Most Significant Votes (w/e 17th November 2023)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Nov, 17, 2023)
|   7 mins

Once again, Most Significant Votes is covering the Southern Hemisphere voting season, and the handful of Northern Hemisphere votes that also occur this time of 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.

It’s been a fortnight where around the world the main focus for shareholder ire has been executive pay.

At the most extraordinarily generous end of the spectrum, US make-up firm Coty (AGM 2nd November) continues to disappoint its minority shareholders. The ‘say on pay’ advisory resolution on remuneration faced 26% headline opposition – or a 69% majority of the outside shareholders once the 52% held by JAB Beauty (a vehicle of the German Reimann family) is excluded. CEO Sue Naby received a $145 million stock award this year (just two years since a $280 million one); with total remuneration in the year almost $150 million, her pay was an extraordinary nearly 3800 times the median pay at the company of around $40,000. The investor opposition apparently spilled over to the board elections too, with remuneration committee chair Beatrice Ballini seeing 23% of shareholders, 62% of those other than JAB, declining to support her re-election. The busy Maria Aramburuzabala Larregui fared even worse, with her 23% opposition amounting to 63% of the minority shareholders. The company also faced a resolution encouraging it to move away from plastic packaging; this won support from 13% of shareholders, or 34% of those who are not JAB.

In Australia, property company Lendlease (AGM 17th November) saw a significant vote against its remuneration report, above the threshold of 25% that amounts to a ‘first strike’ putting the board on notice of the seriousness of investor concerns, and potentially – if there is a ‘second strike’ at next year’s AGM – requiring a resolution next year to oust the whole board, a ‘board spill’ proposal. The level of opposition was notably beyond the 25% threshold: fully 40% of shareholders opposed the remuneration report. What’s more, 34% voted against the re-election of people & culture [remuneration] committee chair Elizabeth Proust. Investors clearly did not believe that the executive pay properly reflected the performance of the company, which sunk into a statutory loss in the year, and also witnessed the death of a subcontractor on a building site. While the committee exercised discretion and reduced awards below what the mechanical measure of performance might have indicated, investors clearly did not believe it had gone far enough. The fatality was the likely reason for the 34% vote against also seen on the reappointment of risk committee chair Philip Coffey.

Casino firm Star Entertainment (AGM 9th November) faced a ‘second strike’ vote after the 30% opposition to its remuneration report last year. It narrowly avoided a strike, with 18% of shareholders declining to back the report this time around – or 20% when the shareholdings of two business partners of the company are excluded. The ‘board spill’ resolution was therefore never called, but the directors need not have been concerned anyway as only 1% of the votes cast on this resolution ahead of the meeting sought to oust them. The vote against a one-off award of so-called ‘retention shares’ to the CEO was rather stronger, with 19% opposing (or 21% other than the business partners). It’s not hard to understand investor concerns about this: the proposed award is worth over A$1.4 million, is in addition to existing incentives, and is not subject to any performance hurdle. What’s more, the first tranche of the award starts to vest in just nine months’ time. These seem like better odds than the firm offers its punters.

Also facing a second strike was retailer Myers (AGM 9th November), which saw a 45% vote against last year. Protests on pay were more muted this year, with only 2% opposing – but with more abstentions than the total votes for and against, those actually supporting the remuneration report were in the minority, at 47%. The other striking result was the welcome for new non-executive director Gary Weiss, apparently because he is busy, with an executive role and a number of other non-executive commitments too. The vote against his appointment was 18%, or 36% of the independent shareholders once the 30% shareholding of Premier Investments (led by giant of Australian retail Solomon Lew) is excluded.

Australian property firm Goodman (AGMs 14th November) had suffered a second strike last year, with 29% opposition following the 42% in 2021 – the spill though was overwhelmingly rejected. The group has a stapled stock structure, meaning that in effect it is a combination of three corporate vehicles, an Australian company, an Australian trust and a Hong Kong company (there are some limited tax advantages of this corporate complexity) and formally holds multiple AGMs, with shareholders having slightly different rights through the different legal regimes. Investors still aren’t keen on pay at the firm, but since the company cut the quantum available, and increased the EPS performance hurdle, it seems clear that views are softening: 13% opposed the remuneration report and 11% opposed the proposed incentive awards for the top executives. In contrast, online employment search firm Seek (AGM 15th November) saw a greater vote against the proposed incentive awards (22%) than against the remuneration report (8%). The structure of the long-term incentive is being adjusted this year, with a move to how performance is assessed, and an extension of the exercise period, as well as a change in the way the value of the awards is calculated. It seems investors were not convinced by the board’s statement that the new approach is no more generous to the executives. In the same way at Sonic Healthcare (AGM 16th November), the opposition to the remuneration report, at 10%, was much lower than the 21% votes against incentive awards under both an option scheme and a performance rights plan.

Also concerning shareholders for uncomfortable generosity – though in a very different league from Coty – was UK retailer DFS Furniture (AGM 10th November). Investors clearly felt that the company had failed to justify the salary level for the new CFO, set at a 14% increase from his predecessor, and a planned 10% uplift in the CEO’s salary – to £500,000 – especially in a period of sustained share price underperformance. This would take the ratio of his pay to that of the firm’s average worker to around 20:1. The opposition to the remuneration report reached 30%, and remuneration committee chair Gwen Barr also saw a 10% vote against her re-election.

Two South African retailers also faced significant opposition. The largest vote against at Shoprite (AGM 13th November) was on the reappointment of Christo Wiese, now a non-executive director but formerly chair of the company. Wiese, 82, has been on the board for more than 30 years and has had a slightly tarred reputation since being the chair of failed business Steinhoff International – in spite of the fact that, as he was also its largest shareholder, he was the largest victim of that accounting scandal. Many shareholders clearly believe that Wiese’s time should be up: 19% of investors opposed his re-election, or 37% once Wiese’s own shareholding is excluded. The company also witnessed significant opposition on pay: 17% opposed the forward-looking remuneration policy vote and 14% the backward-looking remuneration report (respectively 34% and 27% of the shareholders other than Wiese). By comparison, Hilton Saven is a newcomer as chair of Truworths (AGM 9th November), but shareholders clearly think his 20 years on the board is long enough: 26% opposed his re-election; perhaps oddly, a smaller percentage (20%) refused to back his continuing role on the social and ethics committee. Nearly 36% of investors voted against the reappointment of Roddy Sparks as chair of the audit committee; again, tenure seems the predominant concern. Pay is also an issue at the company, with 29% opposition to the remuneration policy and 33% to the report.

We’ll return with Most Significant Votes in a fortnight, on 1st December.

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