Welcome to Most Significant Votes! A weekly update from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlighting the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable.
First, a little more on one of the companies considered in the last MSV. We now have the full voting results for Amazon’s AGM on 25th May, and some of those results are worth a moment’s reflection. In particular, an investor call for a reduction in plastic packaging use failed to gain majority support by just 8 million votes out of the 370 million voted. The 22% and 18% respective support for shareholder resolutions pressing for employee directors and seeking improved tax disclosures were both notable results. But more remarkable was the ‘say-on-pay’ advisory vote endorsing the pay of the top executives. While this was passed with some 56% support, we have to assume that founder and executive chair Jeff Bezos lent the weight of his 64 million shares to this result. Considering just the vote among the free-float shareholders, the resolution faced 53% opposition. Investors were unhappy about the extraordinary grants of shares awarded to three key lieutenants at the company, said to be to provide a smooth succession plan for Bezos’s departure. One received an award worth some $212 million, a second $81 million and the third had to make do with a mere $56 million; furthermore, though these are supposed to be long-term awards, many of them start vesting immediately or within the next year or so. The reported ratio of this pay to that of Amazon’s median employee is an extraordinary 6,474 to 1.
Rival tech giant Alphabet (formerly known as Google) held its AGM this week (1st June) and faced 17 shareholder proposals – believed to be a record, following a relaxation of regulatory constraints. Most notable amongst these was a call for equal voting rights across the shareholder base, which was defeated with 67% of votes against. However, this is of course itself a reflection of the unequal voting rights that shareholders are concerned about. Assuming the founders voted all their special 10-vote shares against the proposal, the vote among all other shareholders was a remarkable 90% for the proposal. Oddly though, shareholders didn’t express their concern about the shareholder structure on other obvious resolutions – approving an increase to the authorised shares by 96% (90% of the non-founder shareholders) and a further allocation of Class C non-voting shares to a share plan by 84% (56% of the non-founder shareholders). Three of the shareholder resolutions considered climate matters, with majorities of independent shareholders supporting calls for reports on water management risks (though only 23% of votes actually cast) and climate lobbying (19% of votes), and 18% (48% of the non-founders) supporting more reporting on the physical risks of climate change. Similar majorities of independent shareholders supported a call for a racial equity audit (though only 22% of votes cast), a report on the abuse of Alphabet’s technology for misinformation and disinformation (23%) and a call for more disclosure on the company’s algorithms (20%). In contrast, only 3% of shareholders (7% of the non-founders) supported a call for employee directors.
Netflix (AGM 2nd June) notably included management proposals to remove poor features of the company’s governance, including supermajority voting rights and a classified board (which means only a third of the board are up for election each year), as well as a shareholder resolution seeking disclosure on lobbying activities. We are still waiting on the voting results. The meeting of bricks and mortar retail giant Walmart (AGM 1st June) included seven shareholder proposals. The one gaining most support (16% in favour) was regarding animal welfare in its supply chain; excluding the votes wielded by the founding Walton family, this amounts to 39% of the free float. Another key focus was employee rights. One proposal called attention to starting pay for the workforce, garnering 13% backing (32% of the free float); another, calling for a workforce pandemic advisory council, was only marginally less supported (13%, or 31%, in favour). The company’s reported pay ratio of the CEO ($26 million) to its median employee is 1013:1.
The most interesting resolutions at media business Comcast (AGM 1st June) were also in relation to employee issues. A call for a racial equity audit garnered 18% support, while a proposal seeking an independent investigation into the effectiveness of sexual harassment policies won backing from 22% of shareholders. Investors in home improvement business Lowes (AGM 27th May) were still more supportive: 56% backed a call for a report on racial and gender pay gaps, and 35% supported having greater insight into whether the company’s suppliers treat employees as contractors. Gunmaker Sturm Ruger (AGM 1st June) saw a majority of shareholders back a proposal for a human rights impact assessment related to gun violence, with fully 68% support.
Two of South Africa’s largest financial institutions held their AGMs. Standard Bank (AGM 31st May) faced a shareholder resolution pressing for calculations regarding financed emissions. Though there was clearly an active debate between the proponents and the company about whether such a resolution was valid and would be binding if passed, the board agreed to put it before shareholders for an advisory vote. The board also stated that it “has no objection to shareholders voting in favour” as it regarded the proposals as being consistent with its existing approach; this led to the three-part resolution garnering almost universal support, with 99.5% of shareholders backing it. More controversial were both pay and audit issues. On pay, 25% of shareholders opposed the remuneration policy and 24% the remuneration report. Strikingly, 28% of investors voted against the reappointment of KPMG as auditor and 23% PwC (South Africa being one of the countries requiring two auditors at some larger companies). The auditors have been in place for 59 years and South Africa’s regulator is moving to a 10-year limit on tenure. The controversy at insurer Old Mutual (AGM 27th May) revolved around individual directors: Thoko Mokgosi-Mwantembe faced 22% opposition to her reappointment as a director, and Olufunke Ighodaro 20% opposition to being reappointed to the audit committee. Both individuals sit on four other public company boards, often the level at which investors assess directors to be too busy wholly to fulfil their duties.
Pay remains hugely controversial in France. Building materials giant Saint-Gobain (AGM 2nd June) witnessed 18% opposition to the 2021 pay of CEO Pierre-Andre de Chalendar, and 17% opposed the forward-looking pay policy for the CEO. During the year, de Chalendar stood down as CEO but remains as chair and his non-independence in this role is the likely driver for more than 5% opposition to his re-election. It may also be worth noting that Saint Gobain has faced heavy criticism in the public inquiry into the Grenfell Tower fire – the firm, through subsidiary Celotex, provided the bulk of the lethal cladding on the tower block. French mining and metals firm Eramet (AGM 31st May) faced more than 6% opposition to its CEO’s 2021 pay, though its forward-looking policy won broad support.
Pay also remains one topic above all that animates shareholders at UK companies. Irn Bru-maker AG Barr (AGM 27th May) saw 27% vote against its remuneration report; its remuneration committee chair David Ritchie also faced 8% opposition to his re-election. At recruitment business PageGroup (AGM 31st May), 6% opposed the remuneration report while two directors faced around 10% votes against their reappointments; auditor Ernst & Young also faced 6% opposition. Still more striking that same day were the results at gambling technology business Sportech – a serial underperformer that now has a number of activists among its major shareholders. There, the remuneration report resolution was defeated with 69% opposition; more remarkably, the vote to approve the report and accounts, usually a formality, was also rejected by 61% of shareholders. Two directors (including the CEO) withdrew their candidacies at the last minute, which can be a sign that they too faced significant votes against. Auditor BDO fared only slightly better, with 31% opposition.