Most Significant Votes (w/e 15th December 2023)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Dec, 15, 2023)
|   9 mins

Welcome to final Most Significant Votes of 2023!. For the last time this year, 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 issue wraps up the Southern Hemisphere voting season, and also covers a handful of Northern Hemisphere votes.

Australian mining services firm Orica (AGM 13th December) chose to put its climate action report up for shareholder approval. The response wasn’t whole-hearted support: 8% voted against, and a further 3.5% abstained (usually a sign that investors believe the company should be recognised for the positive step in making itself accountable but that there are nonetheless gaps in its approach). Presumably investors worry that Orica isn’t moving quickly enough, with thermal coal still representing 14% of revenues, and given it is targeting a Scope 3 emissions reduction by 2035 of only 25%.

Two of Australia’s big four banks, National Australia Bank (AGM 15th December) and Westpac (AGM 14th December), faced shareholder resolutions in effect seeking tougher standards on the transition plans they expect from fossil fuel businesses before they are willing to offer further finance. At NAB, fully 28% of investors backed this call. Meanwhile, perennial corporate governance campaigner Stephen Mayne resoundingly failed in his bid for election to the bank’s board, with only 1% voting for him. At Westpac, 22% of shareholders supported the new fossil fuel finance resolution (with a further 1% abstaining). The bank also chose to put its climate change position statement and action plan up for shareholder approval. This was more positively received by investors, with 8% opposition and a further 2% abstaining.

A rather smaller bank in the country, Bank of Queensland (AGM 5th December), faced regulatory action during the year for failures in its approach to anti-money laundering and counter-terrorism. It has agreed remedial action plans with two different regulators, swept aside much of its prior executive team, and reduced payouts both to the ongoing and the former teams – as well as cutting fees for non-executive directors. Shareholders clearly don’t think the bank has gone far enough, though: the remuneration report faced 40% opposition, and two different incentive awards for the new CEO saw 13% and 16% votes against. This scale of vote on the remuneration report amounts to a ’first strike’ under the Australian system, meaning the bank faces more of a crunch vote next year. The sole NED up for election this year, Bruce Carter – who has been on the board since 2014 and appears pretty busy – also bore the brunt of investor disquiet, with 36% opposition to his reappointment. Narrowly avoiding a first strike on pay was investment vehicle Washington H Soul Pattinson (AGM 8th December), where the vote against the remuneration report was a borderline 24%. However, once the shareholdings of the controlling Millner family and cross-shareholding Brickworks are excluded, the vote against the remuneration report from independent investors was nearer 62%.

Though the median employee at US technology firm Cisco Systems (AGM 6th December) is paid nearly $120,000, the fact that CEO/chair Charles Robbins received almost $32 million in the year means that the company’s reported pay ratio is still 267 to 1. Cisco’s say-on-pay vote faced 26% shareholder opposition. The company also faced a shareholder resolution pressing for a tax transparency report. This gained backing from 24% of investors, with a further 5% abstaining on the proposal. A similar shareholder resolution was among the nine faced by tech giant Microsoft (AGM 7th December); there, it won 21% support. The focus of the other broadly-supported shareholder resolutions was human rights issues: one raising concern about the company being involved in weapons development earned 15% backing; one regarding datacentre operations being sited in countries of human rights concern saw 33% support; while 21% of investors voted for a resolution about the misinformation risks from AI. Opposition to executive remuneration at the company was just 7%: with median pay approaching $200,000 even when Satya Nadella received $48.5 million in the year, the pay ratio was 250:1. A further, and much shrunken, tech business, exercise bike company Peloton (AGM 7th December) is definitely regarded by outside shareholders as overgenerous in its pay practices. The firm proposed to release a further 10% of shares into the option incentive scheme, having given away over 9% of the business to employees in each of the last two years. While the headline opposition to this generosity was 23%, once the votes attaching to the 20-vote-each class of shares held by its private equity investor are set aside, only 11% of independent shareholders actually supported the proposal.

