Welcome back to Most Significant Votes. Once again, Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlights 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.
Australia’s Woodside Petroleum (AGM 28th April) has been a focus for significant climate campaigning. Last year its climate plan faced opposition from nearly 50% of shareholders. There was no equivalent resolution this year, but a shareholder proposal calling for an “efficient managing down” of its fossil fuel assets in line with the goals of the Paris Agreement won backing from 19% of investors. Still more striking were the votes against three directors who faced a vote against campaign from NGOs. Former politician Ian Macfarlane fared particularly poorly, with 35% opposition.
Also in Australia was the second half of the Rio Tinto meeting (AGM 4th May) – which followed the UK meeting on 6th April. The combined votes turned out to be a quiet affair, two years after the company’s destruction of a traditional owner sacred site at Juukan Gorge – which led to several significant votes, leading to oustings of directors. The largest vote opposition this year was the 8% against chair of the sustainability committee Megan Clarke, whom some advisers had targeted over Rio’s plan to develop a large copper mine on first nations’ sacred land in Arizona. Other campaigns, particularly those targeting the audit committee chair and the auditors over concerns about a failure to incorporate climate risk assumptions into the company’s financial reporting, proved unpersuasive of the broader investor base.
In contrast, shareholders called on French utility Engie (AGM 26th April) to be more transparent about its climate transition plans, with a resolution pressing for annual reporting and a regular shareholder vote on the climate strategy. This resolution was flagged through the CA100+ proxy season listing of votes of interest to concerned investors, and won support from 34% of shareholders (including the 12% who abstained); once the large shareholding by the French state is excluded, this was more like 44% support among other investors.
Citigroup (AGM 25th April) faced four shareholder proposals. Among them was the now regular call on a bank to end financing for new fossil fuel exploration, which gained 12% support from shareholders. Best supported (by 32% of shareholders) was a request for a report on the treatment of indigenous peoples in the bank’s financing activities. Meanwhile, a proposal that the board should be led by an independent chair won backing from 19% of investors. On the same day, rival Wells Fargo’s new fossil fuel financing shareholder resolution was supported by 10% of shareholders. Two other climate-related shareholder proposals fared much better: one seeking clarity that lobbying activity is in line with the bank’s net zero commitment won 33% support, and one seeking a transition in line with 2030 sectoral targets 32%. Two resolutions on social concerns were even more positively received: a call for a report on work to prevent workplace harassment and discrimination received majority backing, with 52% voting for and a further 5% abstaining; and one pressing for better policies on freedom of association and collective bargaining was backed by 38% of investors.
Also on the same day, Bank of America’s new fossil fuel financing resolution saw only 8% support. As with Wells Fargo, a resolution calling for a climate transition plan that is in line with 2030 targets won much better backing, at 29%. In spite of the bank’s claims to have assurance of its programmes in place, a call for a racial equity audit was supported by 16% of shareholders. Meanwhile, the generosity of the bank’s pay led to 32% of investors opposing the resolution on top executive remuneration. The $30 million annual reward for CEO Brian Moynihan (a 27% increase on last year) was 258 times the average pay for the workforce – itself a large $117,000. The last of this batch of US banks was Goldman Sachs (AGM 26th April). Here, the same resolution seeking a climate transition plan won 30% backing, while the call to end financing for new fossil fuels was supported by only 8% of shareholders. In contrast, a call for disclosure of gender and racial pay gaps saw 34% of investors support.
There was significant support for two health and fairness resolutions at pharma giant Johnson & Johnson (AGM 27th April): one seeking more responsive vaccine pricing was backed by 33% of shareholders, while one asking for greater access to medicines 16%. On the same day, the shareholders of rival Pfizer were in some ways more amenable to change: while only 14% backed a call for the company to explore the feasibility of allowing others to manufacture its COVID-19 vaccines, its access to medicines proposal won 31% support. UK rival GSK (AGM 3rd May) faced no similar resolution, but did see that rarity, a significant vote against an individual director apparently because of perceived failures on another board: Urs Rohner, formerly chair of Credit Suisse for a decade until 2021, faced 9% opposition to his re-election.
Investors have short memories, it seems. Last year, more than 20% of shareholders either voted against or abstained on the re-election of CEO Gene Murtagh at Irish insulator Kingspan (AGM 28th April), concerned about the extent to which evidence at the Grenfell Tower Inquiry implicated the firm in poor marketing behaviour and inappropriate interactions with regulators (among other failings). This year, nothing has changed about the shocking evidence, but the vote against was under 5% (6% of the non-Murtagh family shareholders). There was 11% opposition (14% of the non-Murtaghs) to the re-election of chair Jost Massenberg, apparently because of the board’s poor gender diversity.
Elsewhere, although there might have been other concerns, the only real issue that seems to matter to investors appeared to be executive pay. Take Irish building materials firm CRH (AGM 27th April): 11% of shareholders opposed the remuneration report and nearly as many refused to back the reappointment of remuneration committee chair Lamar McKay. Much smaller in numeric terms but more striking because it’s a resolution that usually just gets nodded through were the votes on the acceptance of the annual financial statements: 2% either voted against or abstained, apparently because of concerns about the lack of connection between the company’s stated climate ambitions and the financial statements. For a high-emitting cement company like CRH (included on the Climate Action 100+ list), this is a major concern. However, there was a much less notable vote against the reappointment of the auditors – a resolution also flagged through the CA100+ vote listing. And though the Barclays AGM (3rd May) was disrupted by climate protesters, the only vote of consequence was the 12% against the remuneration report.
Most startling was the failure of the remuneration report vote at consumer goods giant Unilever (AGM 3rd May). 55% of shareholders opposed the resolution, with a further 5% abstaining. Further, the members of the remuneration committee all faced personal votes against of 15-20%. The core of investor concern was the pay to be enjoyed by incoming CEO Hein Schumacher, which analysts suggest was not only above that of his predecessor but also of appropriate peers (though it’s far less than US equivalents are paid). Nearly as stunning was the 46% opposition to the pay policy vote at education publisher Pearson (AGM 28th April). The 13% vote against the remuneration report – which at other companies would be striking – paled by comparison. The refreshed policy would allow incentive pay to reach 3x salaries, enabling the CEO to earn nearly £10 million. The increase was a result of benchmarking against US pay levels, which rarely face anything like such a level of opposition.
Ocado (AGM 2nd May) faced a 30% vote against its remuneration report, reflecting investor concerns about executive pay staying largely unchanged in spite of a 45% drop in the share price. Excluding the holdings of the founder directors, the vote against was nearer 36%. The US/UK dual-listed cruise line Carnival (AGM 21st April) saw 16% opposition to its remuneration report – or 21% when the shareholding of the chair (and son of the founder) Micky Arison is discounted. There was a range of votes against on a number of the directors, but notably Stu Subotnick, still argued to be independent despite serving fully 35 years on the board, received a vote against of only 6% (8% of the non-Arison shareholders).
We’ll return with Most Significant Votes on 12th May.