Most Significant Votes (w/e 5th April 2024)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Apr, 05, 2024)
|    mins

Welcome back to Most Significant Votes! As the voting season begins to ramp up, we’re again bringing to 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.

It’s early days for the 2024 voting season – the main activity will occur later in April and into May – but we’ve already seen some striking votes at AGMs. As well as catching some of the very latest voting action, this blog post looks back a bit further to capture significant votes throughout March.

It is early days globally, but the voting season in South Korea is all but over already – and it has included some striking results. Unusually, there were two shareholder proposals at Samsung C&T (AGM 15th March), which regarded as the core of the Samsung chaebol, or family of companies, created by a controversial merger in 2015 that means it now combines construction with fashion operations, among many other things. Both proposals were seeking increased returns to shareholders: the shareholder resolution calling for an enhanced dividend won 23% support, or 42% of those shareholders not from the Lee family or part of the chaebol (which together hold 34% of the shares); while the second, which pressed for a share buyback, earned 18% backing, or 32% of independents. Perhaps even more notable were the votes against director Joong Kyung Choi, whom outside investors clearly do not regard as fully independent: 17% (or 30% of independents) opposed his appointment to the board, and fully 28% (50%) his appointment to the audit committee.

Other Samsung chaebol companies also faced some smaller but still significant rebellions. The independence of director Je-Yoon Shin at Samsung Electronics (AGM 20th March) is clearly also questioned by some, with 12% voting against his appointment to the board (or 15% of those other than the 20% held by chaebol companies). Votes against the approval of the financial statements – typically in Korea used to mark concerns about low returns to shareholders – were notably high at both Samsung SDI (AGM 20th March) and Samsung Engineering (AGM 21st March), at 7% (9% of those not Samsung-related) and 10% (or 12%) respectively.

Members of the SK chaebol also faced notable shareholder rebellions this year. At SK Telecom (AGM 26th March), director Sung Hyung Lee saw a 29% vote against his re-election, or 47% when the 34% shareholding by core of the chaebol SK Inc is excluded. A vote to lift the ceiling for board director pay was also unpopular, with 12% opposing (or 20% of the independents). Outside investors at SK Hynix (AGM 27th March) also clearly have doubts about board independence, with an 11% headline vote against the appointment of Hyun Chul Sohn being 11%, or 15% excluding the SK chaebol shareholdings; Dong Hoon Yang’s appointment to the audit committee was still less popular, with 22% opposition (or 29% of independents). Unusually, at SK Innovation (AGM 28th March) the negative voting focused on the CEO, Sang Kyu Park, with 22% opposition. This will represent a markedly higher vote against among the outside directors when the 34% chaebol shareholding is set aside, but without data on overall attendance at the meeting it’s impossible to calculate exactly how high.

Meanwhile, Korean bank Hana Financial Group (AGM 22nd March) has been, like its peers, caught up in a mis-selling scandal, relating to consumer sales of instruments linked to Chinese equities just as that market began to fall. That seems to be behind the remarkable 25% vote against the appointment of CEO Seung Lyul Lee. The appointment of director Sook Yeon Wong to the audit committee also proved controversial, with 27% opposing.

For the sake of completeness, please note that I am not related to any of the Korean Lees mentioned above.

At the start of March, a prospective proxy battle (as proposals for rival directors are termed in the US) at coffee firm Starbucks (AGM 13th March) went cold, as the company reached a deal to at least initiate talks with the unions which had been promoting three independent non-executive directors who they said could bring independent perspectives, including knowledge of labour issues, to the board. The company has had running disputes with significant numbers of workers, who have complained of poor treatment and barriers to unionisation. While this deal removed many of the opportunities by which investors could have expressed concern about the board’s delivery, there was still evidence of disquiet as both the chair, Mellody Hobson, and the chair of the nominating and governance committee, Jorgen Vig Knudsdorp, faced votes against of around 10%.

Sweden’s Swedbank (AGM 26th March) faced a shareholder resolution (promoted by Greenpeace Nordic and another NGO) calling on the bank to stop financing fossil fuel companies that don’t have robust phase-out plans in line with a 1.5 degree warming ambition. The resolution won just 3% support from shareholders, with a further 1% abstaining on it. An identical resolution at peer Scandinaviska Enskilda Banken (SEB) (AGM 19th March) gained 2% support, or 4% once the votes controlled by Wallenberg investment vehicle Investor are set aside (Investor enjoys extra voting rights). A similar resolution again promoted by NGOs (including this time Action Aid) at rival Nordea (AGM 21st March) won slightly more support, with 4% voting in favour and a further 4% abstaining.

Something clearly smells wrong for investors in Swiss flavours and fragrances firm Givaudan (AGM 21st March). Its chair Calvin Grieder faced a 16% vote against his reappointment, apparently as a protest at the low level of female representation on the board. But this pales into insignificance next to the 25% opposition to the election of Roberto Guidetti to the board, and the still more remarkable 41% of shareholders opposing the reappointment of Tom Knutzen. Both non-executive directors seem to be deemed too busy with a range of other appointments to perform their role on the Givaudan board effectively. Next to this, the 9% opposition to a new and generous performance share plan seems relatively benign. In contrast, local telecom firm Swisscom (AGM 27th March) faced a 15% vote against its remuneration report after consistently poor returns in recent years do not seem to have been properly reflected in executive pay. Swiss/Swedish engineer ABB (AGM 21st March) also saw a vote against pay of 10%, or 13% once the shareholding of Investor (a stake with enhanced voting rights) is excluded. There was a similar level of opposition to the appointment of Johann Forsell as a non-executive director, this is clearly because institutional investors believe his independence is in question given his long-standing roles at Investor.

In Spain, the main issue also appears to be pay. The country’s leading financial institution Banco Santander (AGM 22nd March) faced a significant vote against its pay policy. Proxy voting adviser ISS had recommended that investors oppose this resolution because it perceived that the bank had failed to justify pay increases for the CEO and executive chair. More than 25% of shareholders agreed and opposed the resolution. On the face of it, smaller rival Caixabank (AGM 22nd March) fared marginally better on its equivalent resolution, with 23% of investors opposing. But once the 32% shareholding of the la Caixa Banking Foundation is set aside, this looks more like a 40% vote against among the independent investors.

If you would like to talk about how you could use these, and other, insights to hold your investment managers to account more effectively, please do get in touch.

That’s it for this week. We’ll return with Most Significant Votes on April 19th.

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