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.
Like a number of other extractive companies, BHP Group (AGM 10th November) – newly restructured this year as a single Australian company from its former dual Australian/UK structure – faced climate-related shareholder resolutions. Both those at BHP were put forward by campaigning organisation the Australasian Centre for Corporate Responsibility (ACCR). The resolution pressing for fuller incorporation of climate risks into BHP’s financial reporting garnered 19% support; that calling on the company to align its political lobbying with the goals of the Paris agreement 13%.
Australia’s largest electricity producer AGL (AGM 15th November) has become a climate focus given that it intends to continue burning coal to generate power into the 2030s and 2040s. Early this year tech entrepreneur Mike Cannon-Brookes mounted a takeover bid with the intention of bringing forward the closures of the coal plants. While this did not proceed, he remains an 11% shareholder through his Grok Ventures business and managed to stymie proposals for the separation of the coal operations from the rest of the business. Not content with the board resignations that followed, he’s now proposed four directors to the AGL board. Even though the company opposed the elections of three of the four, all were elected successfully, with support over 80% in all but one case. In addition, the company’s Climate Transition Action Plan faced 31% opposition. At another general meeting the vote against the remuneration report would have provided the headline: this was also 31%, breaching the 25% threshold meaning it amounts to a ‘first strike’ on pay, putting pressure on the board to address concerns so that it doesn’t face a ‘second strike’ next year and potential worse consequences.
Others also saw votes against pay large enough to amount to first strikes. Gold miner Newcrest Mining (AGM 9th November) faced a bruising 37% of opposition on its remuneration report, as investors worried that performance had yet to prove clearly worth the reward showered on the CEO. Meanwhile, Seven West Media (AGM 10th November) saw a 29% vote against its remuneration report. The company also faced 15% opposition to a planned share scheme for non-executive directors, and more than 6% votes against two resolutions to approve awards to the CEO – though when the votes of major shareholder Seven Group are removed these votes against are nearer 16% (note that the major shareholder and others were barred from voting on the other resolutions mentioned).
Finally, the re-election of non-executive director Ryan Stokes, CEO of Seven Group and son of Seven West’s chair, was opposed by 12% of shareholders – or 28% of the free float. If anything, the support for the remuneration report seems high as the company was forced to reissue the report at the end of October having identified errors by its remuneration consultants Ernst & Young that meant that a performance hurdle wasn’t met after all, and so some long-term executive share awards will not now vest as had been disclosed.
So-called flying kangaroo, Australian airline Qantas (AGM 4th November), faced notable opposition but at a lower level, with 12% of shareholders opposing its remuneration report. This seems to be driven by the post-pandemic special pay scheme – known as the recovery retention plan – because the award to the CEO under this scheme also faced 12% opposition.
Meanwhile, the multi-year spat between department store firm Myer (AGM 10th November) and retail veteran Solomon Lew, now a 20% shareholder through Premier Investments, reached another level at the latest AGM. The board’s two director candidates, including the incumbent chair, squeaked across the line with 56% support each. Premier’s proposed candidate, Terry McCartney, fared a little better, however, winning 61% support and so has joined the board. The difference between the votes lodged ahead of the meeting and those cast overall gives some indication of the independent shareholder view as it is clear that Premier voted directly at the AGM itself. Of the votes cast prior to the meeting, the incumbent candidates received at least 88% support and McCartney 37%. The remuneration report vote was also a painful one for the board, with 45% of shareholders voting against.
South African retailer Truworths (AGM 3rd November) again faced a series of negative votes. The 30% opposition to both the backward looking remuneration report and forward looking policy was actually an improvement on last year, when a majority of shareholders voted against. The 40% vote against the reappointment of Ernst & Young as auditor was striking – the firm has been auditor since 1975 and Truworths has already announced that Deloitte will take over for the 2024 financial year, after compulsory rotation is introduced. Some of the directors are also long-standing: Rob Dow, on the board for 24 years, saw 38% opposition, and Hilton Saven, chair and a director since 2003, faced a 29% vote against his appointment to the social and ethics committee.
In the US, at Cardinal Health (AGM 9th November) the ‘say on pay’ resolution faced 9% opposition and the re-election of Carrie Cox, human resources and compensation committee chair, saw 14% of shareholders vote against. The CEO received a total of $13.5 million last year, 211 times greater than the company’s median employee. During 2022 the company, alongside its two peer national drug distributors, reached a settlement with US state governments in relation to litigation about the supply of opioids. The company is committed to paying over $6 billion as part of this settlement.
The headline results at cosmetics business Coty (AGM 3rd November) were notable in themselves, with the say on pay vote facing 22% opposition. But once the votes of majority shareholder JAB Cosmetics and its connected parties are set aside, independent shareholders voted against by a 57:43 margin. On the same basis, the re-elections of three directors were opposed by a majority of the independent shareholders: remuneration committee chair Beatrice Ballini (52% against), KKR executive Johannes Huth (53% against) and Erhard Schoewel (just over 50% against), who is a former executive at Reckitt Benckiser in the days when that company was a major holding of JAB.
The votes by the free float of shareholders of Fox Corporation (AGM 3rd November) weren’t quite as striking, but removing the block vote by the Murdoch family (Rupert chairs the company and son Lachlan is CEO) is still revealing. The headline support for a shareholder resolution encouraging disclosure of lobbying expenditures was 10%, but this was 21% of the independent shareholders. The vote against the say on pay advisory resolution was 5%, or 10% of independents, and former Republican politician Paul Ryan garnered 8% opposition, or 16% of the non-Murdoch shareholders.
There was broad disquiet at UK technology business Darktrace (AGM 4th November). The company blamed the 21% vote against its remuneration report largely on founder Mike Lynch, who recently severed links with the company as he continues to fight extradition to the US in relation to fraud charges over the sale of his former company Autonomy to Hewlett Packard (a $11.7 billion deal that was written down by $8.8 billion within a year). Darktrace said that 70% of the votes against were down to three shareholders, including Lynch and his wife – but it is clear that significant numbers of institutional investors also opposed the resolution. Several members of the board faced big votes against: most notable were the 8% votes against Han Sikkens and Stephen Shanley, who represent private equity investors in the business, and the 11% against Vanessa Colomar, a former Autonomy executive who represents Invoke Capital (a Mike Lynch-founded investment vehicle). The company makes no comment on Mike Lynch’s voting actions other than regarding the remuneration report, but the 11% abstention on the re-election of the chair, Gordon Hurst, looks similar to the reporting Lynch shareholding. Even votes that are usually purely administrative faced opposition: 15% voted against a proposal to allow political donations, and 10% opposed or abstained on approving share buybacks.
Finally, shareholders of New Zealand financial services business Heartland Group (AGM 8th November) appear tired of long-standing chair Geoff Ricketts, who has been on the board since 2010. The 9% opposition to his re-election is remarkably high for the country; Ricketts announced at the AGM that he will not stand for election again.
We’ll return with the next Most Significant Votes in a fortnight, on December 2nd.