Most Significant Votes (w/e 19th April 2024)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Apr, 19, 2024)
|   8 mins

Welcome back to Most Significant Votes! We again bring you highlights of the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable, as selected and discussed by Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy. This run of the MSV blog covers the main Northern Hemisphere voting season. 

Walt Disney (AGM 3rd April) held its contested meeting fully two weeks ago but such are the vagaries of the systems for voting in the US – particularly when, as at Disney, there is a proxy fight – that the full results have only now been released. Proxy fights are US meetings where activist investors propose alternative directors. At Disney, there was not just one set of alternatives – the more recognised one was from Nelson Peltz’s Trian – but two, as smaller activist Blackwells also put forward directors, though these three barely caused a stir, earning just 2% support. Peltz himself was by far the better backed of the two Trian candidates, winning 31% support. But this was a long way from gaining election to the board as even the worst backed board candidate (the others all gained more than 87% of votes) was Maria Elena Lagomasino with 63% support. In addition to Trian recommending against her, as a full-time executive with two non-executive director roles, Lagomasino is likely to have fallen foul of investors’ guidelines on over-commitment. She also chairs the remuneration committee and so some of these negative votes may be in relation to pay concerns; there was a 22% vote against the ‘say-on-pay’ resolution (19% once Trian’s opposition is set to one side). One of the multiple other shareholder proposals was also on pay – seeking investor approval of payments on the departure of executives (so-called ‘golden parachutes’) – and won 11% support. The other notable one sought a report on whether the company’s political expenditures are congruent with its broader approach. This was backed by 28% of shareholders. 

A slew of Canadian banks have held their AGMs. Each included multiple shareholder resolutions, a number of which were proposed at more than one meeting. At Royal Bank of Canada (RBC; AGM 11th April) a proposal requesting disclosure of the ratio of the bank’s financing of clean energy to its exposure to fossil fuels was withdrawn ahead of the meeting. Environmental proposals that were taken forwards were on support for the circular economy, which garnered 12% backing, and one seeking an annual vote on environment and climate change objectives and action plan, which won 17% support (including 2% abstentions). That same call for an annual say-on-climate, as it tends to be known, was also seen at the other Canadian banks, winning 21% support (including 8% abstentions) at CIBC (AGM 4th April), 18% (including 6% abstentions) at Scotiabank (AGM 9th April) and 17% at Bank of Montreal (BMO; AGM 16th April). At RBC and BMO, reporting of the pay ratio between the CEO’s remuneration and that of the average worker was a popular topic. One resolution specifically calling for this disclosure gained 12% support at RBC and 11% at BMO, and one seeking clearer country-by-country reporting to assist pay ratio transparency and also tax transparency, 11% at both RBC and BMO. The same country-by-country disclosure resolution was seen at the other banks, winning 10% backing at Scotiabank and fully 19% (including 7% abstentions) at CIBC. Finally, a number of shareholders clearly feel that both Scotiabank and BMO have been audited by KPMG for long enough. Increasingly, institutions are applying the EU’s 20-year limit to markets globally, and KPMG has been Scotiabank’s auditor since 1992, leading to 6% opposition; the opposition at BMO was 9%, following 34 years’ tenure. 

The issues at other banks looked a little different. Shareholders at Bank of New York Mellon (AGM 9th April) were asked whether they would like more transparency on the US financial institution’s lobbying, whether direct or indirect. Fully 39% backed the call. At Italian bank Unicredit (AGM 12th April) the focus of attention was pay. Both the forward-looking remuneration policy and backward-looking remuneration report faced opposition from 12% of shareholders. Both main proxy advisers, ISS and Glass Lewis, had recommended against on both resolutions, raising concerns about the high reward for well-regarded (not least by himself) CEO Andrea Orcel; many investors were clearly unconvinced by the bank’s rebuttal to their analysis. The bank was proposing to bolster Orcel’s pay – some €5 million in the year – by 30%.

