Welcome to the penultimate Most Significant Votes of 2023!. Once again, 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. The focus remains the Southern Hemisphere voting season, and the handful of Northern Hemisphere votes that also occur this time of year.
First, an AGM that wasn’t. South Africa’s Sasol (AGM&EGM 17th November) – a chemical and energy company built around the conversion of coal into gas and liquid forms of fossil fuel, and whose Secunda conversion plant is believed to be the greatest single point source of greenhouse gas emissions in the world – was forced to take the extraordinary step of abandoning its meeting following noisily chanted protests from Extinction Rebellion activists. The company’s statement reads: “The Chairman accommodated the protesters and went further to invite them to a meeting with representatives of the Sasol Board, which was declined. Once it became clear that the protesters would not accommodate the effective participation of other shareholders, cancelling the meeting became the only prudent option.” Perhaps still more extraordinary was the fact that prior to the AGM Old Mutual, a 178 year old and typically highly conservative South African insurer, issued a public declaration that it would be opposing the advisory vote on Sasol’s climate change commitment and progress to decarbonising its business, and also against the re-election of non-executive director Muriel Dube, who chairs the safety, social and ethics committee. Shortly thereafter, major local (and global) fund manager Ninety One also indicated that it would be opposing the climate resolution. Such public statements are unheard of in South Africa. It may be a high hurdle for Sasol to win support for this resolution when it does reconvene the AGM (at the time of writing, no new date has been set).
As it happened, Sasol did successfully hold one shareholder meeting that day, half an hour before the AGM. This passed off without noisy disturbances but nevertheless saw an unusually high 15% vote against a technical resolution enabling the issuance of new shares amounting to nearly 6% of the existing share capital. This issuance will enable a recent issue of convertible bonds actually to be convertible into shares.
Elsewhere in South Africa, retailer Woolworths (AGM 22nd November) faced a revolt on pay. More than 53% of shareholders opposed its remuneration policy, and 26% the remuneration report. The company reports that the major concern appears to be that the long-term incentive scheme sets insufficiently demanding growth targets. The company is keen to highlight that shopfloor staff in South Africa enjoyed a 9.5% pay rise, thanks to what they call a Just Wage increase – above the 5.2% received by executives and management in the country. But it wasn’t only executive pay that was a concern for investors, who baulked at a proposed 18.8% pay increase for Australian non-executive directors: 22% voted against this resolution.
Australian miner Fortescue Metals (AGM 21st November) – whose name change to just Fortescue was approved at the meeting – also hit issues on pay. Its remuneration report was defeated, with a 52% vote against. This result was aided by the fact that executive chair Andrew Forrest is not permitted to vote his 37% stake on the resolution because key management personnel are barred from participation in this vote under Australian rules. AGL Energy (AGM 21st November) fared better: having seen a 31% vote against its remuneration report it was facing a ‘second strike’ and the threat of a possible ‘spill’ vote to remove the whole board. But this year the vote against remuneration was under 5% so the spill vote was never called – and in any case, under 3% of votes cast before the meeting were in favour of ejecting the board.
At private hospitals firm Ramsay Health Care (AGM 28th November), the tension was around the reappointment of director Michael Siddle. Newly stood down as chair after a decade (and deputy chair for 17 years before that), Siddle is a founding director having worked for the firm since 1968; the company acknowledges that he is not independent but argue that he still brings real value to the board. Investors seem less convinced: 13% opposed his re-election, or 18% if the 19% shareholding of the foundation created by founder Paul Ramsay (of which Siddle is also a director) is excluded. Given that there are reports that shareholders see the need for dramatic reshaping of the business, there is perhaps a concern that Siddle may serve to anchor it in the past.
Other notable meetings this last fortnight were mainly in the US. Oracle (AGM 15th November) continues to have significant disagreements with its institutional shareholders, especially about pay. The vote to approve executive remuneration was opposed by 27% of shareholders, or 55% of those other than chair and founder Larry Ellison, and an amendment to the main long-term incentive scheme fared still worse, with 29% opposition (59% of those other than Ellison). Many directors faced significant votes against but the greatest opposition was reserved for remuneration committee chair George Conrades (remarkably, at 84 the third oldest member of the compensation committee of the board of this technology business): 24% of shareholders opposed his re-election, or 49% of those not named Larry Ellison. Perhaps surprisingly, these numbers show a reduction in opposition from last year. With the CEO paid $5.25 million and the median employee nearly $86,000, the company’s pay ratio is 61:1, relatively low for the US. On the issue of divisions in the reward enjoyed by different employees, a majority – 65% – of non-Ellison shareholders voted in favour of a call for greater disclosure of racial and gender pay gaps at the company; and finally, 23% of shareholders (46% other than Ellison) believe that Larry should step down in favour of an independent chair.
Despite the retirement of patriarch Rupert, the Murdoch family continues to call the shots at both Fox (AGM 17th November) and News Corp (AGM 15th November). It controls 44% and 40% respectively of the companies’ voting shares – both companies have dual class stock and most investors are invested through non-voting shares. Even given this gerrymandering, there were significant votes against at Fox: chair and CEO Lachlan Murdoch, saw 16% of votes cast against his reappointment, or 31% of those who aren’t his family; and former speaker of the US House of Representatives Paul Ryan faced 26% opposition to his re-election, or 51% of those not named Murdoch who were nonetheless permitted to vote. This wasn’t a political comment because the vote supporting the appointment of former Australian prime minister and sometime budgie-smuggler Tony Abbott was overwhelmingly favourable; rather it appears that Ryan is believed to be too busy to do the job properly given his numerous other board roles. Lachlan fared slightly better at News: the opposition there was 12%, or 22% of those other than his family. Former Spanish prime minister Jose Maria Aznar faced the largest vote against, with 14% opposition, or 26% among those who aren’t Murdochs but are nevertheless able to vote.
Another company with distorted voting rights in favour of the family that dominates both company and board is Estee Lauder (AGM 17th November). The family are the only holders of class B stock which carry 10 votes each; these immediately convert to class A shares (each with a single vote) should they be sold out of family ownership. Given that through this mechanism the family controls 84% of the votes, the headline numbers were strongly in favour. For example, only 8% of votes were cast against the say-on-pay approval of executive remuneration; however, this actually amounts to 66% opposition from those not named Lauder. CEO Fabrizio Freda was paid nearly $22 million in the last year, some 645 times the median paid to the broader employees, under $34,000; two years ago, Freda was paid almost $66 million, including a one-off $50 million share award. Executive chair William Lauder received nearly $8 million last year. Similarly, the headline 6% vote against the re-election of former trade negotiator Charleen Barshefsky actually amounted to 46% opposition from non-Lauders; the two directors who are members of family each faced more than 36% votes against from the shareholders who don’t share their surname.
Investors in UK precision engineer Renishaw (AGM 28th November) continue to see a need for board refreshment. In particular the focus is on executive chair David McMurtry and non-executive deputy chair John Deer. Both are founders and have been on the board for approaching 50 years; they are also major shareholders, owning a combined 52%, so the 31% and 28% respective votes against their re-elections actually amount to 79% and 72% opposition from the wider shareholder base.
We’ll return with the final Most Significant Votes of 2023 in a fortnight, on 15th December.