And we’re back! Most Significant Votes returns for the 2023 voting season. Similar to last year, Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, will highlight 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, which will soon begin in earnest; as well as considering some recent votes, this MSV looks ahead to some of what’s to come.
The most striking vote of the year so far was that at Swiss/Swedish engineer ABB (AGM 23rd March), which faced a significant backlash based on the news that it had been caught up in the bribery of a senior executive at Eskom, South Africa’s state power generator. In December, ABB agreed to pay $315 million to settle regulatory cases brought in relation to its misdeeds. At the AGM, 28% of shareholders refused to agree the discharge of the board and management (a formal approval vote in markets with a German law heritage); presuming major shareholder Investor (the Wallenberg family investment vehicle) supported the company, this was 36% of independent shareholders. In contrast, on the same day, shareholders gave Swiss flavours and fragrances company Givaudan an easy ride despite global competition regulators having launched an investigation into possible market collusion between the company and its three main rivals a fortnight previously. Perhaps with more time to consider it, investors may take a different view at the meetings of Germany’s Symrise (AGM 10th May) and International Flavours & Fragrances of the US (AGM 3rd May) – the fourth rival, Firmenich, is private and in the process of takeover by DSM of the Netherlands.
Both ABB and Givaudan were among many Swiss and German companies who faced shareholder ire about proposals to facilitate virtual-only shareholder meetings (23% and 13% votes against respectively). Investors tend to value the visceral force of face-to-face AGMs and recognise that such meetings are less easily controlled by companies than virtual meetings are – even though institutions rarely actually take up the opportunity to attend physically. Shareholders don’t seem to be particularly comforted by the companies’ insistences that this would not be normal practice, but would allow meetings to happen even in the face of another pandemic; the votes seem to be strongest at companies with the greatest proportion of international shareholders, such as the 17% vote against at Siemens (AGM 9th February) and the 24% against at Infineon (AGM 16th February). We can anticipate many more such votes as the season progresses.
Remuneration is a perennial pain point in the voting season. Already we’ve seen some big votes against, including 30% at UK catering giant Compass (AGM 9th February), 19% – including 8% abstentions – at Swiss pharma business Novartis (AGM 7th March) and 12% at Apple (AGM 10th March). Perhaps most notable were pay votes at listed fund managers – historically given more of a free pass by their peers, but seemingly no longer. Premier Miton (AGM 1st February) faced 19% opposition, and Impax (AGM 16th March) saw 41% (including 25% abstentions). Agricultural machinery company Deere & Co (AGM 22nd February) faced one of the first of many shareholder resolutions we’ll see this year seeking to limit severance pay for top executives, a vote that garnered 42% support. Another perennial form of governance shareholder proposal is a call for an independent chair of the board. We’ve already seen strong votes in support of these at VISA (AGM 24th January) and Walgreens Boots Alliance (AGM 26th January), at 24% and 34%, respectively, or 44% of independent investors at Walgreens if the shareholding of executive chair Stefano Pessina is disregarded. We’ll see many more such votes this year, including at Bank of America (April), ConocoPhilips (May), Dow (April), General Electric (May), Lockheed Martin (April), Omnicom (May) and PPG Industries (April). The excess commitments of certain directors is also set to be an ongoing issue for investors this year. An early case was Iain Ferguson, chair of builder Crest Nicholson (AGM 23rd March), who faced 20% opposition to his re-election, apparently because shareholders believe he’s too busy given his two other chair roles at UK public companies.
Apple also faced five shareholder resolutions, including some interesting portends for what may come in the rest of the season. Two of these were so-called ‘anti-ESG’ resolutions, put forward by conservative think tanks seeking to discourage certain activities. One, from the National Center for Public Policy Research, discourages action on civil rights, in a way, according to the company, that “mischaracterizes Apple’s commitment to inclusion and diversity by suggesting that our policies promoting these goals are discriminatory”, and received only 1% support. The other, put forward by the staunchly conservative National Legal and Policy Center, called on the company to report annually on exposures to “Communist China, which is a serial human rights violator, a geopolitical threat, and an adversary to the United States”. The relatively low 6% support for the resolution may indicate a limited investor appetite for such political grandstanding. Both organisations have put forward similar resolutions at other companies.
In contrast, the 35% support from Apple shareholders for a resolution seeking reporting on racial and gender pay gaps suggests investor appetite for proposals trying to address the world’s excess of inequalities remains undimmed. We’ll see plenty more of those – including at Amazon (May), Boeing (April), CVS Health (May), Delta Airlines (June), Goldman Sachs (April), IBM (April), Uber (May) and UnitedHealth (June). Another pathfinder for votes on crucial social issues was the call at Starbucks (AGM 23rd March) for more attention to workers’ rights – the company has faced long-running complaints and strikes, particularly from its US workforce. Unusually, this shareholder resolution was passed, with over 53% of shareholders supporting or abstaining. Also at that meeting, 21% of shareholders supported a call for a clearer policy on CEO succession planning, clearly believing that the way founder Howard Schultz keeps returning as CEO suggests some failure of the company’s approach – the fact the vote was so high at the very meeting where new boss Laxman Narasimhan took charge highlights the scale of investor concerns.
US retailer CostCo (AGM 19th January) saw the first of what will be several votes this year calling on companies to report on reproductive health rights – a subject that is peculiarly political in the US. The 17% support for the resolution is unusually high for what is a relatively new form of resolution, and is perhaps a harbinger for the future. We’ll see other such votes at, among others, Coca-Cola (April), PepsiCo (May), UPS (May) and Walmart (June). Other health-related resolutions (particularly regarding fair access to vaccines and other medicines) are expected at pharma companies, including AbbVie (May), Amgen (May), Johnson & Johnson (April) and Pfizer (April).
Climate will necessarily remain a major focus over the voting season, though we haven’t seen any such votes yet this year. Climate Action 100+ companies will inevitably face the greatest scrutiny, including Berkshire Hathaway, BP, Chevron, ExxonMobil, Glencore and Shell (all AGMs due in May). It would be welcome to see investors press the finance industry harder than they did last year on its role in supporting the continuing development of fossil fuel reserves; key votes will include Bank of America (April), BlackRock (May), Chubb (May), Citigroup (April), JP Morgan (May), Morgan Stanley (May), Royal Bank of Canada (April), Travelers (May), UBS (April) and Wells Fargo (April).
We’ll return with Most Significant Votes in a fortnight’s time, on 14th April.
