Welcome back to Most Significant Votes. 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. This run coincides with the Northern Hemisphere voting season.
The wall of Japanese shareholder meetings, most of which happen over just a handful of days, approaches – next week is the really big week. Among the early arrivals was storied car manufacturer Toyota (AGM 14th June), where a call for greater transparency of the company’s lobbying on climate matters won support from 16% of shareholders. Perhaps more remarkable was the 15% vote against the reappointment of long-standing chair Akio Toyoda, a member of the founding family. Other Japanese companies are also facing criticism for persistent underperformance. One example is printer firm Konica Minolta (AGM 20th June), whose CEO Toshimitsu Taiko faced a 28% vote against his re-election. Meanwhile, media giant Sony (AGM 20th June) is one of the few Japanese companies to pay at levels similar to international competitors and faced a small rebellion on remuneration, with 7% of shareholders voting against the issuance of new stock options. Sony’s CEO Kenichiro Yoshida received total pay over $14 million in 2022.
Beyond Japan, once again, this MSV is dominated by US companies. The largest was Alphabet (AGM 2nd June) – the company behind Google – which faced a couple of strong votes against on pay issues: the vote to approve executive pay was opposed by 24% of shareholders, but once the founders’ majority of voting rights (skewed by having 10x the votes of ordinary shares) is excluded, this was more like 62% of independent investors; and an update to a share-based incentive that included making a further large number of shares available for issue was opposed by 15% of shareholders, or 39% of them other than the founders.
Investors also had the opportunity to say how often they would like the vote on executive pay to be held; it was clear that the majority of the independent shareholders – some 79% – wanted this to be annual, but the founders favoured such a vote only every 3 years so it won’t be more frequent than that. CEO Sundar Pichai was paid nearly $226 million in 2022, a number made only a little more palatable by $218 million being in share incentives which he’s awarded only one year in three. Even though the company’s median employee is paid a remarkable $280,000, this still makes the CEO pay ratio a striking 808:1. Alphabet also faced 14 shareholder resolutions, including one on executive pay issues proposed only at the meeting and which therefore gained minimal support.
By far the most popular was a call for equal voting rights which was backed by 31% of shareholders, or 78% of those who aren’t currently cushioned by the benefit of unfair voting rights. Human rights-related resolutions were also widely supported, including one calling for a human rights assessment of targeted advertising by 19% (or 49% of independents), and one concerned with the human rights implications of the siting of data centers, 14% (35%). A call for greater transparency around algorithms to enable more insight into their impacts on fairness won support from 17% (44%) of shareholders. Finally, a resolution seeking more disclosure on lobbying was backed by 18% (47%), while one regarding climate lobbying specifically was supported by 15% (37%).
Another tech giant, Salesforce (AGM 8th June), faced a call that its chair should be an independent director, which won 23% backing from investors. A similar resolution at retailer Target (AGM 14th June) was supported by 33% of shareholders.
Payment technology company Block (AGM 13th June) saw significant voting in spite of the control of ‘block head’ Jack Dorsey and fellow founder James McKelvey, who wield around 50% of the votes through their Class B shares (which enjoy 10 times the votes of Class A stock). The election of director Amy Brooks – apparently held to account for several governance failings as she is a member of the nominating and corporate governance committee – faced opposition from 12% of shareholders or nearer 34% of those other than Dorsey and McKelvey. Fellow director Shawn Carter, whom the company states is “Known professionally as Jay-Z, Mr Carter is a musician, songwriter, record executive, producer and entrepreneur”, received a rather stronger endorsement from shareholders. A shareholder proposal seeking more disclosure on diversity and inclusion efforts was backed by 15% of investors – or 42% of those other than the founders.
Events business Live Nation (AGM 9th June) also has a music industry legend on its board, in the form of Jimmy Iovine, among other things founder of Beats. Iovine was re-elected with some comfort but the same cannot be said for hyperactive chair Greg Maffei. Maffei is CEO of Liberty Media and represents the company on many boards of businesses in which it invests; 36% of investors opposed his re-election, and once the Liberty Media 30% shareholding is set aside this looks more like 55% of independent investors. The vote on executive pay was even more notable as it was defeated with 54% opposition even including the Liberty Media votes; the vote against was more like 82% of the rest of the shareholder base. This clearly arises from the $117 million share award to CEO Michael Rapino during the year (in spite of the share price falling notably), taking his overall pay to $139 million, or a remarkable 5414 times that of the median employee.
