And we’re back! Most Significant Votes returns, reflecting the launch of the Southern Hemisphere voting season. 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.
October sees the Southern Hemisphere voting season spark into life, and this year, Australia’s AGM season began with two near-misses. In the country, there is a 25% threshold on remuneration report votes: if votes against exceed this number, that vote counts as a ‘strike’. Two ‘strikes’ in consecutive years requires the company to propose a resolution to remove its entire board, known as a ‘board spill’ resolution.
Perhaps most notable was the vote at the country’s stock exchange operator itself, ASX (AGM 19th October). Investors have been frustrated by the generosity of executive pay, not least in the face of an apparently bungled technology update. Last year the vote against the remuneration report was 31%. This year, the opposition was still strong but fell to 21%, meaning that the board spill resolution was not formally put to shareholders (though the company did in any case disclose the votes cast in advance on that resolution, which showed the board would have been safe, with only 2% of investors contemplating this radical step). On director appointments, a stronger vote against was registered on the re-election of the chair, Damian Roche. The vigorous group representing the country’s retail investors, the Australian Shareholders Association, is campaigning for his removal and the 7% opposition to his reappointment is remarkable given the major proxy advisory firms both recommended votes in favour. The ASA says Roche should go within a year.
The second near miss was at biotech giant CSL (AGM 11th October). The company has displeased its shareholders with its pay generosity in spite of a falling share price – and question-marks over its recent A$16 billion acquisition of rival Vifor. Fully 24% of shareholders expressed dis-satisfaction on the company’s annual remuneration report advisory vote. Still less popular was the proposed award of performance shares to the new CEO Paul McKenzie, who was appointed in March. At the date they were valued, this award was worth A$11.9 million – and it seems unlikely that investors were comforted that the face value of this award had since reduced by around 6% given recent falls in the share price. The award faced opposition of 26%.
In contrast to these, waste management firm Cleanaway (AGM 20th October), which was also facing the possibility of a second strike this year after a 25% vote against in 2022, seems to have fully rehabilitated itself in investors’ minds. Its remuneration report this year saw just 2% of shareholders vote against.
Another remarkable pair of votes in Australia was regarding the election of an individual director. Maxine Brenner, who sits on the boards of four major Australian companies, has faced criticism for perceived failures at two of these, airline Qantas and retailer Woolworths – both criticisms related to those companies’ treatment of their workers. At telecoms firm Telstra (AGM 17th October), Brenner was proposed as a director for the first time. There, proxy adviser ISS recommended a vote against and her appointment was opposed by 18% of investors. In contrast, Brenner has already been a director at electricity and gas firm Origin Energy (AGM 11th October) for a decade and so her re-election seemed to be less controversial; nevertheless, it still stirred 7% opposition.
There isn’t only activity in Australia this time of year. In the UK, emerging market fund manager Ashmore (AGM 18th October) saw 13% of shareholders declining to support the firm’s remuneration report (split almost perfectly equally between those opposing outright and those abstaining). Once the substantial shareholding of founder and CEO Mark Coombs – who owns around a third of the company – is excluded, this amounted to opposition from nearly 21% of independent investors. While Coombs himself has a large shareholding, it is notable that only one of the five non-executive directors holds any shares at all – though this doesn’t in itself seem to rouse much concern from investors. Of the five NEDs, only Jennifer Bingham, the senior independent director, faced any scale of opposition. This amounted to less than 5% of the non-Coombs shareholders.
Meanwhile, in the US, food business General Mills (AGM 26th September) faced a shareholder resolution proposing that 10% of shareholders should be able to call an EGM. Perhaps recognising the likely strength of support for this idea, the board itself put forward a rival resolution, setting the threshold at 25% of shareholders instead. It’s not surprising that the management proposal achieved broad support, which 67% of investors backing it. Much more remarkable though was the 61% support for the shareholder resolution.
And at consumer good giant Procter & Gamble (AGM 10th October), investors expressed concern about executive pay. Almost 10% of shareholders opposed the so-called ‘say on pay’ resolution. Chair and CEO Jon Moeller was paid $21.7 million last year, 339 times the $64,000 earned by the company’s median employee.
We’ll return with Most Significant Votes in a fortnight, on 3rd November.