Most Significant Votes (w/e 7th June 2024)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Jun, 07, 2024)
|   7 mins

Welcome back to Most Significant Votes! 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. This run of the MSV blog covers the main Northern Hemisphere voting season.

Social media companies tend to get disproportionate attention. Tech giant Meta (AGM 29th May) – probably still better known as Facebook – faced no fewer than 10 shareholder proposals. But the votes on some of the management resolutions were striking, most notably the 28% headline opposition to planned changes to the main equity incentive scheme – which when the 61% of votes wielded by founder, CEO and chair Mark Zuckerberg (who has dual class shares with extra voting rights) are excluded, looks more like 89% opposition. Partly due to concerns about pay, and partly because there has been no shift in that dual class share structure, all members of the compensation, nominating & governance committee faced at least 13% (or 41% ex-Zuckerberg) opposition; committee chair Peggy Alford failed to gain support from 18% (59%) of shareholders. On the shareholder resolutions, 26% of investors backed one calling for the removal of the dual-class share structure, a remarkable 84% excluding Zuckerberg (who owns 99.7% of those Class B shares). A call for greater disclosure about the risks of AI misinformation and disinformation received backing from 17% of shareholders (or 54%), while a broader resolution on human rights risks from hate speech and disinformation was less successful, with 6% support (18%). A resolution raising concerns about risks to children from social media enjoyed 18% backing (or 59%); a proposal flagging similar worries and recommending the adoption of a minimum age for social media only received 1% (2%) backing – but that’s probably in part due to the fact that the proponent was the National Legal & Policy Center, a right-wing thinktank that’s the origin of many so-called anti-ESG proposals. The sole climate-related shareholder resolution, regarding lobbying on climate matters, won 8% support (or 27%).

By contrast, oil giant Chevron (AGM 29th May) faced only four shareholder proposals. The most popular, regarding human rights impacts, won 23% backing. One seeking greater tax transparency won 15% support while a proposal regarding single use plastics gained only 9% support. French oil major TotalEnergies (AGM 24th May) faced 25% opposition (including 6% abstentions) to its say-on-climate vote, formally the vote to approve its Sustainability & Climate Progress Report 2024. What was more, 26% of shareholders opposed the reappointment of CEO and chair Patrick Pouyanné (including 3% abstentions) and 11% that of lead independent director Jacques Aschenbroich. Aschenbroich chairs the governance committee which decided not to take forwards a call to separate the roles of chair and CEO. Meanwhile, Canadian oil and gas infrastructure player TC Energy (AGM 4th June) witnessed 9% of shareholders backing a call for fuller consent of indigenous peoples to be sought for its projects. Further, 7% of investors objected to the reappointment of KPMG as the company’s auditor, regarding the firm as not fully independent since it has been in the role since 1956. However, the company reports two years of active dialogue with shareholders following 25% opposition to this resolution in 2022, and so may regard the latest level of opposition as a success.

Belgian chemicals firm Solvay (AGM 28th May) witnessed a 17% vote against the re-election of non-executive director Aude Thibaut de Maisières, who is one of three directors representing 31% shareholder Solvac. Once the Solvac shares are excluded, this looks more like 31% opposition from the wider shareholder base. Pay also appears an issue at the company, with the headline 12% opposition to the remuneration report looking more like 23% of the non-Solvac investors. In a similar way, the reported 8% vote against the remuneration report for Gonzalve Bich, CEO of French stationery company Bic (AGM 29th May), is 29% of independent shareholders once the Bich family 64% of the voting rights (some of their 47% of the shares enjoy double voting rights) are excluded. The 8% vote against the remuneration policy translates to more like 28% of independents. Pay was also a key issue at French advertising giant Publicis (AGM 29th May) with the pay report for Arthur Sadoum, management board chair and CEO, seeing 22% opposition, or 25% once the 12% of votes wielded by the Badinter family are set aside. Three other pay resolutions also saw votes against of 11% (or 13%) and upwards. But more shocking was the vote on Sadoum’s appointment of as a director: 25% of shareholders – 30% other than the Badinters – opposed. Elisabeth Badinter, current vice-chair of the supervisory board, wasn’t spared, with 14% votes against looking like 16% of those not in her family.

