Welcome to the final Most Significant Votes of this voting season. 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.
Last edition I promised a wall of Japanese shareholder meetings, and it has duly arrived. The following is a small selection from the hundreds of AGMs held in the last two weeks. Industrial conglomerate Mitsubishi (AGM 23rd June) – whose varied business lines include gas and oil production, petrochemicals plants and thermal power generation – faced two climate-related shareholder resolutions. One calling for short- and medium-term greenhouse gas emission targets aligned with the goals of the Paris Agreement won 20% support; the other called for disclosure on how each material capex decision aligns with the company’s declared Net Zero target and won backing from 12% of investors.
Electric Power Development Corp, the electricity generator usually known as J-Power (AGM 28th June), also faced two shareholder resolutions, again with the first calling for Paris-aligned emission targets. This was backed by 21% of shareholders. Meanwhile, 15% supported a call that pay incentives to be aligned with emissions targets.
Another generator, Tokyo Electric Power, better known as TEPCO and unfortunately as the company responsible for the Fukushima Daiichi nuclear reactor, held its AGM on the same day. It faced a shareholder resolution calling for capex to be aligned with net zero, and for accounting assumptions to reflect this. Nearly 10% of shareholders backed this proposal. Six of the 10 other shareholder resolutions were anti-nuclear power in various forms; none of the 10 secured notable support apart from a call for disclosure of pay for directors on an individual basis, backed by 13% of investors.
Also on the same day, peer Kansai Electric Power (KEPCO, inevitably) faced no fewer than 26 shareholder resolutions, again many simply anti-nuclear. One of these called for the removal of CEO Nozomu Mori, whom the proposing shareholders suggest has not done enough to change the company’s culture since a 2019 bribery scandal; it was notable that under 70% of investors backed the executive, with 18% supporting the resolution and 13% abstaining. Other long-standing directors also lacked investor support, most remarkably the 39% vote against Takamune Okihara, 9 years on the board and associated with the company’s bank MUFG. Again, two separate calls for disclosure of pay for directors on an individual basis proved popular, with 35% and 33% of investors supporting similar resolutions proposed by different shareholders. But the most popular of the shareholder resolutions, with 37% backing, was the one calling for a transition plan aiming for Paris alignment in 2050; one seeking to prevent any investment in a new coal-fired power plant won 20% support.
Three of the country’s banking giants faced calls to align their lending and investment portfolios with the goals of the Paris Agreement. At MUFG (AGM 29th June) this won support from 18% of investors, while at Mizuho Financial (AGM 23rd June), 21% of shareholders backed this proposal. Beyond that it was defeated, at the time of writing the voting outcome on the resolution at Sumitomo Mitsui Financial (AGM 29th June) has not been disclosed.
At Softbank (AGM 20th June) there was a remarkable display of opposition to a director election. Kenneth Siegel leads the Tokyo office of giant US law firm Morrison & Foerster and has advised Softbank extensively on past transactions. The company accepts that he is not independent and notes that there is likely to be future work for the law firm. More than 33% of investors agreed that he isn’t independent, and opposed his re-election. Considering that chair and CEO Masayoshi Son holds 30% of the shares, this looks like only a bare majority of other investors backed Siegel’s election. Similarly, minority shareholders are clearly uncomfortable about the number of board members at Mitsubishi Motors (AGM 22nd June) with clear associations with either Nissan or various Mitsubishi family companies. Six of the 13 directors faced nearly 20% opposition or more – and once the collective 54% held by Nissan and Mitsubishi Corp is set to one side, in each case this looks like opposition from a majority of independent shareholders.
