Most Significant Votes (w/e 12th May 2023)

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 #assetowners and on which they might wish to hold their fund managers accountable. This run coincides with the Northern Hemisphere voting season.

Norway’s?Equinor?(AGM 10th May) is seen as a darling of the energy transition, but it remains a major oil and gas player, including planning the development of new fields. It faced no fewer than 7 shareholder proposals, but the only one that gained any substantive support was that proposed by NGOs WWF and Greenpeace, calling for absolute reductions in CO2 emissions, including Scope 3, and targets aligning them with the goals of the Paris Agreement. 4% of shareholders supported the resolution. However, once the Norwegian government’s 67% shareholding is excluded, this looks like nearer to 29% of the independent shareholders. On the same day, local renewable energy generator?Norsk Hydro?perhaps unsurprisingly faced rather different concerns, with 13% opposition to its remuneration report, or 33% opposition from shareholders other than the Norwegian government.

There was a notable slap on the wrists for Dutch health tech firm Philips (AGM 9th May) which has struggled to manage the recall of sleep apnoea devices and other respirators, and seen a near-60% share price fall as a result. It announced last month that it had set aside €575 million in respect of class action litigation over the issue. More than 76% of shareholders voted against the discharge of the management board – often seen as a formality – and when abstentions are taken into account under 20% were willing to sign off on management’s actions last year.

In contrast, the UK’s Capita (AGM 11th AGM) seemed to get a free pass for its recent sizeable losses of data through a cyber attack, with no substantial votes against or abstentions that could be attributed to shareholders noting concerns about oversight of this key risk area. The one resolution that did see opposition was, sadly, the election of an employee director. However, at least this year the vote against Janine Goodchild’s election was under 5% rather than the 24% opposition to the appointment of Lyndsay Browne last year. Goodchild will be an audit committee member while Browne was a remuneration committee member, but sadly both votes seem wholly to misunderstand the intent to facilitate more employee directors in the UK and are inconsistent with the opportunity this offers for greater board understanding of the business operations.

German insurer Hannover Re (AGM 3rd May) was challenged by a group of shareholders over its apparently increasing underwriting support for new fossil fuel activities. These shareholders called on their fellow investors to oppose the supervisory board’s formal discharge from liabilities for 2022 actions. And they did so in sizeable numbers: 14% opposed the discharge of each individual director.

Similar criticisms of the fossil fuel – particularly coal – policies of local rivals Allianz (AGM 4th May) and Munich Re (AGM 5th May) do not seem to have roused the same support. Instead, 21% of shareholders declined to back Allianz’s remuneration report; at least in part, the concern appears to be a notable €6.5 million award to an exiting executive. Some 14% refused to support Munich Re’s remuneration report.

There was overwhelming support for the climate report from Swiss cement giant Holcim (AGM 4th May). The scale of the company’s carbon emissions mean it is included in the Climate Action 100+ list of companies; the carbon intensity inherent in the chemical processes in the creation of cement mean it is particularly hard to abate. Nonetheless, only 4% of shareholders flagged concerns about its climate plans – most of them abstaining on the report. Once again, pay was a much greater concern, with 12% opposition to the remuneration report.

German rival HeidelbergCement (AGM 11th May) – to be renamed Heidelberg Materials following the meeting – faced no such challenges, though its supervisory board chair, Bernd Scheifele, who was formerly chair of the management board and is therefore seen as not independent, did see 10% opposition to his discharge from liabilities.

The production of gas through fracking shale causes significant fugitive emissions of methane gas. Shareholders of Coterra Energy (AGM 4th May) were sufficiently concerned about the potential implications of this that there was resounding support for a shareholder proposal seeking independent analysis on whether its methane emission reporting is accurate: the resolution was backed by 69% of shareholders with a further 7% abstaining. The 37% who supported a call for a report on lobbying on climate matters was less resounding but will also be seen as a success by the proponents. Oil sands are also highly carbon-intensive, and Canada’s Suncor Energy (AGM 9th May) faced a shareholder resolution asking for a report on how its capex aligns with its stated 2030 emissions reduction and 2050 net zero targets. This won 18% support.

