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

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Jul, 05, 2024)
|   8 mins

Welcome back to the last Most Significant Votes of this voting season! For the last time this run, 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.

As promised, this fortnight is mostly a story of the frenetic Japanese voting season, where hundreds of meetings occur over just a handful of days – including single days that see most of a sector hold their AGMs. We’ll only capture a few of the real highlights here.

Shareholder resolutions are relatively easy to propose in Japan, and the nation’s electricity companies typically face many of them, a lot expressing retail investor disquiet about nuclear power generation – the 2011 disaster at the Fukushima Daiichi power plant frames much of the nation’s thinking about the issue. These tend to gain only limited support. The company responsible for the Fukushima plant, Tokyo Electric Power (AGM 26th June) – more usually referred to as TEPCO – faced 10 shareholder proposals. Three of these were on Fukushima or on nuclear power more broadly; marginally more successful was a resolution urging more renewables generation, which won 3% backing. By far the most positively received shareholder proposal was one seeking disclosure of executive pay on an individual rather than a collective basis, a frequent proposal in Japan this season. This gained 16% support. Meanwhile, chair Yoshimitsu Kobayashi faced a 19% vote against because of board independence issues. As 55% of TEPCO’s shares are held by the Nuclear Damage Compensation Corporation (to support the clean-up from Fukushima), this result is likely to have been much greater as a proportion of the free float, but as the company hasn’t disclosed the detailed results we cannot tell.

The sector has also faced recent regulatory investigations for alleged price-fixing on electricity supply for business. Among the 18 shareholder resolutions at rival Kansai Electric Power (AGM 26th June) – inevitably, KEPCO – were three seeking the removal of three directors to reflect this apparent misconduct. These three failed notably, with each gaining no more than 2% support, but a number of the others were well-received by shareholders: 16% supported a call to decarbonise the business (18% excluding the shares held by local governments); the more successful of two resolutions seeking KEPCO’s full contribution to a zero-carbon society won 22% (or 25%) backing; and 28% (or 32%) backed the call for individual pay disclosures. Meanwhile, investors clearly worry significantly about board independence at KEPCO, with no less than 36% (42%) of shareholders declining to support the appointment of MUFG banker Kiyoshi Sono to the board, including 12% abstentions.

Nippon Steel (AGM 21st June) also faced shareholder resolutions on climate matters. Most successful was the sole one promoted through Climate Action 100+, calling for a report on the company’s climate-related lobbying activities. This garnered 28% backing. The others also gained significantly positive responses, with 23% of investors calling for a clear link between pay and delivery on climate matters, and 21% pressing for targets for reductions in greenhouse gas emissions. A shareholder call for votes against the reappointment of the chair/CEO Eiji Hashimoto based on the company’s slow response to concerns about climate change looked to have earned a strong response, with 12% opposition, but there have been several fairly sizeable votes against combined chair/CEOs this year, and there are multiple drivers of vote decisions on Japanese board elections (ranging as broadly as general board structure concerns, diversity and balance sheet inefficiencies among other things), so it’s hard to be sure what were the motivations for this vote.

Japan’s insurers have faced investigations over alleged anti-competitive behaviour in setting premium rates. This, plus ongoing perceptions that they have excess cross-shareholdings with related entities, which make their balance sheets inefficient and insulate them from market influence, seems to be the driver for some sizeable votes against individual directors. At Tokio Marine (AGM 24th June), chair Tsuyoshi Nagano faced a 28% vote against while CEO Satoru Komiya saw 33% opposition. At rival MS&AD (AGM 24th June), the reappointment of CEO Noriyuki Hara was opposed by 35% of shareholders, and that of vice chair Yasuzo Kanasugi by 15%. And at Sompo (AGM 24th June), CEO Mikio Okumura faced 38% votes against.

Elsewhere in the world, French testing giant Bureau Veritas (AGM 20th June) faced significant rebellion over its board. Most controversial was the appointment of a corporate director, BPI France, which is a new strategic 4% shareholder. An oddity of the French market, companies can be appointed as corporate directors; while they are represented physically on the board by individuals, investors often feel this structure limits the accountability of those individual directors. 20% of shareholders voted against this appointment, or more like 55% of external investors once the votes of strategic investor Wendel are set aside (all of Wendel’s 35% shareholding carries double voting rights, meaning it wields 52% of the votes). Wendel-representative director Claude Ehlinger fared a little better, with 17% opposition, or 48% of those other than his employer. Pay was also controversial, with 8% (or 24%) opposition to the policy for the CEO. CEO Hinda Gharbi was appointed during the year and received €3.8 million for 2023, and may receive a maximum of €5.4 million a year hereafter; this is around 120 times the average pay of the company’s French employees. French engineer Alstom (AGM 20th June) also has a corporate director, its 17% shareholder Caisse de Dépôt et Placement du Québec. This appointment faced 9% opposition, or 11% once CDPQ’s own shares are set aside.

German food delivery firm Delivery Hero (AGM 19th June) failed to persuade many shareholders to ignore proxy adviser ISS’s recommendations to oppose the appointment of two directors. Most striking was the result regarding newly proposed Roger Rabalais, who represents 28% shareholder Prosus on the board and faced 19% opposition (including 7% abstentions). This looks more like 29% opposition among the shareholders other than Prosus. The debate on reappointing nominations committee chair Martin Enderle was with regard to board diversity. Proxy adviser ISS recommended against because the shareholder appointed directors on the supervisory board don’t meet the 30% expected threshold for female representation, while the company stated “We disagree with this methodology, which is contrary to German law”, arguing that the supervisory board as a whole should be considered, including the women appointed as workforce representatives – which takes overall gender diversity to 38%. Over 9% (or 14%) of shareholders appear to have sided with the ISS view. Pay was also an issue, with investors apparently concerned by CEO Niklas Ostberg receiving €4.5 million when the share price nearly halved over 2023 (and is down around 80% from its peaks in the pandemic); 13% opposed the remuneration report (7% of those abstaining), or 20% other than Prosus.

And finally for this voting season, Kroger (AGM 27th June) faced a shareholder resolution calling on the US supermarket chain to pay staff a living wage. Despite stating that “Our associates enable our success, and we are committed to investing in theirs by continuing to improve wages, comprehensive benefits, and career development opportunities…Over the last five years, we have invested more than $2.4 billion in incremental wage investments,” the median wage at the company is $31,300 – less than a five-hundredth of the $15.7 million paid to CEO Rodney McMullen. 17% of shareholders backed the living wage proposal. A call for workforce protections through a just transition was a little more successful, with 19% support. A shareholder resolution on the externalised health costs of tobacco sales – unusually, framed using the theory of universal ownership under which broadly invested shareholders are harmed in their wider portfolios by such externalities – won 13% backing. Meanwhile, PricewaterhouseCoopers and its predecessors have audited Kroger since 1929 and yet are still said to be independent. 12% of the shareholders who voted clearly believe it’s time for a change.

That’s it for this run, as the Northern Hemisphere voting season is largely over. We’ll return with Most Significant Votes in October.

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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