Most Significant Votes (w/e 31st May 2024)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, May, 31, 2024)
|   5 mins

Welcome back to Most Significant Votes! We again bring you highlights of the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable, as selected and discussed by Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy. This run of the MSV blog covers the main Northern Hemisphere voting season.

The big voting story this week was all about a shareholder proposal that was never put to the shareholder meeting. US oil supermajor Exxon Mobil (AGM 29th May) had sued the proponents of a resolution on climate – investor Arjuna Capital and Dutch NGO Follow This – and continued to do so even after they withdrew the resolution (even, it seems in Arjuna’s case, after the investor promised never to file such a resolution at the company again). Giant Californian pension fund CalPERS led the investor response to this, saying that it was voting against the entire Exxon board as a result, and putting its reasoning in unusually strong terms: “decades of shareholder rights are under threat from a lawsuit filed by the leaders of a powerful US corporation, designed to punish two small groups that dared to speak truth to power”. Other investors targeted votes against at the CEO and/or lead independent director. We don’t yet have the full results – the convoluted US voting system means it will take a day or so more for those – but the preliminary tally showed the lowest support for any director was 87%. This won’t include abstentions, so it may be that when we do see the full results the votes will show a little more bruising than this seemingly minor impact. But at present, this looks like an invitation to other US companies to use lawsuits (at shareholder expense) to silence one of the few mechanisms for their accountability to investors. Another Climate Action 100+ company, Swiss-based miner Glencore (AGM 29th May) saw 17% opposition (including the 7% who abstained) to its ‘say-on-climate’ vote, to approve its Climate Action Transition Plan – or more like 20% of those other than founder Ivan Glasenberg, who retains 10%. 33% of shareholders at electric utility NextEra (AGM 23rd May) backed a call for disclosure of its climate lobbying activities.

Other large US companies again saw large numbers – and in many cases large votes in favour – of shareholder proposals. As last year, online retail giant Amazon (AGM 22nd May) faced more than a dozen. Perhaps unsurprisingly given its ongoing issues in workforce relations, the most popular of them were those regarding freedom of association and warehouse working conditions, each earning 32% backing, or 37% once the 11% owned by founder Jeff Bezos is excluded. A resolution regarding plastic packaging gained 29% support (34% ex-Bezos), one regarding planning for a just transition 24% (or 28%), and one seeking Scope 3 greenhouse gas emissions reporting 16% (19%). Finally, a couple of resolutions considered human rights issues in relation to the use of Amazon products by customers; a general one on the issue won 19% (or 22%) backing, while one call specifically for restraint in selling Amazon’s facial recognition product won 20% (23%).

The most popular proposals at JP Morgan (AGM 21st May) were on governance matters, with 43% of shareholders backing a call for an independent chair at the bank and 41% pressing for oversight of rewards for departing executives – though only 9% urged its asset management arm to toughen its voting stance, especially on climate and diversity matters. Two other resolutions were on human rights issues: the one seeking better protections for indigenous peoples in the bank’s lending practices won 31% support, while one pressing for more due diligence around operations in conflict-affected areas was less successful, gaining only 9% backing. Rival bank Morgan Stanley (AGM 23rd May) faced fewer shareholder proposals, with only two worthy of mention: the 32%-backed call for greater transparency of lobbying activities, and the 24%-supported request to disclose the ratio between its financing for clean energy and fossil fuel activities. Once the 23% shareholding of Japan’s Mitsubishi UFG is excluded, these results look more like 45% and 34% respective support from independent shareholders. Meanwhile, the bank fared less well than its peer on the vote on executive pay, which witnessed 25% opposition (35% ex-MUFG). CEO James Gorman was paid almost $33 million; even though median employee pay at the bank was a remarkable $136,500, Gorman received 241 times as much.