UK banking giant HSBC (AGM 5th May) largely faced down a rebellion from its largest shareholder, Chinese insurer Ping An, which is urging a split of the business on geographical lines. Many of the resolutions at the meeting saw around 20% opposition to the board’s position, but given the scale of the Ping An shareholding and the 52% turnout, this suggests that few other investors beyond a limited gaggle of Hong Kong-based retail investors opposed the company. In particular, the two resolutions that Ping An’s supporters proposed, calling for the Asian business to be spun off and for the dividend to be restored to pre-Covid 19 levels, seem to have won backing from few other than Ping An itself. Six other resolutions did reach the threshold of 20% opposition which means the company will have to have a dialogue with shareholders and report back, but in each case, Ping An apparently opposed so the votes against by the wider shareholder base were minimal.

Another venerable Hong Kong name, holding company Jardine Matheson (AGM 4th May) – now Bermuda-resident – faced significant shareholder opposition to its board elections. David Hsu, newly retired as an executive of the company remains a non-executive; clearly, 24% of shareholders (30% of the outside investors once the founding Keswick family shareholding is excluded) do not feel he is independent. Unsurprisingly, investors had still more concerns about the independence of Anthony Nightingale, who was an executive at the company from 1969 and has been on the board for almost 30 years, 11 of them as a non-executive, and who sits on the audit committee. The vote against his re-election was 30% (38% of the non-Keswicks).

European steel giant Arcelor Mittal (AGM 2nd May) faced a number of significant votes. The headline vote against the re-election of eponymous executive chair Lakshmi Mittal, at 18%, was striking enough, but once the family shareholding is excluded, this is nearer to 42% opposition from outside investors (including 7% abstentions). Investors appear in part to find his $8 million pay for the year distasteful in the face of ongoing employee deaths, not least five in a mine explosion in Kazakhstan at the end of last year. 4% opposed the remuneration report – 9% of the non-Mittal investors – and 5% (12% of the independents) declined to discharge the board from liability for its actions in 2022.

The vaccine produced by Moderna (AGM 3rd May) was one of the stars of the Covid-19 pandemic, saving many lives and creating huge profits for the company. Some 12% of shareholders opposed the startling generosity of the reward to the CEO by boosting his pay by 50% in the same year he exercised options worth $393 million. In contrast, only 8% supported a shareholder proposal encouraging vaccine fairness globally by sharing of intellectual property with manufacturers in less developed economies. On the same day, 18% of shareholders at pharma peer Gilead backed a similar call for greater access to the company’s medicine intellectual property.

American Express (AGM 2nd May) railed at the company over executive pay, especially a one-off special ‘retention’ award to a number of individuals including the CEO. This took his pay to $48 million in 2022, 972 times the median pay for Amex staff of $49,400. The vote against was fully 47%. Similarly, at France’s Schneider Electric (AGM 4th May) the remuneration report for the chair/CEO was opposed by 35% of shareholders; three separate remuneration policy votes all faced 11% opposition and more. Jean-Pascal Tricoire was paid €6.5 million in 2022. In contrast, all but 4% of investors backed the company’s climate strategy.

Canadian miner Barrick Gold (AGM 2nd May) faced a range of opposition, particularly related to pay, with 22% of shareholders opposing the remuneration report. A number of the compensation committee members faced sizeable votes against, particularly the two whose lengthy board tenure calls into question their independence for the role (more than 18 years in each case) – Gustavo Cisneros (13%) and Brett Harvey (14%). Well-paid executive chair John Thornton also faced a notable 18% vote against. Further, auditor PricewaterhouseCoopers has been in the role for 40 years, double the maximum limit many shareholders now expect: 14% declined to support the firm’s reappointment, a strikingly high vote against such a resolution.

Pay was also a concern at UK hospitality giant Intercontinental Hotels (AGM 5th May). Both the remuneration report and the remuneration policy faced 26% opposition. Shareholders were in part unhappy with exercises of discretion during the year, in particular adjustments to a cashflow metric. CEO Keith Barr was paid ￡4 million in the year, 109 times the median pay at the company. Barr’s departure has since been announced, and he has indicated he is returning to his native US, where he believes he will be paid much more generously.

Finally, at Raytheon (AGM 2nd May), a majority of shareholders signed off on protecting senior officers of the US defence company from liability for breaches of their fiduciary duty. While this change is in line with updated company law in Delaware (the state where most US public companies are incorporated) it still seems surprising that only 22% of investors objected to letting executives off such fundamental duties. More positively, 38% of shareholders supported a call that the company develop a greenhouse gas emissions reduction plan in line with the goals of the Paris Agreement.

We’ll return with Most Significant Votes on 19th May.