South African investment vehicle Remgro (AGM 4th December) has a board dominated by the Rupert family, and four of the eight proposed non-executive directors have been on the board for so long that investors believe their independence has eroded (the newest appointment among that eight, Dr Thabi Leoka, actually withdrew from the board just before the AGM, making the situation worse). Independent shareholders expressed significant disquiet about this, with a majority of them opposing the reappointment to the audit committee of three of its four members; however, all were still reappointed thanks to the 43% block vote wielded by patriarch and Remgro chair Johann Rupert through his special class of shares (holding 10 times the voting power of the ordinary shares). One of the three, NP Mageza, fared only marginally better in the vote on his re-election to the board itself, with 47% of independent shareholders opposing; with Rupert’s support, this looks more like a 23% vote against. Rupert himself faced 15% opposition from the outside shareholders, but was of course comfortably re-elected with 92% of the overall vote. Opposition to pay has also grown over the year, with 33% voting against the remuneration report (16% once Rupert’s votes are included): the company has not addressed concerns over the performance linkage and the need to close the discount to NAV. There were also controversial director appointments at South Africa’s Harmony Gold Mining (AGM 4th December). Chair Patrice Motsepe, who also chairs and owns 40% of African Rainbow Minerals (ARM), a 12% shareholder in Harmony, faced a 23% vote against his re-election; excluding the ARM votes, this represents a 27% vote against among the independent shareholders. Additionally, long-standing director John Wetton was not a popular choice for membership of the audit committee: he saw 27% opposition to his appointment, or 31% of those other than African Rainbow.

UK cyber technology firm Darktrace (AGM 7th December) continues to struggle to throw off its heritage. Mike Lynch – currently facing trial in California on fraud allegations around the accounting at tech firm Autonomy, where he was CEO and which was bought by Hewlett Packard Enterprise in 2011 for the soon-written-down price of $11 billion – helped found Darktrace, and he and his wife Angela Bacares are the largest among a group of individual shareholders who collectively hold more than 10% (another among this group is Sushovan Hussain, Autonomy’s former CFO, who is currently in US jail for fraud). These shareholders have the right to propose a director, and changed their representative shortly after last year’s AGM; other investors apparently weren’t keen on the choice as while the former representative director Vanessa Colomar saw 11% opposition in 2022, fully 57% opposed Patrick Jacob’s appointment this year, meaning he was immediately removed from the board. Assuming the shareholder group all supported his election (and, given that Lynch has pledged around half of his shareholding for bail, it’s not clear that would even have been possible), this would look more like 70% opposition. Oddly, while the shareholdings of both KKR and another private equity investor Summit have dropped below 10% and they have therefore lost the right to appoint directors, both still have members of their investment teams on the board – each of whom saw opposition of just over 7%. Though the board added a woman director during the year, women are only 30% of the board, now seen as too low a level of diversity in the UK; this seems to have been the driver for the 32% vote against the re-election of nominations committee chair Lord (David) Willetts, the former conservative minister.

A less controversial UK founder, Peter Hargreaves, now has his wish at Hargreaves Lansdown (AGM 8th December). Last year Hargreaves led a public revolt against the company’s leadership; this year, in spite of discussions that led in February to agreed ‘shared protocols’ around his interaction with the board (trailed in the press as being a resolution to the disagreements), the discontent has continued. It seems it wasn’t enough that former CEO Chris Hill departed during the year: chair Deanna Oppenheimer was clearly still a target (the vote against her in 2022 was 34%), and she decided at the end of November to withdraw her candidacy from the board. The departure of audit committee chair Roger Perkin was also announced on the same day; since his re-election in 2022 was overwhelmingly supported, this might be interpreted as a sign that he disagreed with some of the decision-making around Oppenheimer’s departure. Five of the non-executive directors whose reappointments were put to the AGM faced votes against of 23% or more – a level closely corresponding to Hargreaves’ shareholding. Of the other two NEDs, each of whose reappointment was overwhelmingly supported, Adrian Collins is Hargreaves’ representative in the boardroom and Michael Morley only joined the board in August.

Compliments of the season to all our readers. We’ll return with Most Significant Votes in 2024.

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