Most Significant Votes (w/e 24th May 2024)

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.

The AGM of European oil major Shell (21st May) was a noisy affair, with campaigners in the room chanting and singing versions of Dolly Parton classics – as well as protesting outside with placards and megaphones. The voting was quieter but still blunt in its messaging. There was 27% opposition (including 6% abstentions) to the company’s ‘say-on-climate’ resolution, seeking approval for its Energy Transition Strategy.

Somewhat fewer, 21% (including 3% abstentions) backed a shareholder resolution seeking Scope 3 carbon emissions targets aligned with the goals of the Paris Agreement. Scope 3 targets are particularly challenging for fossil fuel producers as they essentially press for cuts in production. A group of shareholders also chose to make personal their concerns about the company stepping back on the ambition of its decarbonisation trajectory, with 11% refusing to support the re-election of chair Andrew Mackenzie.

The greatest shock-waves around votes so far this voting season greeted the results of the Boeing AGM (17th May). The media mostly appeared amazed that, in spite of the company’s ongoing safety and engineering challenges, shareholders collectively chose to back the reappointment of CEO David Calhoun and to endorse an increase in his pay. Certainly, it seems odd that the vote against the non-executive chair of the Aerospace Safety Committee, David Joyce, faced a larger vote against (34%) than the CEO, whose day job it is to run all aspects of the company (23%).

Something similar happened last month at the meeting of Spirit Aerosystems (AGM 24th April) – the Boeing supplier particularly implicated in the questionable work on ‘door plugs’ – where chair of the risk committee Ronald Kadish faced an 11% vote against but CEO Patrick Shanahan a much more modest 5%. 38% of shareholders declined to support the pay vote at Boeing, but that means a clear majority supported Calhoun having been paid $32.8 million for 2023 (a level achieved even though he declined any annual bonus for the year), a significant increase on 2022 and some 273 times more than the company’s average employee pay.

A larger proportion – 40% – of shareholders at US insurance giant Travelers (AGM 15th May) opposed its pay resolution, though only 11% supported a call for the company to reflect pay ratio data in its executive reward. The insurer was pressed for fuller disclosures of the greenhouse gas emissions associated with its underwriting, with 16% of shareholders supporting this; the same percentage also backed calls for it to pay more attention to methane emissions by its clients in the energy sector, and to build human rights concerns into its underwriting approach.

Swiss-based peer Chubb (AGM 16th May) still retains its American accent and faced a pair of US-style shareholder resolutions. Fully 29% of its investors backed the call there for disclosure of the greenhouse gas emissions associated with its underwriting, while 27% called for disclosures on racial and gender pay gaps. Meanwhile, many shareholders clearly do not welcome the adoption of US board structure norms as 21% opposed the appointment of CEO Evan Greenberg as chair (only 6% voted against his election).

Rival American International Group (AGM 15th May) – which used to be run by Evan’s father Maurice Greenberg – also faced a 35% vote against its remuneration resolution. AIG faced far fewer shareholder resolutions, but one calling for it to have an independent chair won 38% support. Travelers CEO Alan Schnitzer was paid nearly $23 million, 194 times the average employee pay; AIG’s Peter Zaffino $24 million (remarkably, down from $75 million the prior year), 278 times its average.

Fellow insurer Swiss Life (AGM 15th May) has been audited by PricewaterhouseCoopers since its establishment in 2002. This tenure above the 20-year limit set in the EU is increasingly frowned on by investors even in markets where that limit doesn’t apply, and 20% of shareholders voted against PwC’s reappointment. As we’ve seen at some other European companies this year, investors are raising fresh concerns about the independence of supervisory board chairs who were former executives; the same was true here, with Rolf Dorig receiving 10% opposition. He is also a busy man, which won’t have helped. A fellow supervisory board member, lawyer Henry Peter, is almost laughably busy with his biography listing 13 board memberships at organisations across a range of scales; 12% of investors voted against his reappointment as a result.

Germany’s Heidelberg Materials (AGM 16th May) also faced concerns about its chair, Bernd Schiefele, another former top executive. The building materials firm (formerly known as Heidelberg Cement) witnessed a 30% vote against his re-election, and also 15% opposition to Ludwig Merckle, who is seen to have too close a relationship with Schiefele, who also chairs a company that Merckle controls and is deputy chair.

A Climate Action 100+ company, engine and power business Cummins (AGM 14th May), was urged by 17% of shareholders to link executive pay to greenhouse gas emissions reductions across its value chain, i.e. including the most important footprint of its products in use. A more remarkable 44% pressed the company to appoint an independent chair.

A less carbon intensive business, restaurant chain Denny’s (AGM 15th May), saw a shareholder resolution only barely defeated that called for specific emissions disclosures rather than its repeated claims to be reducing them. Including the 4% abstentions, 52% of investors did not support the board’s position. A pig welfare resolution also received notable support, though at the lesser level of 25%.

German sportswear giant Adidas (AGM 16th May) has displeased investors with its approach to pay, with CEO Bjorn Gulden receiving €9 million even though the company fell into losses in 2023. Fully 44% refused to back the remuneration report (around 4% appearing to abstain). Further, the company’s chair Thomas Rabe, who also chairs the committee overseeing pay, faced a 33% vote against his re-election, and a further member of that committee, Ian Gallienne, 22%. Both may well also be seen as too busy to carry out their roles fully.

The country’s kidney dialysis business Fresenius Medical Care (AGM 16th May) was also dinged on pay, with the reported 12% of investors opposing the remuneration policy representing 20% of those other than parent Fresenius SE. Given the much greater support for the backwards-looking vote on its remuneration report, shareholders clearly do not welcome moves to make pay more generous under the new policy.

It’s clear that many shareholders at UK housebuilder Vistry (AGM 16th May) – recently created by the merger of Bovis Homes and Countryside Properties – don’t welcome the decision that CEO Greg Fitzgerald will also take on the role of executive chair. 22% opposed his election, extraordinarily high for an executive. 18% also voted against the remuneration report, but given that last year the same resolution barely even passed, the company may count that a success. It remains determined to increase the pay opportunity for management; Fitzgerald made just over ￡3 million last year, some 58 times the median employee wage. Shareholders also appear grumpy about both the independence (he’s been on the board for 16 years and chair for 14) and the lack of action on diversity by chair Douglas Sutherland at serviced office business IWG (AGM 21st May). There was a 7% vote against Sutherland’s re-election, or 12% of investors other than 29%-holder CEO Mark Dixon.

In many ways both got off lightly. One of the quirks of UK corporate governance now is that where there is a shareholder holding 30% or more, independent directors must be subject to election both by the shareholders overall and by the independent shareholders. A second election can be called if the independent shareholders oppose such an individual’s appointment to the board (at which point the majority vote will prevail).

Very unusually, this provision has now been triggered at UK-listed Ukrainian iron ore producer Ferrexpo (AGM 23rd May), where Vitali Lisovenko received an 83% vote in favour overall, but this meant 53% opposition to his reappointment by the shareholders other than founder Kostyantin Zhevago, who holds some 49% of the shares. Zhevago himself left the board last year and is mired in corruption allegations; he also apparently opposed resolutions to allow the issuance of new capital by the company, meaning they were defeated with 70% opposition overall. The board stated, “that this voting outcome was primarily as a result of the Company's largest shareholder not wanting to incur further dilution to its voting interest in the Company”.

That’s it for this week. We’ll be back with Most Significant Votes on May 31st.