Most Significant Votes (w/e 28th April 2023)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Apr, 28, 2023)
|   5 mins

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.

Yesterday’s protest vote at BP – based on concerns about the company’s decision to downgrade its emissions reduction targets – was seizable but not overwhelming. A group of UK pension schemes had pre-announced their intention to oppose the re-election of the chair Helge Lund as a mark of their concern; in the end, the total vote against his election was just under 10%. A shareholder resolution calling for the company to align Scope 3 emissions targets (the bulk of emissions for an oil business) with Paris Agreement goals won support from 19% of shareholders (including 2% abstentions). The largest vote against this was on the remuneration report, which 19% of shareholders opposed.

Otherwise this fortnight, we’ve seen notable votes at European companies with storied brands – particularly sizeable when the votes of independent shareholders are considered. At French luxury goods giant LVMH (AGM 20th April) there were 20% votes against the appointments of advisory board members Lord (Charles) Powell and Diego Della Valle – advisory board members attend board meetings but are not formally directors, and shareholders often object to this French legal oddity – and against the remuneration reports on pay for chair/CEO Bernard Arnault and managing director Antonio Belloni. Arnault, already the richest man in the world given his family’s over €250 billion dominant shareholding in the business, was paid some €7.8 million in 2022, oddly including nearly €4.5 million in shares. Once the family’s near-70% voting rights were set aside, the votes against these resolutions were all around 72% of independent shareholders.

Smaller cross-town rival Hermes International held its AGM on the same day and saw some similarly striking results. One of the largest votes against was on the pay for the joint executive chairs of the company (each a member of the founding family, which dominates the share capital and even more so the voting rights). The headline 9% opposition to this resolution translates to a vote against of around 60% of the independent shareholders. Similarly, the 7% who opposed the vote on related party transactions amounts to some 51% of the independents. Italian cold weather luxury competitor Moncler (AGM 18th April) also suffered a rebellion on pay: an 11% vote against its remuneration report, or 15% of the independent investors.

Luxury of a different sort also gave rise to pay concerns: 31% of shareholders at Swiss chocolatier Lindt & Sprungli (AGM 20th April) voted against the remuneration report. Once the supporting foundations and other allied investors are excluded, this looks more like a 45% vote against. Also on 20th April, Swiss chocolate, coffee and other food producer Nestle was also the subject of a pay rebellion, with 18% of shareholders rejecting the remuneration report. In addition, over 16% opposed the reappointment of busy director Dinesh Paliwal to the compensation committee.

Shareholders of French beauty company L’Oreal (AGM 21st April) seem of the view that its management isn’t worth it, with 15% opposing the remuneration report – or 26% of those not from the founding family. In addition, 13% (or 22% of the independents) opposed the re-election of Fabienne Dulac, an Orange executive with a poor attendance rate at L’Oreal board meetings. Similarly, at German Nivea business Beiersdorf (AGM 13th April), the headline vote against the remuneration report was striking enough at 24%, but once the votes of the majority shareholder are taken into account, that amounts to 70% opposition from minority investors. The company had both made an unexplained €1 million retention award to a senior executive but also was notably generous to some departed executives too. On the same day, Campari also saw some remarkable voting activity, though this was again masked by the fact that it has a majority shareholder whose dominant control is exaggerated by an unequal voting rights framework so that it wields around 70% of the votes. The 17% vote against the remuneration report, 15% against a share options scheme and 16% against a share buyback look more like 82%, 75% and 77%  votes against among the minority shareholders.

At another Italian heritage company now listed in the Netherlands, investors are clearly uncomfortable with those driving the sports car maker Ferrari (AGM 14th April), some of whom they believe are distracted at the wheel by their other business commitments. Executive chair John Elkann – who also chairs car firm Stellantis and is CEO of the dominant family holding company Exor – faced a 12% vote against. Two other scions of major business families are also on the board: Delphine Arnault, LVMH board member and chair/CEO of Christian Dior and whose attendance record at Ferrari board meetings was poor, faced a 10% vote against; and Adam Keswick, who is busy on the boards of Jardine Matheson and various of its associated companies, saw 23% opposition. The lack of diversity on the board about which many shareholders are concerned – and which played at least a part in the vote against Elkann – is not just about the tendency to appoint multiple members of corporate dynasties but also poor gender diversity. Once the Agnelli family shareholding is excluded, these votes against are still more notable: 17%, 14% and 33%, respectively.