Canadian e-commerce tech powerhouse Shopify (AGM 4th June) also aroused ire over remuneration. The vote on executive pay faced 31% opposition – or 59% of those other than the management team and directors, who benefit from shares with 10 times voting rights, and in the case of the founder and CEO Tobias Lütke a special founder share that ensures outsiders have at most 60% of votes overall. More remarkable still were the results on resolutions to make more shares available under the option plan, opposed by 37% (or 71%) of investors, and that to amend the incentive scheme, opposed by 35% (or 67%). Perhaps unsurprisingly, the chair of the compensation committee Gail Goodman also faced a large vote against, of 24% (46%). Lütke receives a salary of just C$1, but does benefit from $20 million in options annually; even more startling was the C$75 million in incentives for COO Kasra Nejatian last year. The 10% opposition to the remuneration report at energy supplier Centrica (AGM 5th June) was less striking, but an unusually high result in a notably quiet voting season in the UK. CEO Chris O’Shea was paid £8.2 million, 142 times the average pay at the company; investors may also have baulked that his annual incentive award was cut by just 10% to reflect a scandal around pre-payment gas meters being imposed – often by breaking into properties – on some customers.

Perhaps ironically, US discount retailer Dollar Store (AGM 29th May) – a pioneer in pricing all goods at $1 – faced one of the largest rebellions on generous executive pay seen in the country this year, at 27% opposition. The shares more than halved over 2023 after a profit warning. CEO Jeff Owen was ousted after less than a year in the job – still being paid $7 million for the year – and his predecessor Todd Vasos was enticed to return to the role with an options award valued at $8 million. The reported ratio between CEO pay and that of the median employee (paid $18,500) was more than 500 to 1, unusually high even in the US. A 2021 study by the Economic Policy Institute found that 92% of Dollar General workers earn less than $15 an hour; both Owen and Vasos very clearly fall into the 8%. At the other end of the corporate pay spectrum is private equity manager Carlyle Group (AGM 29th May), which reports employee median pay of $230,000. Notwithstanding this remarkable level, its CEO pay ratio was more than 800 to 1 as new CEO Harvey Schwartz enjoyed recruitment awards that took his reported pay to just under $187 million. The executive pay resolution faced 19% opposition – or 35% once the 39% shareholding by Carlyle management collectively is excluded – and a proposed amendment to an existing pay scheme 18% opposition, or 33% ex-management votes.

There’s clear evidence of different views among the main shareholders of French miner Eramet (AGM 30th May). The extraordinary sight of a 37% headline vote against the proposed dividend (a resolution that’s usually waved through), which was accompanied by a 41% vote against the pay policy for the CEO/chair Christel Bories, can only have been delivered because the state shareholding (26% of the shares, but 30% of the votes because of double voting rights) was opposed, and the Duval family (37% of the shares, 44% of the votes) voted in favour. The dividend was controversial because of a sharp deterioration in performance in the face of metal price falls in 2023, leading to negative free cashflow; and the pay policy included an increase in the shares made available for award. Other investors’ views are largely irrelevant in the face of this dominant pair, but it appears that 22% of other shareholders also opposed the dividend, while 43% opposed the pay policy.

A still more unusual result was seen at Gildan Activewear (AGM 28th May), the Canadian clothing company behind labels such as American Apparel. Gildan has faced a proxy fight led by activist Browning West, sparked by the ousting of former CEO Glenn Chamandy. In spite of support from another hedge fund, Coliseum Capital, the board lost the battle comprehensively and stood down earlier in the week, leaving the way clear for uncontested elections of the eight directors proposed by Browning (which included the return of Chamandy) – six of whom nonetheless faced opposition of 14% and more. Meanwhile, a union-proposed shareholder resolution pressing for greater workforce protections, especially on health & safety matters, won 14% backing.

That’s it for this week. Things seem to be starting to quiet down again so we’ll turn fortnightly again with the next issue, returning with Most Significant Votes on June 21st.

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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