Most Significant Votes (w/e 4th November 2022)

Most Significant Votes continues its short fortnightly run of regular updates from?Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, that highlight the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable. This run is timed to report on the Southern Hemisphere voting season, and also sweeps up the small parallel season in the North.

Investors at leading Australian miner?South 32?(AGM 27th October) were faced with a management resolution to endorse its Climate Change Action Plan, which includes considerations of portfolio resilience, Scope 3 greenhouse gas emissions, physical climate risk and climate change risk management. The company repeatedly and in bold emphasised that this vote “will be advisory only and does not bind the Directors or the Company”, reinforcing the symbolic nature of these resolutions. In the end, 11% of shareholders were unwilling to support the company’s plan, suggesting that they believe it should be doing more.

Another Australian mining company,?Whitehaven Coal?(AGM 26th October), which continues to invest in new coal production, faced a shareholder resolution on climate matters – urging that the company’s capex be brought into line with the targets of the Paris Agreement. This garnered 24% support from shareholders. The company was also on a ‘first strike’ for pay, having seen more than half of shareholders vote against its remuneration report last year; it survived this year with only 10% opposition, well below the 25% that would have triggered a ‘second strike’ and the need to offer a vote on the reappointment of the entire board. Notwithstanding this, chair Mark Vaile, a former Australian deputy prime minister who has led the board for a decade, faced 8% opposition to his re-election.

Insurance Australia Group?(AGM 21st October) was also facing a possible second strike this year after a significant vote against its remuneration report at its 2021 AGM. Clearly, the company had done a good enough job in winning shareholders round to its approach, as only 4% failed to approve the report at this year’s meeting. Nevertheless, concerns remain, as the reappointment of chair Tom Pockett was greeted negatively, with 9% of shareholders opposing his re-election.

Australian waste management business?Cleanaway?(AGM 21st October) did suffer a first strike – with more than 25% of shareholders voting against its remuneration report this year. In this case, 26% opposed the resolution, upping the pressure on the company to improve its approach over the coming year or risk further embarrassment at its 2023 AGM. Shareholders were clearly uncomfortable about the generosity of the treatment of ousted CEO Vik Bansal and of the awards made to his replacement Mark Schubert.

Bansal’s new employer?Boral?held its AGM yesterday (3rd November), and while he has just been appointed a director he wasn’t up for election as under the Australian system executive directors aren’t subject to a shareholder vote. The controversial resolution at the meeting was the approval of a new constitution for the company. This faced 11% opposition, probably largely because it allows for fully virtual shareholder meetings – something investors believe reduces the sense of accountability that boards should feel and enables them to have greater control of proceedings. The removal of the requirement for non-executive directors to hold shares may also have irked some investors.

Conglomerate?Wesfarmers?(AGM 27th October) was a long way away from a strike – with 95% support of its remuneration. However, investors were nonetheless concerned about whether the award to the CEO of some A$7 million in shares was appropriate: the approval of this garnered support only from 91% of shareholders, with 6% abstaining on the resolution.

South African miner?Northam Platinum?(AGM 25th October) also faced a bruising on remuneration. Remarkably, a majority of investors – 56% – opposed both the backwards-looking remuneration report and the forward-looking policy vote. Shareholders clearly were uncomfortable with a remuneration framework that led to the CEO’s overall pay rising to Rand46.5 million in the face of poor share price performance and the company’s acknowledged weakness as measured across its key performance indicators.

A remarkably similar result faced the remuneration report at Australia’s?Downer EDI?(AGM 3rd November), with a huge 56% vote against. This is clearly above the 25% threshold and thus constitutes a ‘first strike’. The remuneration committee exercised a lot of discretion over the year, not least excluding the impact on performance from the Covid-19 pandemic and Australia’s wet weather from their assessment of delivery by the executives. Shareholders rarely support this. Commentators have noted that Mark Chellew chairs both Downer and Cleanaway, making him the first chair of two ASX100 companies to receive first strikes in a single year. Chellew himself wasn’t up for election at Downer (he faced 4% opposition at Cleanaway), but Teresa Handicott, chair of the remuneration committee, was. She faced only 2% opposition, a surprisingly low number given the scale of the concerns about her committee’s decisions during the year.

US work uniform provider?Cintas?(AGM 25th October) responded to investor backing for a shareholder proposal at its 2021 AGM calling for the removal of supermajority voting rules – which mean it may not be enough that half or more of shareholders support a proposal for it to pass – with a set of management resolutions to remove the constraints. Resolutions meaning that a simple majority of shareholders can remove directors and to approve mergers and other major transactions passed comfortably were both passed with the support of 67% of shareholders. Given that management was commending these changes, it’s surprising that a third of shareholders opposed. Shareholder proposals this year were less successful, with 46% of shareholders supporting a call for a report on political spending.

Finally, there was a striking pair of results at minnow?New Zealand Oil & Gas?(AGM 2nd November). A minority shareholder proposed two resolutions to enhance rights for investors in the face of dominance by 72% shareholder OG Oil & Gas. The proposals would have required the board to report publicly on dialogue with shareholders if any management resolution were opposed by more than 50% of the independent shareholders, and ensured that a lead independent director is appointed whose election is conditional on support from independent shareholders. Both resolutions were soundly defeated, but once the OG Oil & Gas shareholding is set aside, they won overwhelming support from minority shareholders, with 97% either voting in favour or abstaining on the resolution.

We’ll return with the next Most Significant Votes in a fortnight, on November 18th.