Investors also had several concerns about Stellantis (AGM 13th April) itself – created by the merger of the Fiat and Peugeot businesses. Following a majority vote against its remuneration report last year, the company has worked hard to earn more support this time around – including engagement with more than half its shareholders, it says – and reports multiple changes to its pay approach. It also tried to soften the voting overall by separating the remuneration report vote into two, one of the legacy issues and one excluding the legacy issues; this was particularly successful, with the legacy issues facing 54% opposition (some 77% of the independent shareholders) and the non-legacy 28% opposition (39% of the independents), but even the latter is hardly a ringing endorsement. Investors also baulked at appointing another Exor representative to the board, and so 19% opposed the election of Benoît Ribadeau-Dumas (27% of the independent shareholders).

Among Jardine Matheson’s family of businesses is Indonesia’s United Tractors (AGM 12th April). As a coal miner and mining services supplier, the company’s carbon footprint is notable, and it is included on the Climate Action 100+ list of the world’s leading emitters. There was no climate-specific resolution for consideration by shareholders, but investors did focus concerns on the election of the (all-male) board, proposed as a single resolution. The reported opposition was 24%, but once the majority shareholding of Astra Internasional is excluded, it appears that 91% of independent shareholders opposed the election resolution.

One company which did face a specifically climate-related vote was Spanish infrastructure giant Ferrovial (AGM 13th April), whose assets include airports and toll roads. Ferrovial put its climate strategy report up for shareholder approval, and 9% of investors declined to do so. But to put that vote in context, the company faced greater opposition on a range of other resolutions: the pay policy for the new Dutch company that Ferrovial will become following a transaction (itself opposed by 7% of shareholders) faced 11% opposition, and two of the busiest directors saw 12% and fully 25% of shareholders vote against. Another Spanish airport operator, Aena (AGM 20th April), also faced a vote on its climate action plan. 10% of shareholders declined to support the resolution. Given that the state owns half of the company, this amounted to some 23% of independent shareholders.

Canadian banks faced a range of climate shareholder resolutions. At Toronto-Dominion (AGM 20th April), 29% of shareholders backed a call for a clear transition plan to deliver 2030 emissions reductions targets; 26% supported there being an annual vote on environment and climate matters; and 15% argued for care in lending against sales of high-polluting assets. Meanwhile, a proposal at Bank of Montreal (AGM 18th April) also called for an annual vote on its environmental and climate plan, winning 19% support. Another shareholder resolution at BMO called for a racial equity audit. This one was backed by 40% of shareholders. Both banks also faced a contrarian shareholder proposal seeking a commitment to ongoing investment in Canada’s fossil fuel sector, which was largely dismissed with just 1% or 2% backing.

Also in the US, aeroplane manufacturer Boeing (AGM 18th April) saw significant support for a series of shareholder proposals. One calling for gender and racial pay gap disclosure was backed by 48% of shareholders; another seeking greater transparency on lobbying activities generally 38% and one regarding lobbying on climate-related matters by 40%. Major chemical business Dow (AGM 13th April) faced two shareholder resolutions. That calling for an independent chair of the board won 27% support from shareholders. Still more popular, with 31% backing, was a proposal pressing for a move away from the production of single-use plastics.

French outsourcing firm Teleperformance (AGM 13th April), whose year has been marred by allegations of mistreatment of its extensive workforce, faced a series of bruising vote results. Among the most striking was the remuneration report for the chair and CEO Daniel Julien being opposed by 27% of shareholders, and 25% failing to back that for his deputy Olivier Rigaudy. Meanwhile, 18% of investors refused to endorse the re-election of Jean Guez as a non-executive director; as a former executive, Guez is acknowledged not to be independent, and the two-year term he was proposed for would take his tenure on the board to nearly 15 years, and his age to 79. Finally, Deloitte faced opposition of 15% to its reappointment as auditor; its 24-year holding of the role exceeds the EU’s recognised 20-year limit to independence.

We’re turning weekly now for a while so we’ll return with Most Significant Votes on 5th May.


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