidacies of five of the longer-standing directors and a now ironic-sounding ‘transformation award’ incentive for the executive team. Many of these seem likely to have been defeated in the circumstances. A proposed special investigation put forward by a shareholder was roundly rejected, and all but one of the management resolutions actually put to the meeting were passed, but only just: for example, the chair Axel Lehmann won only 56% support, the remuneration report and board compensation were approved by bare 50% majorities and the climate strategy was backed by just 53%. While a majority of those voting for or against the proposed maximum pay for the executives supported it, the number of abstentions meant it did not reach the necessary majority support. Many of these votes will have been cast prior to the final ignominious failure of the company.

Unsurprisingly, the following day Credit Suisse’s acquirer UBS (AGM 5th April) received an easier ride. Nonetheless, it still faced 19% opposition to the vote on its sustainability report – which incorporates its climate plans and delivery, no doubt the main driver of vote decision-making. And 14% of shareholders refused to support its remuneration report vote. Sweden’s Swedbank (AGM 30th March) saw 6% of shareholders back a Greenpeace resolution calling on the company to align its strategy with the goals of the Paris Agreement.

Italy’s UniCredit (AGM 31st March) was the subject of significant debate for more mundane reasons. The main proxy voting advisors were concerned about the bank’s pay policies, particularly the generosity with which CEO Andrea Orcel is being treated. The board proposed that Orcel, who has presided over a strong recovery by UniCredit which has seen its share price nearly double, should see his salary increased by half and his overall package rise to nearly €10 million. The moves were controversial enough that former remuneration committee chair Dame Jayne-Anne Gadhia resigned earlier this year. In the end, thoughtful investors were split on the issue, and opposition to the remuneration policy was 31% and to a new pay scheme 29%. On the same date, Spain’s CaixaBank also faced shareholder ire over pay changes, with its proposed amendments to the board pay policy seeing 24% opposition – albeit almost all of this abstentions rather than outright opposition – or 42% once the la Caixa Foundation’s voting rights are excluded. Local rival Santander got off relatively lightly: again on the same day, its remuneration policy saw only 9% of shareholders vote against it and its remuneration report 11%.

Meanwhile, Royal Bank of Canada (AGM 5th April) – newly identified this week as the world’s largest bank financier of fossil fuel activities – faced 8 shareholder resolutions. The one seeking a racial equity audit gained the most support, with 44% of investors backing it; another social resolution, pressing for disclosure of the ratio between CEO pay and that of the average-paid worker, won 17% support. Of the three climate-related shareholder proposals, one calling for absolute reductions in financed greenhouse gas emissions was supported by 22% of investors, and that seeking an end to financing of new fossil fuel exploration 11%. Local rival Scotiabank (AGM 4th April) was requested to seek net zero plans from its most greenhouse gas-intensive customers, a resolution that gained 25% backing. Further, 14% of shareholders declined to support the reappointment of its auditor KPMG, apparently because of independence issues – the firm has been in place for more than 30 years. On the same day, another Canadian bank CIBC also saw strong opposition to its 20-year auditor EY, at 12%; a call for pay ratio disclosure gained 15% support. The EU has set 20 years as the maximum tenure for audit firms, and increasingly investors are applying this standard globally.

The other significant climate-related shareholder resolution this last fortnight was faced by the Australian oil and gas business Santos (AGM 6th April). More than 18% of investors supported a proposal calling for transparency on how its capital investment in fossil fuels will be managed down in line with the goals of the Paris Agreement. Discontent was also seen over director elections, particularly that of long-standing oil industry executive Janine McArdle, and over the remuneration report, both of which saw 10% opposition.

For the second year in a row, the shareholders of Ericsson (AGM 29th March) declined to discharge the board from its liabilities. The Swedish telecom operator has been embroiled in bribery allegations and earlier in the month had paid the US Department of Justice more than $200 million over alleged bribes to Iraqi militants, a clear breach of earlier undertakings the company gave to conclude a 2019 investigation into corrupt practices. While we don’t have this year’s full voting results yet, we know that more than 10% of shareholders voted against the discharge of all the directors apart from two recent arrivals (10% is the threshold for these resolutions to pass in Sweden). Last year, the votes against were between 15% and 25%; given that Wallenberg family investment vehicle Investor wields 24% of the votes at the company and presumably supported the discharges (not least of the patriarch Jacob Wallenberg), these votes against represent still more significant portions of the independent shareholders.

Japan’s Canon (AGM 30th March) saw a nearly seismic vote with its chair and CEO gaining re-election by the barest of margins with just 50.59% support. Fujio Mitarai is more than that: the 87-year-old is a nephew of one of Canon’s founders and largely created the modern business. His age and the recent stagnation of the company told against him. The two other executive directors also up for election fared a little better, but still, each saw opposition from 23% of shareholders. Meanwhile, Korean tobacco business KT&G (AGM 30th March) largely faced down a tilt from activist shareholders seeking changes to the board and a higher dividend payout. The sole of their multiple proposals to win shareholder support – and it was backed by 82% of shareholders – was one to shift to quarterly dividend payments, but the level remains at that proposed by management rather than the two different higher options put forward by the activists.

A significant number of shareholders do not want Walt Disney (AGM 3rd April) to step back from its stance on social equalities concerns, even though the company’s vocal opposition to Florida’s so-called ‘don’t say gay’ law triggered events that led to it being stripped of its privileged property rights in Florida by state governor Ron De Santis. In fact, fully 36% of investors backed a call for the company to change its approach to political donations so that they more closely align with its stated position on social issues, such as equality of treatment and opportunities, and on climate change. US software giant Broadcom (AGM 3rd April) faced a bruising on pay, with a remarkable 68% vote against its report on pay to executives and 39% against the election of remuneration committee chair Harry You. The $61 million paid to CEO Hock Tan in 2022 was 338 times the pay to the company’s median employee (itself a high $180,000).

We’ll return with Most Significant Votes on 28th April, by when the voting season will be in full flow: we’ll switch to weekly MSV blogs from then.


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