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.
Swiss commodities firm Glencore (AGM 26th May), now one of the largest thermal coal miners in the world, has told investors in recent years that it is the best owner of its coal assets because it will responsibly run them down – a better solution, it has said, than selling them to others who may run them for longer and less responsibly. However, the company’s apparently opportunistic bid for Canada’s Teck somewhat undermined this argument as it proposed creating a coal specialist miner alongside one that combined Glencore’s and Teck’s more future-facing assets, which produce minerals including those needed for batteries such as cobalt and nickel. The bid caused Teck to call off its own planned split, but it also seems to have upset Glencore’s shareholders. Nearly 32% rejected the company’s latest climate plan – which looks more like 40% opposition from those who are not executives or former executives of the company. Further, a shareholder resolution (the sole one highlighted by Climate Action 100+) calling for clarity over how the company’s thermal coal operations will be made consistent with the goals of the Paris Agreement and net zero timelines for phasing out coal won support from 30% of shareholders or 38% of the independents. Climate also seems likely to be the reason for the unusually high 4% vote against the appointment of auditors Deloitte.
Another London-listed miner, Ferrexpo (AGM 25th May), is much diminished because its iron ore operations are located in Ukraine – operations continue but are restricted because of the Russian invasion and the diminished availability of workers. It has also faced the challenge that founder and major shareholder Kostyantin Zhevago has been arrested in France and is fighting extradition to Ukraine to face fraud and corruption charges. This legal situation perhaps explains why Zhevago is not named by the company as its controlling shareholder (he holds nearly 50%) whose influence means independent shareholders get separate votes on some directors. Most of these passed with relative ease, but investors are clearly concerned about supposedly independent non-executive director Vitalii Lisovenko whose reappointment was approved by the barest of majorities of minority shareholders, even while the headline vote in his favour was 80%. Similarly, the chair Lucio Genovese faced 16% opposition, or 43% of those other than Zhevago. On the same day, US miner Mosaic – a giant specialising in fertiliser minerals phosphate and potash – faced a shareholder resolution calling for greenhouse gas emission reduction targets across Scopes 1, 2 and 3. This won 30% support.
Another resolution flagged by Climate Action 100+ was the shareholder proposal at France’s oil major TotalEnergies (AGM 26th May). This sought Scope 3 emissions targets in line with the goals of the Paris Agreement, and including 6% abstentions, 35% of shareholders expressed support for it. Meanwhile, 14% of investors refused to back a vote on the company’s own sustainability and climate progress report. At the same time, more than 17% of shareholders didn’t support the reappointment of long-standing director Marie-Christine Coisne-Roquette to the board; her tenure of more than a dozen years is seen by many as contrary to the independence needed for her role chairing the governance and ethics committee in particular. US power utility Southern (AGM 24th May) also faced a call to set Scope 3 greenhouse gas emissions targets in line with a 2050 net zero target. This was backed by 24% of its shareholders.
For the second year in a row, tech giant Amazon (AGM 24th May) again faced a record-breaking number of shareholder resolutions – this time 18. But one of the strongest votes contrary to management was on the pay of executives, opposed by 32% of shareholders (38% of those other than founder and chair Jeff Bezos). Though CEO Andrew Jassy was paid ‘only’ $1.3 million in 2022, around 38 times the average worker at the firm, he is still enjoying the benefit of the prior year’s $212 million share award. Judith McGrath, compensation committee chair, also faced 29% opposition (35% of those other than Bezos). Investors seem most concerned with customer (ab)use of Amazon technology: a shareholder proposal seeking stronger customer due diligence was backed by 35% of investors (42% ex-Bezos) and one concerned about customer use of facial recognition tech by 38% (46%).
Workforce-related proposals also received strong backing: one on freedom of association won support from 35% of shareholders (43% of those not Bezos), one regarding disclosure of gender and racial pay gaps 30% (36%) and one on warehouse working conditions 36% (44%). Marginally less successful were proposals regarding climate matters: one concerned about climate-related lobbying activity was backed by 25% of investors (30% non-Bezos), one regarding a ‘Just Transition’ 30% (37%), and one seeking a report on climate risks in Amazon’s employee pensions 15% (18%) – though 8% of those were abstentions.
Other US companies saw rather fewer shareholder proposals. But US restaurant chain Chipotle Mexican Grill (AGM 25th May) was also urged not to interfere with the rights of its workers in terms of collective bargaining and freedom of association. US companies frequently mount anti-unionisation campaigns. The resolution was backed by nearly 34% of investors. Blackrock (AGM 24th May) told its shareholders that its role is not to engineer real-world decarbonisation. Most seemed to agree, with only 11% supporting a call for the globe’s biggest fund manager to report on how its stewardship activities might most effectively deliver this aim and thereby preserve value for its clients. On the same day, US insurer Travelers was urged to limit underwriting of new fossil fuel exploration by 10% of shareholders and to produce a report on the carbon emissions associated with all of its insurance activities by 16%. Fully 36% believe that the company should conduct a racial equity audit.
US advertising giant Interpublic (AGM 25th May) saw an unusually high vote against the reappointment of its auditors, at 8%. PricewaterhouseCoopers has held the role since 1952, with 70 years in office being substantially beyond the 20 years that many now expect as the limit to an audit firm’s independence. French rival Publicis (AGM 31st May) saw heavier opposition across several remuneration resolutions. Most notable were the 27% and 14% votes against the pay policies for the chairs of the management board and supervisory board respectively (30% and 15% once the votes of the founding Badinter family are set to one side). Their respective pay reports for the 2022 year also faced 20% and 14% opposition (22% and 15% excluding the Badinters). Publicis’s management board chair and CEO Arthur Sadoun was paid €2.5 million for 2022; Interpublic’s CEO Philippe Krakowsky $13 million. In contrast to the voting at Publicis, the vote on executive pay at Interpublic caused barely a ripple, with under 6% opposition.
Finally, the storied printer business Xerox (AGM 25th May) currently enjoys the attention of activist investor Carl Icahn, who holds 20% of the stock. Under a 2021 shareholder agreement with the company, Icahn currently appoints three directors to the board. Other shareholders don’t seem to agree with the characterisation of one of these three as an ‘independent designee’, perhaps unsurprisingly as James Nelson has had an association with Icahn businesses since 2001. Fully 33% of investors voted against Nelson’s reappointment, or 44% of those other than Icahn. Perhaps surprisingly, the two other Icahn nominees, who are not asserted to be independent, were given a much easier ride; the significant difference in votes was explained by the fact that Nelson’s purported independent status sees him sit on the crucial audit committee. In addition, 30% of investors – or 40% of those other than Icahn – supported a shareholder proposal asserting that significant termination pay for departing directors should be subject to investor approval. Given the tendency of activist investors to seek management changes, such a right might be of particular importance at Xerox.
We’ll return with Most Significant Votes on 9th June.