Most Significant Votes continues its short fortnightly run of regular updates from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, that highlight the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable. This run is timed to report on the Southern Hemisphere voting season and also sweeps up the small parallel season in the North.
On the face of it, only some 12% of investors supported a shareholder resolution at Australian coal miner New Hope (AGM 24th November) calling for a report on how capex into the coal business and operational management will be made consistent with the Paris Agreement goal of net zero emissions by 2050. The proponents of the resolution, in effect, call for the business to be wound down over the next few decades. However, given that 38% of the company is held by Washington H Soul Pattinson, another Australian public company that is now an investment conglomerate, the support for the resolution from independent shareholders was more like 35%.
The bulk of other votes in Australia were pay-related. Most notable was the ‘second strike’ at property company Goodman (AGM 17th November) – a vote greater than 25% against the remuneration report for the second year in a row. Including abstentions, the opposition to the resolution this year was 31%. Such a vote triggers an opportunity for shareholders to require every member of the board to be subject to re-election at an EGM that must be held within 90 days; however, this so-called ‘spill’ resolution was roundly defeated, with only 1% of shareholders voting for it. The contrast with the 31% vote against the re-election of Phillip Pryke, who chairs the remuneration committee, is particularly stark. Investor concerns appear to be focused on the scale of the pay for the CEO, which totalled A$44 million in the year; the company has agreed to moderate levels of award going forwards. Fellow property company Lendlease (AGM 18th November) is less generous – its CEO took home a ‘mere’ A$3.3 million last year, largely because his long-term incentives missed their performance hurdles and did not vest. But shareholders nonetheless appear uncomfortable with the range of changes to pay structures, which seem to make the balance of reward more short-term. The vote against the remuneration report neared 11%.
There were three significant votes against pay at employment search technology firm Seek (AGM 17th November). Two resolutions to approve pay awards to new CEO Ian Narev faced 20% and 12% opposition, and the remuneration report was also opposed by 12% of shareholders. In the context of recent poor performance at the business, it appears that Narev’s significant reward – some of which does not require performance hurdles to be reached – is seen to be out of kilter. Similarly, and on the same day, health technology firm Sonic Healthcare saw 15% of shareholders oppose the remuneration report (including 6% who abstained) and 8% opposition to long-term incentives for each of the CEO and CFO. Mining services company Mineral Resources, also on that day, won general support for its remuneration report but still faced 22% opposition to a proposal to enable certain generous payments should a senior executive depart from the company.
Pay was also prominent at US meetings. But for the votes of founder and chair Larry Ellison – who retains 43% of the company – many resolutions at US tech giant Oracle (AGM 16th November) would have been defeated. For example, while the say on pay vote was officially passed with 67% support, among independent shareholders this result was almost precisely reversed, with 69% opposition. The three directors facing the greatest votes against are all octogenarians: chair of the compensation committee George Conrades, whose election was opposed by 63% of the independent shareholders; vice-chair of the committee Naomi Seligman, opposed by 61%; and committee member (and former secretary of defense and head of the CIA) Leon Panetta, opposed by 62%. Ellison and CEO Safra Catz each received identical cash bonuses of $7.8 million and option awards worth $129 million during the year, giving a pay ratio to that of the median employee of 1,842:1.
Another US technology business faced a still more striking result on remuneration. The compensation committee at Western Digital (AGM 16th November) decided during the year to waive the performance linkage from the newly appointed CEO’s recruitment award, meaning he only needs to stay in role till next year to receive around $20 million in shares. This decision proved highly unpopular: fully 87% of shareholders opposed the say on pay resolution.
Shareholders remain supportive at News Corporation (AGM 15th November) but removing the nearly 40% block vote wielded by the Murdoch family (Rupert chairs the company and son Lachlan is executive co-chair) reveals some disquiet. The vote on Lachlan’s election was 12% against, with a further 7% abstaining; removing the family vote shows opposition from 34% of the other investors. The headline vote against the say on pay advisory resolution was 7%, but this represents 13% of independent shareholders. Similarly, a shareholder resolution encouraging disclosure of lobbying expenditures garnered 14% support, 26% of the independents.
US food supplier Sysco (AGM 18th November) witnessed a 36% vote against pay. The compensation committee had introduced new flexibility in its assessment of executive performance in the context of the recovery from the Covid-19 pandemic; while performance was well below long-term targets the reward received was still significant following the application of this flexibility. The CEO’s total pay of some $13.7 million (almost halved from the two prior years) is still 163 times that of the company’s median employee. A shareholder resolution seeking an audit of labour issues in Sysco’s supply chain won 20% support, while one seeking a reduction in the use of plastic packaging (on which the board gave no voting recommendation) received overwhelming 88% backing.
South Africa continued its record of some extremely sizeable votes against. Retailer Woolworths (AGM 23rd November) saw 30% opposition to its remuneration report. In its public response, the company took some encouragement from the vote on its forward-looking remuneration policy, which received under 6% opposition. It may be right to do so given that most South African AGMs see very similar votes against both report and policy. Smaller retail rival Shoprite (AGM 14th November) was a case in point, with 23% of shareholders opposing the remuneration policy and 25% the remuneration report. Logistics firm Super Group (AGM 29th November) saw 45% votes against both remuneration policy and report, despite detailing its efforts to respond to shareholder concerns following votes against last year of more than 25%.
The headline vote against the remuneration report at UK builder Kier Group (AGM 17th November) was a notable 44%. But when the similar number of shareholders who abstained on the resolution are taken into account (by law, these votes aren’t counted in the official calculations, though they are by observers) only 41% of investors were willing to support the board on the resolution. What’s more, remuneration committee chair Heather Rabbatts faced 13% opposition to her re-election, and all four other non-executive directors who were committee members through the year saw votes against above 7.5%. Even though there was 26% opposition to the remuneration report vote in 2021 (36% including abstentions), the CEO’s pay rose 70% this year. While this is a somewhat unfair comparison as it is the first year that a long-term scheme vests for him, the increase did include a 26% salary rise to £750,000. Reported salary increases for the wider workforce were somewhat more modest, at up to 4%, with a smaller number (presumably of the least well paid) also receiving an additional £300. By further contrast, the non-executive directors enjoyed a fee uplift of 8.1%. The ratio of the CEO’s pay to that of the median UK employee is now 61:1, up from 36:1 a year ago. This sets a difficult context for the discussions the company is planning with shareholders on updating its remuneration policy.
Another striking result in the UK was the vote to re-elect Noel Tata to the board of Smiths Group (AGM 16th November). Tata is a scion of the industrious Indian family and he chairs three Tata group companies, Tata Investment Corp, Trent and Voltas, as well as being vice chair of Tata Steel and Titan. It seems that Smiths shareholders believe this makes him too busy to carry out his non-executive director role on their board effectively, as over 15% voted against his reappointment.
We’ll return with this year’s final Most Significant Votes in a fortnight, on December 16th.