Most Significant Votes (w/e 20th May 2022)

Welcome to Most Significant Votes! A weekly update from Paul Lee, Redington’s Head of Stewardship & Sustainable Investment Strategy, highlighting the key AGM decisions that matter to asset owners and on which they might wish to hold their fund managers accountable.

Pay resolutions in the US, even at the most lavish companies, rarely face significant opposition (average support approaches 90%). And even less frequently do investment institutions turn against one of their own. This makes the vote at JP Morgan (AGM 17th May) extraordinary. 69% of shareholders opposed the so-called ‘say on pay’ resolution to approve pay for the bank’s leading five named executive officers, including chair and CEO Jamie Dimon. Although the JPM reporting repeatedly references $34.5 million as Dimon’s pay during 2021, this doesn’t include an additional award of 1.5 million options, worth $50 million, making Dimon’s actual pay in the year some $84.4 million. Even though the bank’s median employee is paid an already generous $92,000, the ratio of this to the CEO’s pay is an amazing 1:917. The special option award, allied with a later $28 million option award to the COO, was stated to be with regard to retention and leadership continuity. We’re still waiting for the publication of the broader voting results at the AGM – including on two climate-related shareholder resolutions, one encouraging no financing for further fossil fuel exploration and the second seeking absolute contraction targets for the bank’s financed emissions.

Set against that seismic vote in the US, pay votes in the UK barely registered. In spite of facing a so-called ‘red top’ (an indicator of high concern from the Investment Association’s IVIS voting service), the remuneration report at clothing retailer Next (AGM 19th May) faced under 8% opposition. IVIS was concerned at the scale of payouts – up substantially from last year’s pandemic-depressed levels – in a year when the company had taken advantage of the government’s job retention ‘furlough’ scheme and had given no indication that it would return the money. Chair Michael Roney faced greater opposition of some 16%. Similar furlough-related concerns at sausage roll and pastry shop Greggs (though the company paid back the £4.9 million received in 2021, it still retains the £87 million from 2020) led to 14% opposition to its remuneration report at its AGM the day before.

A much more sizeable vote against was seen at biotech firm Abcam (AGM 18th May) – an AIM-listed stock but one that’s on many institutions’ radar screens because of its £2.5 billion market cap – where its remuneration report faced opposition from 38% of shareholders and its remuneration policy by only slightly less. Non-executive director Mara Aspinall, who stood in as interim remuneration committee chair for much of the year, also faced a 7.5% vote against. The company states its commitment to ongoing engagement with those shareholders who felt unable to support the resolutions, though the fact that its formal announcement of the AGM results doesn’t include details on the scale of the votes against doesn’t encourage me to believe it will be listening as hard as it might. Though at least Abcam does make its voting results available, in contrast to AIM peer and posh mixers company Fever-Tree (AGM 19th May).

Republic Services (AGM 16th May) faced two shareholder resolutions, one seeking an environmental justice audit and the second a civil rights audit. Both received significant support from investors, with around 39% backing the civil rights audit and 36% backing the environmental one. This followed the success of a similar civil rights audit resolution at rival trash and recycling business Waste Management the prior week (AGM 10th May) – where 55% of shareholders backed the call. Tobacco giant Altria has announced the preliminary result that shareholders have also voted in favour of a civil rights equity audit of that company. We await full details of the voting at yesterday’s AGM. We’re also waiting on the publication of the vote results on similar resolutions at Mondelez International, Chipotle Mexican Grill (AGMs 18th May), AT&T and Home Depot (AGMs 19th May).

Chocolatier Hershey (AGM 17th May) faced a call to report on whether it will eradicate child labour from its West African cocoa supply chain by 2025. The company argued that it’s already reporting heavily on its sustainability activities, and while it accepts that child labour remains endemic in cocoa farming in the region, it has in place significant programmes to eliminate it. It seems that investors generally were persuaded by these arguments as the resolution garnered only 8% support. Another unusual resolution on a social issue was faced by restaurant chain Denny’s Corp (AGM 18th May). This sought an increase in starting wages to the level of the minimum wage; the voting result has yet to be disclosed.

Despite the US pride in democracy, there are significant elements of corporate governance that look quite the opposite of good democratic practice. At most companies, for example, it’s not possible for shareholders to formally propose directors to be added to the board without going through the time and expense – and the head-on conflict – of a full proxy fight. Hence the idea of ‘access to the proxy’, which would allow shareholders to put forward directors on the board’s AGM agenda (a shareholder right taken for granted in many countries). Shareholders at finance house Charles Schwab (AGM 17th May) put forward an access to the proxy proposal, and the company’s response was not simply to oppose this but actually to put forward its own proposal to deliver the change, with a few more protections and caveats. This needed 80% shareholder support to successfully change the company’s bylaws, and cleared that hurdle comfortably with only 1% of investors opposing. In contrast, the rival shareholder resolution gained only 31% support. A second shareholder resolution seeking greater disclosures around lobbying activities won backing from 35% of investors.

This week’s been relatively quiet, but the activity and noise levels are set to increase again next week, with AGMs from large companies including Amazon, Chevron, Exxon Mobil, McDonald’s, Meta, Morgan Stanley, Publicis, Shell and TotalEnergies.