Controversial tech business Palantir Technologies (AGM 6th June) has a particularly unfair voting structure. Its founders are guaranteed just under 50% of all voting rights at the company, meaning that their Class F shares wielded more than 900 votes each at the AGM. This is in addition to the Class B shares which have 10 votes each, most of which are also held by current directors. Ordinary investors are reduced to Class A shares with just a single vote each. All of this makes it extremely difficult to interpret the votes cast at the meeting. Nonetheless, it looks like the 8% opposition to the re-election of chair Peter Thiel is more like 32% opposition from those shareholders who are not Thiel and the two other founders of the business.
The voting rights at Comcast Communications (AGM 7th June) are also gerrymandered, with chair and CEO Brian Roberts holding all Class B shares, which carry the right to 33% of all votes no matter how many Class A shares are issued. This and other governance anomalies seem to have driven significant opposition to the reappointment of Kenneth Bacon as chair of the entertainment company’s governance and corporate responsibility committee. Around 24% of shareholders opposed this vote, or 39% of those other than Roberts. Meanwhile, a shareholder proposal seeking a racial equity audit was backed by 11% of shareholders (18% of the independents) and 10% (17%) supported a call for strengthened greenhouse gas reduction targets.
Delta Air Lines (AGM 15th June) faced two shareholder proposals. The one seeking shareholder approval for particularly sizeable termination payments to departing executives won majority support, with 60% backing it. One seeking freedom of association and collective bargaining for the workforce fared slightly less well but still gained 33% support.
Health insurer UnitedHealth (AGM 5th June) was pressed to mount a racial equity audit of its services – a shareholder proposal backed by 22% of investors. Still more successful was a resolution calling for a closer alignment between its political spending and the company’s stated policy aims – noting a number of clear inconsistencies: this won support from 30% of shareholders. Meanwhile, 10% of investors at Regeneron (AGM 9th June) supported a call for the pharma business to make greater efforts on access to medicines. Israeli pharma competitor Teva (AGM 15th June) saw its vote on executive pay marginally defeated: this seems related to the sizeable recruitment awards to incoming CEO Richard Francis, which amount to $15 million in addition to the usual incentive payments.
Oil services business Nabors Industries (AGM 7th June) continues to pay generously despite ongoing losses and underperforming its sector. Chair and CEO Anthony Petrello was paid nearly $11 million – some 217 times the pay of its median employee – while the calculated ‘compensation actually paid to the CEO’ (which takes account of share price movements and the like) was more than $30 million. Shareholders expressed their distaste for this, with more than 60% opposing the vote on executive pay, and 26% declining to support the re-election of remuneration committee chair Tanya Beder. The financial sector’s Dun & Bradstreet (AGM 15th June) fared only marginally better, with 46% opposition to its vote on executive pay. Because of what are stated to be ‘one-time strategy and retention awards’, the $29 million paid to CEO Anthony Jabbour was more than treble what he has been paid in previous years and 356 times the firm’s median worker.
In the UK, there were campaigners outside yesterday’s AGM of Whitbread, calling on the company to pay a living wage. The protests inside the meeting were much more muted, the most notable being the 6% vote against the remuneration report. Outgoing CEO Alison Brittain was paid £3 million in 2022 – with the number of shares in a 2020 award reduced because of possible windfall gains from having been made in the depths of the COVID-19 pandemic. With a relatively low-paid workforce, this puts her pay at 105 times that of the median worker.
Also yesterday, more striking was the vote on pay at fast fashion retailer Boohoo, whose share price is down around 90% since its peak in the pandemic, leading to some particularly controversial recent share awards lapsing. Notwithstanding this, the scale of executive bonus awards despite losses at the company led 32% of shareholders to oppose the remuneration report, or somewhere around 42% of those other than the founders. Another founder-dominated UK business, THG (AGM 21st June) faced a substantial vote against the re-election of non-executive director Iain McDonald, whom investors see as compromised given his 13 years on the board and banking advice on a bid for the company last year. Some 24% opposed his reappointment or more like 32% of those other than founder Michael Moulding.
We’ll return with the next Most Significant Votes in a fortnight, on 7th July.