Fast food firm McDonalds (AGM 22nd May) was pressed regarding greater action against the development of anti-microbial resistance through antibiotic use in its agricultural supply chain. 16% of shareholders supported this, while 37% called for better treatment of poultry by suppliers. 16% also backed a call for more transparency on its public policy and political influence efforts. Chocolate and snacks giant Mondelez International (AGM 22nd May) witnessed 23% support for a call to do more on child labour in the cocoa supply chain, and 32% backing regarding human rights concerns in conflict zones. Mondelez retains operations in Russia. 12% of shareholders of restaurant chain Wendy’s (AGM 21st May) backed a call for a racial equity audit – or more like 15% when the 16% of votes wielded by Nelson Peltz and his Trian investment vehicle are set aside.

French telecoms firm Orange (AGM 22nd May) appears to have a few problems with its unions. First, it had to take the extraordinary step of withdrawing a resolution proposing the candidacy of an employee representative director put forward by one union because of a court decision that the process for his being chosen “was not conducted in accordance with the standards that apply in such electoral processes in terms of ethics and fairness”. Other employee director candidates were taken forward, and appointed, so that the company still fulfils local governance requirements. Meanwhile, the employee mutual savings fund, which is part of an overall 8% employee share ownership (and 13% voting rights as some of the holdings count double), proposed a shareholder resolution that sought equivalent share-based remuneration for employees as that enjoyed by the executive team. This won 20% headline support, but excluding the employee votes – and on the other side those wielded by the French state (23% of shares, 29% of votes) – it looks like support was nearer 12% (including 5% abstentions) from external investors. The pay policy votes for the CEO and the chair of the board faced 18% and 15% headline opposition respectively, but without knowing how the employee mutual funds voted it’s impossible to know more clearly how investment institutions voted.

Design software firm Dassault Systèmes (AGM 22nd May) faced significant questions about its approach to pay. The headline 20% opposition to the remuneration policy, and 21% to the pay report for the CEO look more like 71% and 78% opposition once the 65% of votes wielded by the Dassault and other families are set to one side (they hold just under 50% of the shares and benefit from some double voting rights). The 10% vote against the reappointment of the chair of the remuneration committee Laurence Daures also looks more like 37% of independent shareholders. Investors seem unhappy about an unusual backward-looking scheme whereby the former CEO and now executive chair, Bernard Charlès, is receiving shares as part of a “gradual process” which has “the aim of ultimately recognizing his entrepreneurial role spanning over 35 years with Dassault Systèmes and giving him an equity stake comparable to that of founders of companies in the same sector”. Remarkably, Dassault also faced at least 22% opposition to each of six resolutions granting the board full discretion to either mount a merger or demerger – a minimum of 80% opposition from outside investors. On the same day, the new CEO of Dassault Systèmes, Pascal Daloz, also faced election as a non-executive to the board of ST Microelectronics in the Netherlands. Over 27% of shareholders there opposed his appointment, clearly believing he is too busy to carry forward the role effectively.

Elsewhere in France, it seemed that only pay mattered. Bank Societe Generale (AGM 22nd May) saw an 11% vote against the pay policy for its CEO and deputy CEO; outsourcing firm Teleperformance (AGM 23rd May) faced 15% opposition to the backward-looking remuneration report for its chair/CEO, and 17% for the forward-looking policy for him. Swiss investment house Partners Group (AGM 22nd May) also took a bruising on pay matters. The backward-looking remuneration report faced 19% opposition (including 4% abstentions); once the holdings of the founders are excluded, this looks more like 25% opposition. Remuneration committee chair Flora Zhao faced an 18% (or 23%) vote against her reappointment, and 20% (26%) against her re-election to the committee – though in part this may be because the committee also handles nominations and some investors blame her (even as a woman) for perceived poor female representation on the board. Meanwhile the founders (all male) faced votes against of 8% upwards.

Finally, Norwegian fertiliser firm Yara International (AGM 28th May) faced a shareholder resolution on disclosing Scope 3 emissions and setting appropriate targets. This won support from 11% of shareholders, or 21% once the Ministry of Trade & Industry’s 36% shareholding is set aside.

That’s it for this week. We’ll be back with Most Significant Votes on June 7th.

Interested in leveraging these insights and others to hold your investment managers to account more effectively? We’d love to discuss how. Get in touch

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