Pay is an issue in Switzerland as well. While the remuneration report at Swiss Re (AGM 12th April) passed with 9% opposition, there is still clear investor disquiet as there was 16% and 17% opposition respectively to the maximum pay in the forthcoming year for executives and for the non-executive directors. Its CEO was paid more than SwFr9.8 million last year. This outdid the SwFr7.6 million paid to the CEO of Switzerland’s Zurich Insurance (AGM 10th April), where remuneration is clearly also a concern. The most notable vote there was the 19% opposition to the remuneration report – and the sustainability report also fared relatively badly, with 8% opposition. The proposed maximum pay for the executives for the next year was also poorly received, with a 14% vote against. In addition, the fact that non-executive director Joan Amble was absent from three board meetings brought her below the 75% attendance rate that many investors accept as the minimum; in the absence of a clear explanation, 11% opposed her reappointment on this basis.  

Australian oil and gas business Santos (AGM 11th April) also saw a vote against pay, by 10% of shareholders. Nearly as many investors, some 8%, refused to back the re-election of chair Keith Spence. The company was rather strident in welcoming this as – in its view – a whole-hearted endorsement: its announcement of the results of the meeting was headlined ‘Shareholders back Santos board and strategy at Annual General Meeting’. It is probably fair that some at least of the opposition to Spence’s re-election – in the absence any more closely relevant resolution – will have been based on concerns about the company’s approach to climate change. 

Pay is only the starting point of dissatisfaction at Germany’s Deutsche Telekom (AGM 10th April). There, the remuneration report was opposed by 11% of shareholders – or 19% of those other than the German state. But further, 7% (or around 12% of the independent investors) opposed the formal discharge of the supervisory board, and 6% (or 11%) refused to back the reappointment of supervisory board director Karl-Heinz Streibich. Danish renewables darling Vestas (AGM 9th April) has also disappointed shareholders by an apparent disconnect between its pay approach and its weak recent performance: 18% opposed both the remuneration report and the remuneration policy votes. Even more striking was the 28% (all abstentions) that refused to back the re-election of chair Anders Runevad, who as the former CEO has questions to answer both about his independence and his performance. A number of investors have tightened their expectations on chair independence, and higher votes against those who are former top executives are likely to be a feature of this season. 

The debate on pay continues to be a particularly bitter one in the UK. Some commentators – predominantly from the corporate world – have been arguing for months that UK companies need to pay executives more in order to compete with the much higher rewards available in the US. It’s clear that not all investors are persuaded as the votes at pharma giant AstraZeneca (AGM 11th April) showed. The company was seeking permission to raise the maximum pay of its CEO Pascal Soriot by two and a half times his salary of nearly £1.5 million – increasing his maximum annual bonus to three time the salary, and his annual share incentive awards to 850% of salary – taking the annual package to £18.7 million. This is around the same level of peers at US rivals Pfizer and Johnson & Johnson, though somewhat less than that at Eli Lilly or AbbVie. The unpersuaded amounted to fully 37% – the proportion of shareholders who refused to back AstraZeneca’s proposed new pay policy – or 39% when the shareholding of Sweden’s Investor AB is excluded. This is a Wallenberg family investment vehicle and other shareholders are clearly also concerned about Marcus Wallenberg’s independence and over-commitment to other boards as 22% (23% other than Investor) opposed his re-election to the AstraZeneca board. In comments to the FT, AstraZeneca’s chair blamed proxy advisers for “double standards” that “do serious harm” to UK competitiveness. This story looks set to run. 

Meanwhile, chemical giant Dow (AGM 11th April) faced a shareholder proposal on single use plastics, asking for a report on how reduced demand for virgin plastics might impact the business; 27% of shareholders backed this call. At US housebuilder Lennar (AGM 10th April) 24% of shareholders urged the company to establish clear targets for greenhouse gas emission reductions. Even more strikingly, once the votes wielded by executive chair and co-CEO (and son of the founder) Stuart Miller – exaggerated through a dual class share structure with 10 times voting rights shares – are set aside, this looks more like 42% backing.  

That’s it for this week. We’ll return with Most Significant Votes on May 3rd. 


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