Most Significant Votes (w/e 16th December 2022)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Dec, 16, 2022)
|   5 mins

Most Significant Votes continues its short fortnightly run of regular updates from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, that highlight the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable. This run is timed to report on the Southern Hemisphere voting season and also sweeps up the small parallel season in the North.

Three of Australia’s big four banks faced identical shareholder resolutions regarding climate change this week. Just like the proposal faced back in October by the fourth, Commonwealth Bank of Australia, these resolutions all urged no further financing of new fossil fuel exploration. All were coordinated by campaigning group Market Forces, and reflect scientific consensus that the world can’t afford further drilling if we are to achieve the Paris Agreement goal of warming well below 2 degrees above pre-industrial temperatures. All received a similar relatively low level of support: Westpac (AGM 14th December) saw 12% support (the bank also avoided a ‘second strike’ on pay with only 6% opposition to its remuneration report); Australia and New Zealand Banking Group (AGM 15th December) 9%; and National Australia Bank (AGM 16th December) 7%.

Washington H Soul Pattinson (AGM 9th December), an investment company that (as noted a fortnight ago) among other things is the major shareholder in coal miner New Hope didn’t face any formal challenge itself in relation to climate change. But its chair, Robert Millner, wasn’t entirely unscathed. Millner is a member of the family that remains significant shareholders, has been a director for 38 years and chair for 24, and chairs or is a director of many of the company’s investments. He faced 12% opposition, or nearer 14% of the independent shareholders once the family stake is taken into account; if the 26% stake held by Washington H Soul associate company Brickworks was also voted (and there’s nothing to suggest it wasn’t) then the vote against Millner by independents was more like 29%.

South Africa’s Sasol (AGM 2nd December), one of the continent’s biggest CO2 emitters through its coal-to-liquids operations, put its climate change management approach to shareholders for approval. Late last year, the company raised its ambition for emission reductions by 2030 from 10% to 30%. This appears to have been received positively by shareholders, as only 8% opposed the management resolution. Two pay proposals were received less favourably, with 19% opposing a new long-term incentive plan. Generic pharmaceutical business Aspen Pharma (AGM 8th December) witnessed a 31% vote against its remuneration report. This may be because of the company’s weak response to the King IV corporate governance code challenge to discuss how executive pay is fair in the context of wider remuneration, and because the remuneration committee’s planned changes for next year in effect amount to an implicit admission of failure to deliver some quite basic expectations until now: increasing the proportion of executive pay that is variable and incentive-linked; ensuring executives are aligned with shareholders through holding Aspen shares; and enhancing KPIs, not least by introducing one associated with access to medicines.

Staying in South Africa, healthcare business Ascendis Health (AGM 30th November) faced the extraordinary situation of seeing the re-election of one of its standing directors – the chair in fact – rejected by shareholders. However, Harry Smit was an unusual chair as he had been forced into office less than a year ago by a coalition of (mostly retail) investors seeking management and strategic change. Fully 80% of votes cast were against his re-election, and with others abstaining; in fact, only 17% of shareholders supported him. Lawrence Mulaudazi also received a rough ride from shareholders, 45% of whom objected to this non-independent non-executive director being appointed a member of the company’s audit committee. If those who abstained on the resolution had also opposed, it too would have been defeated.

Rupert family investment vehicle Remgro (AGM 30th November) also faced some dramatic votes, though because the family – father Johann chairs and son Anton is a non-executive director – controls 43% of the votes through holding all the class B shares, all resolutions were nonetheless passed. If only the votes of the independent investors are considered, long-standing non-executive director PJ Moloketi would have been ejected from the board with a 53% vote against; M Morobe would have survived only barely with 48% opposition. What’s more, three of the four resolutions to appoint members of the audit committee would have been defeated, and 35% of independent shareholders opposed the remuneration policy.

In a similar way, Patrice Motsepe, executive chair of miner African Rainbow Minerals (AGM 1st December), dominates its shareholder base, controlling some 46% of the shares and so ensuring all resolutions were passed. Taking his stake into account, the headline 32% vote against the re-election of acknowledged non-independent non-executive director Mike Arnold represents around 65% of the independent shareholders. Four of the audit committee members faced even larger opposition to their appointments, and the remuneration report faced opposition from 52% of independent shareholders.

Two US technology leaders faced calls for tax transparency. At Cisco Systems (AGM 8th December) 28% of shareholders backed a shareholder resolution pressing for disclosures consistent with GRI’s tax standard. At publication date, we still awaited the full results of the Microsoft (AGM 13th December) meeting – where there was also a resolution on climate risks faced by the company’s pension schemes – but news reports suggest these shareholder resolutions were defeated.

The post-pandemic puncture at exercise bike company Peloton (AGM 6th December) hasn’t put the brakes on the company’s extraordinary pay decisions. Newly installed CEO Barry McCarthy was awarded no less than $167 million in options, ostensibly to cover four years of awards, though with the first tranche released after just a month. With no say on pay resolution (the company only permits such votes every three years), investors could express views only on the re-election of chair Karen Boone. They did so, largely in the form of abstentions. The headline 88% support for Boone’s re-election was mostly based on the backing of the founders and private equity investors who enjoy Class B shares with 20 votes each. Excluding these, only 53% of outside shareholders backed Boone, with 41% abstaining and 6% opposing outright.

Something similar was seen at Associated British Foods (AGM 9th December) in the UK: 8% of shareholders opposed the remuneration policy. The Weston family owns more than half the shares; excluding these, the vote against was 23%. Precision engineer Renishaw (AGM 30th November) is another unusual beast in the UK market, with more than 50% still in the hands of its founders, both of whom still sit on the board nearly 50 years on. Their re-elections were passed, but with 30% opposition to the reappointment of executive chair David McMurtry and 26% against that of deputy chair John Deer – this is 75% and 65% opposition from the independent shareholders. Senior independent director David Grant was also re-elected, but faced 4% opposition – 11% of the minority investors. His decade-long presence on this unusual board and role leading director nominations clearly caused a number of investors some concern.

Much diminished UK banknote printer De La Rue called an EGM (2nd December) in response to calls from activist investor, Crystal Amber, for the resignation of chair Kevin Loosemore. The headline vote against Loosemore’s re-election was 17%, but the bulk of this was Crystal Amber’s shareholding. According to the company’s announcement accompanying the results, “Excluding the votes cast by Crystal Amber, 94.9% of the votes cast were in favour of Mr Loosemore continuing to serve as a Director of the Company and as Chairman of the Board.” It remains to be seen whether Crystal Amber agrees that the matter is now closed.

Thanks for joining me on this whistle-stop tour of votes over 15 MSV editions this year. This blog has proved so surprisingly popular that we’ll definitely return in March for what will no doubt be another interesting year of AGMs. In the meantime, enjoy the festive season and best wishes for a prosperous and sustainable 2023.

Asset owners interested in holding their investment managers to account may also want to read Redington’s first annual review of manager Stewardship Code reporting, which reveals a number of weaknesses. This review was published earlier this week.

 

 

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