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 major voting showdown this week was at European oil major Shell (AGM 23rd May). Once the noisy disruption of protestors – some of whom attempted to occupy the stage – was quelled, the formal meeting itself was scarcely less bitter. Fully 23% of shareholders declined to back the company’s energy transition plan, and even more notably 24% (including 4% abstentions) backed a shareholder resolution pressing that its greenhouse gas emission targets should be aligned with the goals of the Paris Agreement. As if that weren’t enough, 8% of investors opposed the reappointment of chair Sir Andrew Mackenzie. Spain’s Repsol (AGM 25th May) enjoyed a rather easier time of it, with the only notable vote being opposition to the remuneration report, by 18% of shareholders. US oil rival ConocoPhillips (AGM 16th May) also faced no climate-specific resolutions. Instead, the support for a resolution pressing for an independent chair won 26% support, and 17% of shareholders backed a call for greater transparency on its global tax payments.
US chocolatier Hershey (AGM 16th May) has the bulk of voting rights controlled by trusts expected to back the founder’s philosophy, which included operating as a responsible business. This didn’t lead the trusts to support a call for the company to do more to prevent child labour in the cocoa supply chain – a perennial human rights concern for the industry. The headline vote was only 4% in favour of this resolution, but this appears to amount to 24% of the outside shareholders. More striking was the vote on the re-election of non-executive Robert Dutkowsky, one of only two individuals on the board where independent shareholders can vote without the Hershey trusts getting involved: fully 43% opposed his reappointment, apparently because he is perceived as too busy. Rival Mondelez (AGM 17th May) also faced a shareholder resolution calling for public targets on eradicating child labour in the cocoa supply chain. This was supported by 22% of shareholders.
Tesla (AGM 16th May) also faced a resolution regarding child labour, and forced labour. But since this proposal was put forward only at the meeting itself most shareholders (who vote some time in advance) had no opportunity to back it. Indeed, the electric carmaker reports that it won the support of precisely zero investors, meaning that even whoever put forward the resolution wasn’t able to support it themselves. Rather more notable was the vote on the re-election of chair Robyn Denholm, which was opposed by 26% of shareholders – or around 42% of the shareholders who are not Elon Musk, the CEO. Musk himself is clearly not worried about Tesla’s dependence on him, and the risks that might come from him potentially being distracted by his noisy efforts at social media firm Twitter; he voted against a shareholder proposal expressing concern about key-person risk at the company. Support for this resolution was 7% or around 11% of those other than Musk.
US banking giant JP Morgan (AGM 16th May) has yet to persuade its shareholders on a number of issues. On auditor PwC – a resolution usually universally supported, the 7% opposition is likely to be because many shareholders no longer see the firm as independent as it has been in office for 58 years. A similar level of opposition was seen on the election of incumbent chair/CEO Jamie Dimon, but more significantly 38% of investors supported a call that the bank’s chair should be independent. Almost as many – 36% – were in favour of a resolution seeking climate transition plans consistent with 2030 reduction targets. In contrast, the resolution seeking a phase-out of lending to new fossil fuel projects won 10% backing, and one seeking absolute emission targets for lending to high impact sectors 14%. Rival Morgan Stanley (AGM 19th May) saw rather fewer shareholder proposals, and there the resolution calling for no more fossil fuel finance was backed by only 6% of investors. French bank Societe Generale (AGM 23rd May) faced no such resolution, but the pay policy for its CEO was opposed by 22% of shareholders.
Meanwhile, a shareholder proposal calling on Hartford Financial (AGM 17th May) to address the risks from underwriting new fossil fuel projects was supported by 10% of investors. Nearly 9% of shareholders at State Street (AGM 17th May) backed a call for its stewardship activities to take account of systemic risks to its clients’ investments, and the conflicts of interest faced by the directors of companies in which it invests.
The US’s Southwest Airlines (AGM 17th May) had a melt-down in its operations at Christmas, cancelling more than 15,000 flights as its systems and schedules failed to recover from a severe winter storm, leaving passengers stranded and luggage in the wrong places. This may have played a part in a vote seeking a right for investors to remove directors winning majority support with 53% backing, an increase in support from prior years. The chair of the nominations committee Veronica Biggs also faced 20% opposition to her reappointment: the debacle appears to have re-emphasised to investors how much in need of refreshment the board is.
At last year’s AGM, 9% of shareholders at restaurant chain Denny’s (AGM 17th May) backed a call for the company to improve its starting pay for workers. This year, 15% (including 5% who abstained) supported a call for the company to require franchisees to provide their workers with paid sick leave. A similar resolution at CVS Health (AGM 18th May) was backed by 28% of shareholders, with the same percentage of investors also backing a call for a workers rights assessment at the pharmacy company. On the same day, rail company Union Pacific also faced a paid sick leave resolution; there, it was backed by 13% of shareholders.
German car rental firm Sixt (AGM 23rd May) witnessed an extraordinary voting result, which saw eponymous founder and supervisory board chair Erich Sixt only just receive sign-off from investors for his actions in 2022, with 52% support. The family shareholding – amounting to some 58% of the voting rights – was abstained on the resolution. Meanwhile, the remuneration report was opposed by around 20% of shareholders – which appears to be more like 87% of the non-Sixt investors. Pay also remains controversial at French/Italian glasses firm EssilorLuxottica (AGM 17th May). At 31%, the headline opposition to the remuneration policy for the chair/CEO was striking enough. But once the votes of major shareholder Delfin are set aside, this looks like a small majority of independent investors were in opposition. Similarly, the opposition to the 2022 remuneration report for CEO Francesco Milleri, appointed chair as well during the year, was 11%, or 17% of the non-Delfin shareholders. Milleri was paid more than €4 million in 2022, but looks set to enjoy a 20-35% uplift in his reward for 2023; not all of his incentives seem strongly performance-linked.
In a similar situation to that we saw last week at abrdn and Jupiter, the bulk of the votes not backing the pay resolutions at UK fund manager M&G (AGM 24th May) were abstentions. In total, 17% of shareholders failed to support the remuneration policy, but 14% of those abstained; the same percentage abstained on the remuneration report out of the total of 15% expressing concern. It appears almost as if investment managers are keen to avoid actually voting against their peers.
This year has seen some large votes against capital resolutions at UK companies, the powers to issue shares, whether pre-emptively (allowing existing shareholders first rights) or not. Many have faced opposition around the 20% level as investors seek to maintain their control over businesses and not grant directors unconstrained freedom to act. But the votes at gambling business Playtech (AGM 24th May) were in another league, with three resolutions facing more than 50% votes against. Since two of these, and a further one that scraped a majority of support, needed 75% backing to be effective, four management resolutions failed to pass at the AGM, a very unusual occurrence indeed. Further, two directors and the remuneration report each faced concern from over 20% of shareholders (including very substantial levels of abstention). It is worth noting that the company’s shareholder base is still showing the wreckage of two failed takeover bids last year and so these votes probably represent bidders biding their time and protecting their interests rather than necessarily reflecting the voice of mainstream institutional investors.
We’ll return with Most Significant Votes on 2nd June.
