Most Significant Votes (w/e 9th June 2023)

Paul Lee

Head of Stewardship & Sustainable Investment Strategy
(Friday, Jun, 09, 2023)
|   5 mins

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.

This week’s MSV is dominated by US companies from both the old and the new economies, many of which faced multiple shareholder resolutions. US oil major ExxonMobil (AGM 31st May) had been the subject of a ‘vote no’ campaign on three directors, CEO and chair Darren Woods, lead independent director Joseph Hooley and chair of the Environment, Safety and Public Policy Committee Susan Avery. Hooley faced the greatest vote against, at 9%, but the lack of success of the campaign – mounted by NGO Majority Action – is shown by the lower 7% opposition to Avery. Majority Action was complaining about the failure to set a robust net zero target including Scope 3 emissions, and to align both capital allocation and lobbying activities to the goals of the Paris Agreement. Those concerns are in spite of the presence on the board of the three directors elected following the 2021 campaign by Engine No 1. There were also 12 shareholder proposals this year, the most successful of which – winning 38% support – called for better measurement of methane emissions. Most of the others were also on climate matters: a resolution pressing for Scope 3 targets was backed by 12% of shareholders; one asking that the emissions baseline be reset to reflect asset sales 25%; one seeking clearer provisions for asset decommissioning 17%; and one regarding planning for a Just Transition 23%. Meanwhile, a resolution calling for fuller reporting on tax matters won the support of 14% of shareholders.

In another ‘vote no’ campaign, this one flagged by Climate Action 100+, US investor Wespath called publicly for investors not to back the re-election of two directors at rival Chevron (AGM 31st May). Wanda Austin and Enrique Hernandez are both members of the public policy committee and Wespath blames them for the company’s lobbying on climate matters; however, only 5% backed them on Austin and 8% on Hernandez (though there may of course have been other reasons for those votes). More well-received were shareholder proposals on climate matters, many of them similar to those faced by Exxon: in particular, one seeking Just Transition protections for the workforce won support from 25%, one asking that the emissions baseline be reset to reflect asset sales 20%, and one calling for a medium-term target on Scope 3 emissions 12%. A call for better tax reporting was backed by 15% of investors.

Restaurant chain McDonald’s (AGM 25th May) faced not one but two shareholder proposals encouraging it to take anti-microbial resistance risks more seriously, and so work to reduce the use of medically significant antibiotics in its protein supply chains. Prior to its move two years ago to step back from the shareholder proposal process, it seems likely that regulator the Securities and Exchange Commission would have barred one or other of these as duplicative as they do not seem to raise different issues – indeed the company’s response, arguing for votes against each, appears identical. Yet one was backed by 20% of shareholders and the other only by 18%. A proposal seeking more disclosure on chicken welfare was more successful, with 39% backing. Even more notable was a call for greater transparency over the company’s lobbying activities, which by a very small margin won majority support.

The vote on executive pay at retail behemoth Walmart (AGM 31st May) was a slap on the wrists. 21% of investors opposed it, but given the substantial shareholding by the founding Walton family, this was nearer 47% of the independent investors. Still more remarkably, a call for greater efforts on workplace safety – including protections against gun violence – was backed by 24% of shareholders, or 55% of those not called Walton, and one calling for a racial equity audit 19%/42%; in contrast, a proposal asking for better human rights due diligence on the company’s supply chain won only 6% support, or 14% of the non-Waltons, and a call that workforce pay be reflected in executive compensation only 5%/11%.

At US tech giant Meta (AGM 31st May) – the company formerly known as Facebook – 28% of votes were cast against a shareholder proposal calling for an abandonment of the dual class capital structure and for all shares to have equal voting rights. However, since founder Mark Zuckerberg holds almost all of the Class B shares that hold 10 votes each, he personally wields a majority of voting power, this amounts to 92% of those who aren’t Zuckerberg. That was by far the most popular of the 11 shareholder resolutions that the company faced. But others achieved a majority of the non-Zuckerberg votes: one seeking a human rights impact assessment of targeted advertising won 18% support, or 60% other than Zuckerberg, and another seeking greater child protection on the platform 17%/54%. A resolution seeking more disclosure on lobbying activities was backed by 15%, or 49% of those not called Zuckerberg, while one regarding lobbying specifically on climate by 10%/33%. Somewhat less popular was a call that executive pay internalise external costs on the economy, society and the environment, which was backed by 7%, or 24% of those other than Zuckerberg.

Meanwhile, Expedia (AGM 31st May) faced some extraordinary votes regarding pay matters. The vote on executive pay was opposed by 43% of shareholders, but given that executive chair Barry Diller controls nearly 28% of all votes through a dual class share structure, the vote against by other shareholders was 67%. Diller himself was paid $8 million in 2022, and the CEO Peter Kern $1 million, but it’s clear that investor concerns are really about the scarcely believable $296 million that Kern was paid in 2021. A newly proposed pay scheme, that would release 6 million further shares to provide further executive incentives, was opposed by 38% of shareholders, or 60% of those who aren’t Barry Diller. Most remarkable were the votes on the remuneration committee: the chair, one Chelsea Clinton, faced opposition from 47% of shareholders, or 74% of those other than Diller.

Netflix (AGM 1st June) also raised investor ire over pay: its executive remuneration vote was opposed by 71% of shareholders. Despite the striking fall in the share price over 2022 because of a reversal in subscriptions, the two co-CEOs were each paid more than $50 million – more than 230 times the already high median pay at the company of $218,000. Meanwhile, a shareholder proposal calling for workers’ rights to freedom of association and collective bargaining won backing from 38% of investors.

The more modest pay of around £1 million at UK engineer Melrose (AGM 8th June), around 26 times the median pay level, was still enough to raise 24% opposition (including 7% in abstentions) – though this vote was on the pay policy, which does allow rewards of rather greater than this when the company sells on the businesses it has acquired and enhanced. The rather easier ride that is generally given to pay in the US than in the UK and Europe was certainly among the considerations that led London-listed Irish buildings materials firm CRH (EGM 8th June) to propose a shift of its listing to the US. This plan won broad support, but the 5% opposition to the move is unusually high for such a transactional resolution.

Spanish renewable energy generator Acciona Energias (AGM 1st June) achieved the remarkable – and almost certainly unique – feat of seeing not a single shareholder vote against its sustainability report and 2025 plan, and only a fraction of a percent abstain on it. Its pay was rather less well-favoured, however, with 13% of shareholders raising concern about the remuneration policy and 14% on the remuneration report. Given the company remains more than 80% owned by Acciona, the engineering business from which it was spun out in 2021, that amounts to opposition from nearly 90% of the independent investors. Also in Spain on the same day, Cellnex Telecom tried again to make its pay much more generous for executive directors. Last year, a new pay policy just managed to achieve majority support; this year, despite what the company reports was extensive outreach it was not much more successful: opposition came from 41% of shareholders (including 5% abstentions).

The voting season is beginning to slow down so we’re returning to fortnightly issues: the next Most Significant Votes will be issued on 16th June.


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