Most Significant Votes: Nissan Motor, Renault, Toyota Motor, SoftBank, NTT, Tokyo Electric Power, Nvidia, Dell Technologies, Volkswagen, Block.

By Paul Lee

Welcome back to Most Significant Votes! This time, we complete our run of blogs covering the Northern Hemisphere voting season. As always, we identify the key AGM decisions that matter to asset owners and on which they may wish to hold their fund managers accountable.

As foreshadowed last time, we have witnessed hundreds of shareholder meetings in Japan over just a few days. Much of this blog is thus focused just on that country; the following briefly captures a few of the highlights.

Most notable in a country that favours consensus and where even votes against directors of over 10% are highly unusual was the extraordinary sight of a director at Nissan Motor (AGM 23rd June) failing to win re-election. Audit committee chair Motoo Nagai won only 48% support from shareholders; the voting seems to confirm prior reports that major shareholder, French car partner Renault, would abstain on Nagai’s appointment. Of those shareholders who actually voted, 40% opposed him. Nagai is reported to have been instrumental in an abandoned proposal for Nissan to merge with peer Honda – something Renault opposed – working closely with his former employer, bank Mizuho Financial. A newly proposed director, Junichi Shinbo, who also has associations with Mizuho, faced some collateral damage, with 26% opposition to his appointment; excluding what looks like a repeat of Renault’s abstention, 9% of other investors voted against him.

Shareholders of Toyota Tsusho (AGM 23rd June) seemed unmoved by being called ‘cherished’ in the formal invite to the shareholder meeting: 32% voted against the reappointment of Toyota Motor-linked non-executive director Didier Leroy, or 41% of those other than the car company, which holds 22% of the conglomerate so-called ‘trading company’.

Another Toyota-linked company, telecoms-led conglomerate KDDI (AGM 17th June) is one of those companies seen to need greater business focus and efficiency. This led to 37% and 22% votes against the reappointment of chair Makoto Takahashi and CEO Hiromichi Matsuda respectively – which, assuming major shareholders Kyocera and Toyota Motor both voted their collective 25% shareholdings, look more like a remarkable 52% and 30% opposition. And at Kyocera (AGM 25th June) itself, long-standing chair Goro Yamaguchi (also a non-executive at both Toyota Tsusho and KDDI) faced 30% opposition to his election, on performance grounds and because of perceived unresponsiveness to shareholder concerns; 12% voted against CEO Shiro Sakushima. Oddly, a somewhat smaller number – 24% – supported the shareholder resolution from activist Oasis Management calling for Yamaguchi’s removal. 26% supported the activist’s candidate for the board, respected director Kotaro Okamura, and 19% backed its call for a more substantial share buyback programme to tighten the balance sheet and boost the current low returns on equity.

At internet firm LY Corporation (AGM 19th June), 4% of investors opposed the election of CEO Takeshi Idezawa, which looks more like 14% of independent shareholders once the 62% held by A Holdings (a joint venture between Softbank and Naver Corporation) is set aside. There was disquiet also about a proposal to extend share incentives to non-executive directors (though not those on the audit committee): again 4% opposed (or 13% in this case). A similar proposal at pharmaceutical giant Takeda Pharma (AGM 24th June) also faced disapproval, with 17% of investors voting against.

At Softbank Group (AGM 24th June) itself, chair and CEO Masayoshi Son faced a notable 14% vote against, or 21% of the shareholders other than himself (the founder retains 30%). With only 1 woman among the 9 directors, the company doesn’t meet even the low gender diversity levels that investors are willing to accept in Japan. More notably, non-executive director Ken Siegel faced 29% (or 45%) opposition; as managing partner of the Tokyo office of Morrison Foerster, Softbank’s lawyers, his independence is in question (notably he was excluded from participating in two board meetings during the year because of conflicts of interest). Meanwhile, tech firm NEC (AGM 19th June) displeased shareholders by proposing to enable virtual-only AGMs. 23% of investors voted against a change to the articles of association to permit this.

National telecom champion NTT (AGM 18th June) faced no fewer than 12 shareholder resolutions. The two most popular were technical ones regarding the process for such proposals themselves, but most of the rest were regarding strategy and financial efficiency. The most popular of these, garnering 6% support (or 10% of investors once the government’s 36% stake is set aside) sought greater disclosure on the cost of capital, clearly reflecting the perennial concern in Japan that some companies feel little need to generate returns greater than their cost of capital.