Japan Airlines (AGM 23rd June) was among those companies where investors were concerned about business performance: the three most senior executive directors each faced a vote against their re-election of between 15% and 17%. On the same day at Nippon Steel, the two most senior executives saw opposition of around 12%. Nonetheless, a proposal to appoint an alternative director to the board instead of one of the serving outside directors wasn’t put to the meeting given the support for the reappointment of that individual, Tetsuro Tomita – even though the 11% opposition to his re-election was hardly resounding, particularly at a Japanese company. Similarly, at insurer Tokio Marine (AGM 26th June) the two most senior executives faced 17-18% opposition. On the following day, the CEO of chemicals company Toray, Akihiro Nikkaku also saw his re-election opposed by 18% of shareholders.
At Honda Motor (AGM 21st June) the three most senior executives all faced 10-11% votes against. Perhaps most striking were the 35% vote against the CEO, and 34% vote against the executive chair, of Kyocera (AGM 27th June). It seems that shareholders were not persuaded by the machinery-to-consumer-goods conglomerate’s rebuttal of the recommendations from proxy adviser ISS, which based calls for votes against on the large portion of the company’s balance sheet tied up in its shareholding on public company KDDI. Increasingly, investors are seeking to hold individuals accountable for issues around the low capital efficiency and cross-shareholdings that are still prevalent in the Japanese market. And given the highly concentrated nature of the Japanese voting season, investors are unusually dependent on the recommendations from the major proxy advisers.
The shareholders of online garage sale eBay (AGM 21st June) aren’t happy about the generosity of the company’s approach to pay. The vote on executive pay itself was opposed by 18% of investors, but more remarkable was the vote on a board proposal to release a further 30 million shares for incentive awards. This is nearly 6% of the company’s stock and the board expects to have given it out to employees within just two years, when it promises to come back to shareholders with a further request. The vote against this was 42%.
Still more strident opposition was seen to pay at France’s testing firm Bureau Veritas (AGM 22nd June). Among the most significant votes against were the votes on the remuneration report on the CEO’s pay, and the pay policy for that same role; these were 33% and 21% respectively. However, given investment house Wendel holds 36% of the shares and (through the double voting rights for long-standing shareholders often seen in the French market) 52% of the votes, these levels of opposition seem to be more like 79% and 51% of the independent shareholders.
In January this year, US exchange Nasdaq (AGM 21st June) appointed its CEO Adena Friedman to also hold the role of chair, shifting chair Michael Splinter from that role into the lead independent director one. A number of shareholders clearly believe that this is a retrograde step, as not only did 28% support a shareholder resolution calling for an independent chair, but also there was a 6% vote against Friedman’s re-election, a highly unusual level of opposition to a US executive director.
Finally, activist investor Alex Denner of Sarissa Capital hasn’t covered himself in glory in recent weeks. He and fellow Sarissa-linked directors left the board of US biotech firm Biogen (AGM 26th June) late enough in the process that the shareholder meeting needed to be delayed by two weeks – in Denner’s case this followed 14 years on the board. But he took the opportunity to propose as an independent director Susan Langer; it only later emerged that Langer is his romantic partner. While she has some relevant biotech experience – most of it at Biogen itself, where she was a mid-ranking executive till 2019 – her relative youth makes her an unusual choice as a public company outside director. Investors still seem unconvinced about the board: Langer was elected, but only with 54% support; three other directors had votes against around the 40% level and a further three faced more than 20% opposition.
Denner in part resigned to focus on his activist campaign at rival biotech Alkermes (AGM 29th June), where Sarissa holds 8.5% and had proposed him and two others as directors. Vote recommendations from the main proxy advisers were framed by the controversy over Langer’s appointment at Biogen (ISS said supporting Denner’s candidacy was “no longer a tenable solution”) and none of the three Sarissa candidates was elected – Denner himself gaining 25% support, or under 17% of the wider shareholder base once Sarissa’s votes are set aside. Sarissa voted against all but one resolution at the AGM, in many cases – as Alkermes tartly notes – contrary to its own recommendations to shareholders.
And that’s it! With the frantic Japanese season done, the Northern hemisphere voting season comes to an end. We’ll return with Most Significant Votes in October, when the focus shifts to the Southern hemisphere.
