Most Significant Votes (w/e 6th May 2022)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, May, 06, 2022)
|   4 mins

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.

As promised last week, we’ll start with Kingspan (AGM 29th April). The Irish insulation manufacturer has been a darling of the responsible investment world due to its climate change credentials. However, it hasn’t fared well under the scrutiny of the Grenfell Inquiry (into the devastating 2017 tower block fire in West London in which 72 people died), even though its products represented only 5% of the insulation on the Tower. Particular lowlights revealed by evidence have included continuing to sell a reformulated product under paperwork for its predecessor for a full 15 years and threatening a regulator that was planning to enforce the rules with a lawsuit. There was no obvious resolution on which investor concerns could coalesce, but the re-election of Gene Murtagh as CEO clearly caused concern to many, with nearly 16% actively abstaining and a further 5% opposing his appointment. This was one of those cases where an abstention was a logical step: not endorsing Murtagh’s reappointment while waiting for further conclusions from the Inquiry (it also happens to accord with ISS’s core recommendation on the resolution). Perhaps inevitably, there was also a strong vote of over 20% against the remuneration policy.

Last Friday also saw the AGMs of two of Europe’s largest banks, Credit Suisse and HSBC. Credit Suisse has seemed the world’s most accident-prone bank in recent years, and made a trading loss of $5.5 billion last year after being caught up in both the Greensill Capital and Archegos failures. So it’s perhaps unsurprising that 60% of shareholders voted against the discharge of the management for the 2020 year (in effect, signing them off from liability if they’ve reported accurately to investors) even though the bank excluded its Greensill-linked supply chain finance funds from the resolution. In spite of Credit Suisse’s challenges, investors rejected the special audit proposed by a group of shareholders – though the proposal did win over 10% support. The bank also faced a call not to finance further fossil fuel exploration, a resolution supported by 19% of shareholders (around double the support seen at similar resolutions at US banks, reported in last week’s blog). After the withdrawal of its shareholder resolution calling for a reduction in fossil fuel financing – following the bank agreeing to change its approach and wind down exposures – perhaps the strongest protest at the HSBC AGM was the surprisingly well-sung flashmob version of ABBA’s Money, Money, Money by a bunch of Extinction Rebellion campaigners that briefly interrupted the meeting. That was well-handled by HSBC’s chair Mark Tucker.

UK banking rivals Standard Chartered and Barclays both held their AGMs on Wednesday, suffering less tuneful disruptions by Extinction Rebellion and Money Rebellion campaigners, which also seemed to be handled less well. Standard Chartered’s resolution seeking endorsement for its net zero by 2050 pathway faced opposition from 17% of shareholders, but remuneration was the main focus of investor ire. Institutions couldn’t understand decisions to continue with high payouts in spite of the bank receiving a record regulatory fine. Including abstentions, opposition was 34% to the pay policy and 33% to the pay report. Barclays faced a less bruising 11% vote against its remuneration report but also failed to win over a large number of shareholders with its climate strategy – which garnered 19% opposition.

Probably the most striking of the week’s climate change votes was at US aircraft manufacturer Boeing (AGM 29th April). There, a shareholder resolution seeking net-zero alignment won overwhelming support from shareholders after the board gave its backing to the proposal. Perhaps surprisingly, even given the board’s backing, 11% of votes were still cast against or in abstention. At the other extreme, a shareholder resolution asking Canadian energy company Imperial Oil (AGM 3rd May) to cease oil and gas exploration and development was defeated resoundingly, with only 2% of shareholders in support. As a reminder, the International Energy Agency (IEA) makes clear that there should be no new fossil fuel developments if we’re to achieve net zero. That’s perhaps particularly pertinent for firms such as Imperial, which conducts oil production from highly carbon-intensive oil sands.

