Welcome to Most Significant Votes! Our regular update from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlighting the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable.
Fintech firm Block – formerly Square – (AGM 14th June) faced a shareholder resolution calling for the winding down of its differential voting rights. Like many tech companies, the votes at Block are mostly in the hands of the founders, despite having invited other investors to share the economic exposure. Co-founders Jack Dorsey (self-proclaimed Block Head) – who also founded and leads Twitter – and James McKelvey together own 99% of the Class B shares, which carry 10 times as many votes as the Class A shares held by external investors, thereby controlling 55% of the overall votes with under 12% economic ownership. On the face of it, the shareholder proposal garnered 28% support, but assuming that the two founders voted against it, the vote among independent investors was more like 81% in support.
Elsewhere in the US, we saw some very large votes against director re-elections – resolutions that often go through with 90%+ support. At Delta Air Lines (AGM 16th June), new director Leslie Hale faced opposition to her appointment of 42%; even the next highest vote against, 15% contrary to the reappointment of Sergio Rial, seems small in comparison, although it itself is an unusually sizeable level of opposition. At music concert business Live Nation Entertainment (AGM 16th June), the extraordinarily busy chair Greg Maffei (he is also CEO of Liberty Media and is an executive or non-executive director of multiple associated businesses) saw 36% of shareholders oppose his re-election. And two directors at online craft retail emporium Etsy (AGM 15th June) received a similar bruising: long-standing remuneration committee member Jonathan Klein facing 34% opposition, and audit committee chair Margaret Smyth 37%.
In the UK, the investor obsession with pay continues. But votes against rarely get to the scale of the 72% opposition to the remuneration report resolution at publisher Informa (AGM 16th June). Informa is a serial offender on pay, and investor frustration has built over the years: last year’s remuneration report was opposed by 61% of shareholders and the new remuneration policy considered then faced 41% opposition. While the outcomes reported and voted on this year still clearly raised investor ire – essentially, protecting executive pay from the negative consequences of the pandemic – there are some signs that relations with shareholders may have begun to turn a corner. The tone of contrition from new chair John Rishton is a marked change, and his wholesale reshaping of the board is also a shift. This seems to have been enough to ensure that Rishton himself faced only 4% opposition to his reappointment and three resolutions to revise the terms of pay plans all under 2% opposition. But that may be little comfort to long-standing remuneration committee member Helen Owers who saw 20% of shareholders oppose her re-election. The proposal for the reappointment of Stephen Davidson, the former remuneration committee chair, was withdrawn from the ballot after having been initially included, ostensibly because he took a new chair role. This may be a sign that he would have faced greater opposition than Owers.
A similar conclusion could be reached on the decision of remuneration committee chair Mike Wright to leave the board of Pendragon, and so the resolution for his reappointment being dropped at the AGM on Tuesday. Fellow remuneration committee member Dietmar Exler faced a 40% vote against; more awkwardly, the opposition to CEO Bill Berman’s re-election was 35%. The remuneration report itself was opposed by 66% of shareholders. Also withdrawn was the resolution at Foxtons (AGM 15th June) to reappoint Nic Budden as a director. However, in this case, Budden was CEO and the withdrawal reflects the appointment of Guy Gittins as his successor, announced at the end of May. Most striking was the vote on the incoming CFO, Chris Hough (an internal promotion), who faced 27% opposition, including 14% in abstentions. Otherwise, the focus of concern was pay, as it has been for a few years at the company. The remuneration report received opposition from 18% of shareholders, but more striking were the votes on the remuneration committee members: committee chair Alan Giles and member Sheena Mackay faced 43% votes against, while Rosie Shapland saw 28% opposition. Only slightly less striking were the votes at Whitbread (AGM 15th June). There, opposition to the remuneration report was 40%, while remuneration committee chair Frank Fiskers faced an 11% vote against and uncompromising company chair Adam Crozier faced 16% (5% of those abstentions). At all three companies, investors were again concerned about executive pay continuing seemingly unaffected even though the company had taken furlough money for its wider staff and not seen fit to repay it.
DIY retailer Kingfisher (AGM 22nd June) saw a more staid 7% vote opposing its remuneration report, but non-executive directors Claudia Arney, Catherine Bradley, Sophie Gasperment and Rakhi Goss-Custard all saw more than 12% of shareholders vote against. Arney chairs the remuneration committee, of which Bradley and Goss-Custard are also members; Gasperment seems to be considered too busy by many investors despite her recent departure from the board of Accor. Fast fashion firm Boohoo (AGM 17th June), whose performance has recently dipped significantly, also suffered a painful revolt on pay. 33% of shareholders voted against the remuneration report and 25% against a generous new incentive scheme; with 12.5% of the shares still in the hands of the founder, these results are still more striking. Finally among this group of UK retailers with recent AGMs, on the same day, Tesco’s new non-executive director Bertrand Bodson was welcomed to the board with a vote against of 29%. As a full-time CEO, his now two non-executive roles are deemed excessive. Both remuneration report and policy were opposed by 8% of shareholders. CEO Ken Murphy’s £4.7 million pay package means the ratio of his pay to that of Tesco’s median UK employee (£21,000) is 224:1.
Swiss drinks bottler and FTSE 100 constituent Coca-Cola Hellenic (AGM 21st June) also faced a bruising on pay after having relaxed the performance hurdles for incentive awards. The company put two pay reports to shareholders, one under Swiss law and the other under UK regulations, and both received identical 33% opposition. The chair of the remuneration committee, Charlotte Boyle, faced a 22% vote against, and long-standing committee member Reto Francioni a 13% vote against. More recent committee member Anna Diamantopoulou got away relatively lightly with only 6% opposition. In France, waste giant Veolia (AGM 15th June) faced varying levels of opposition to resolutions on pay – and indeed pulled a proposal for an exceptional bonus for the chair and CEO. The most significant vote on a resolution that was taken forwards was against the pay policy for the chair, which faced 31% opposition.
Spain’s International Consolidated Airlines (AGM 16th June), which owns both Iberia and British Airways, among others, also faced a substantial vote against pay in its case on proposed amendments to its pay policy. This earned support from only 74% of shareholders, with 18% opposing and a further 8% abstaining on the resolution. Many investors appear unconvinced by the company’s view that an increase in the reward for the CEO was needed so soon after having approved a new remuneration policy last year – it was perhaps particularly controversial because the new pay policy involves awards in the form of restricted stock, where the reduced performance linkage is generally justified by a reduction in the overall level of reward. To see awards increasing so soon after approving such a new structure was clearly felt to be problematic. Also in Spain, electric utility Iberdrola (AGM 17th June) was one of the few Climate Action 100+ companies not to face a climate-related shareholder resolution, nor to put its own plans up for shareholder consideration. Instead, the significant vote at its AGM was again on pay, with 24% of shareholders opposing the remuneration report. One company facing a climate-specific resolution was in a rather less exposed sector: Monster Beverage (AGM 14th June) saw 44% of shareholders support a call for a report on plans to reduce greenhouse gas emissions.
And finally, shareholders are beginning to recognise that our headlong rush into battery technology and electric vehicles can have significant downsides that need to be managed. A shareholder resolution at US car giant General Motors (AGM 13th June) called for a report on the use of child labour in EV supply chains and garnered 23% support.
That’s all this fortnight. We’ll return with Most Significant Votes on July 8th.