Sage of Omaha Warren Buffett’s Berkshire Hathaway – one of the most climate-exposed companies to have not made comprehensive carbon emissions disclosures nor have a declared target – faced a pair of climate change resolutions at its meeting (AGM 30th April). Both the call for an annual climate risk report and one for a net-zero goal won 27% support from shareholders. Swiss cement business Holcim (AGM 4th May) was one of the few companies to put its annual climate report up for an advisory vote – what some call a ‘say on climate’. This earned the endorsement of nearly 90% of shareholders. Of the dissenters, more than 5% abstained which, in this context, is likely to mean that the company has made some good progress, and its putting the report up for a vote is viewed as a positive in itself, but that those shareholders believe far more is needed for the company to genuinely deliver a strategy that responds appropriately to the challenge of climate change. A challenge not to be underestimated given the carbon intensity of cement. On the same day, there was also a small 4% vote against auditor PwC at the AGM of France’s Air Liquide on the basis of climate change concerns and a failure to reflect these in the audit.

Also on 4th May, Luxembourg-based steel company ArcelorMittal was only meekly held to account over the deaths of 29 people at its steelworks and mines in the last year. Glass Lewis had recommended votes against both the board discharge resolution and the remuneration report – despite the number of deaths, the pay of both Lakshmi Mittal  (executive chair) and his son Aditya Mittal (CEO) rose (their base pay was up 9%, they were awarded bonus payouts of 171% and 125% of basic salary and their overall reward reached $6.1 million and $5.8 million respectively). Only 12.3% of shareholders felt this made the remuneration report worth censuring, and 11% opposed the discharge resolution. Though, as the Mittal family controls some 34% of the shares and only 65% of shares were voted overall, these levels of opposition look like around 25% of the free float.

As ever, pay resolutions proved controversial at a number of companies. Most remarkable was the vote at pharma giant GlaxoSmithKline (AGM 4th May), where 38% of shareholders opposed the remuneration policy (as well as 9% voting against the remuneration report). While there’s wider discontent about the company (over operational performance and the slowness of moves towards demerger), the overwhelming support for the reappointment of the CEO, Emma Walmsley, suggests that this vote may have been about pay alone. The negative recommendation from ISS argued that a proposed move to allow maximum bonuses of 3x salary rather than 2x would put the company beyond its FTSE 10 peers, just at a time when the demerger is shrinking the business and cutting complexity, as well as putting greater emphasis on short-term performance. Also resounding were the votes at supermarket tech business Ocado (AGM 4th May), with 29% of shareholders opposing the introduction of a new Value Creation Plan and the same percentage opposing the remuneration policy. The plan rewards management with 3.25% of value created for shareholders above a threshold (up from 2.75%) and would potentially pay out £100 million over five years to CEO Tim Steiner. Steiner’s £58.7 million total pay in 2019 had caused some consternation, but the majority of shareholders seem willing to continue to support this model of pay plan. Yesterday at drug company Indivior, investors remained concerned about the company granting good leaver status to former boss Shaun Thaxter (who was jailed in 2020 for six months after pleading guilty to improper marketing of its anti-opioid treatment); last year, 38% opposed the remuneration report on this basis. This year, 11% of shareholders did, with 15% (5% of them abstentions) opposing the re-election of remuneration committee chair Daniel Phelan.

Finally, at the AGM of the Netherlands’ Just Eat Takeaway (AGM 4th May), perhaps the most controversial vote was not put to the meeting, with chair Adriaan Nuhn withdrawing his candidacy the day before. This would have been after the company had a view of the voting results, and with ISS recommending votes against his election and an activist agitating over the colossal waste of money through the June 2020 Grubhub takeover (a $7.3 billion purchase – more than the value of the entire company now after shares have halved in 2022), it’s entirely possible that he would not have been re-elected, making the departure perhaps more forced than chosen. Three members of the supervisory board whose re-election resolutions did go forward to the meeting faced opposition of around 30%; the discharge resolutions for both the management and supervisory boards also saw votes against approaching 25%. The resolution to reappoint the COO, Jorg Gerbig, was also set aside at the last minute, pending an investigation into alleged misconduct at a company event.

Meetings today that may feature in next week’s blog include AbbVie, Colgate Palmolive, Marriott International and Repsol.


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