Of the 11 shareholder resolutions faced by Tokyo Electric Power (AGM 25th June), only one garnered any notable support: a call for individual disclosure of executive pay was backed by 16% of investors. At the same time, 17% opposed the re-election of CEO Tomoaki Kobayakawa; in part this reflects concerns about board diversity, with only 1 woman among the 13-member board, as well as performance and safety issues. A second executive who sits on the nominations committee, Shigehiro Yoshino, faced 13% opposition.

Rival Chubu Electric Power (AGM 25th June) has faced a series of compliance scandals over the last year, including in its nuclear business. This led to some strident voting, with 44% against chair Satoru Katsuno and 39% against CEO Kingo Hayashi. Shareholder proposals to remove each of them garnered 32% and 28% backing respectively.

Meanwhile, Kansai Electric Power (AGM 25th June) faced 14 shareholder proposals. The most popular (at 26%) was one seeking more disclosure on executive pay, but perhaps more significant were two climate-related ones: that seeking broad decarbonisation of the business garnering 14% backing, and that urging investment in renewables and net zero 17%.

Events were a little more sedate outside Japan, but there was still scope for some notable results.

At Nvidia (AGM 24th June), the chipmaker that is the main beneficiary of the data centre boom, a remarkable 87% of investors backed a shareholder resolution calling for the removal of all requirements for supermajority support for decision-making, or 92% of those other than CEO Jen-Hsun Huang, who holds 4% of the shares. Scarcely less remarkable was the 18% (or 19%) backing for a proposal calling for transparency around the greenhouse gas emissions caused by the use of Nvidia’s chips. US supermarket Kroger (AGM 25th June) was also pressed for disclosure on greenhouse gas emissions; again, 18% backed this call.

Dell Technologies (AGM 25th June) is another of the companies seeking to redomicile to management-friendly Texas. The headline 3% opposition to this move sounds negligible but given the skewed voting rights wielded by chair and CEO Michael Dell and Silver Lake Capital (they hold essentially all of two classes of shares each enjoying 10 votes each) this was actually more like 49% of the wider shareholder base. Similarly, a vote against executive pay of 3% looks nearer to 48% of the independent investors. While Dell received a relatively modest $3 million, COO Jeffrey Clarke enjoyed an option award of $132 million, taking his pay to over $154 million. Lead independent director Ellen Kullman seems to have carried the bulk of the formal blame for the skewed governance structures, with 3% (47%) opposing her re-election; Dell himself faced 2% (28%) opposition.

Electric truck maker Rivian (AGM 22nd June) decided that its founder and CEO Robert Scaringe needed an incentive package of more than $400 million (paying him 4458 times that of the average employee). 33% of shareholders disagreed with this – or 63% setting aside Scaringe’s own existing shareholding (he’s the only holder of the 10-times voting right B shares) and assuming that Amazon and Volkswagen (which respectively hold 13% and 12% of the A shares) supported the proposal. Karen Boone, the sole member of the compensation committee up for re-election, faced 19% (or 35%) opposition. 

Volkswagen (AGM 18th June) itself has one of the most skewed voting structures of any corporate, with the most actively traded preference shares holding no votes at all and the voting ordinary shares held very tightly. The Porsche/Piech family retains 53% of the storied German carmaker, the state of Lower Saxony 20% and the nation of Qatar 17%, leaving under 10% in free float. The formal discharge from responsibility of two family members, Hans Michel Piech and Wolfgang Porsche, were the least popular resolutions with the 3% opposition looking more like 82% once the major shareholders are set to one side. Performance is struggling and even the re-election of longstanding chair Hans-Dieter Potsch (who also happens to be CEO of Porsche) faced 2% (or 37%) votes against, with a similar vote opposing the remuneration report. A proposed settlement with the company’s insurers with regard to the dieselgate scandal – which would among other things avoid claims against current and former management and supervisory board members – also proved highly unpopular, with the 3% vote against looking more like 62% opposition from outside shareholders.

All the board candidates at fintech Block (AGM 16th June) faced significant opposition, though the varying levels of opposition may suggest mechanical voting approaches by investors rather than the application of clear judgement. The chair of the payment services company’s governance committee, Amy Brooks, and its lead independent director, Roelof Botha, faced the biggest votes against, with 17% and 13% opposition respectively, or 43% and 32% once the votes of the founders are excluded (they wield 53% through holding a 10-vote share class). Those differential voting rights and the fact that not all the board stands for election each year seem to have driven these voting decisions – plus Botha, a Sequoia Capital partner, looks busy. Meanwhile, Shawn Carter – better known to many as rapper Jay-Z – faced 8% (or 19%) opposition. Least opposed was James McKelvey, with 6% (15%) votes against. McKelvey is supposedly independent, but as a co-founder of the business alongside Jack Dorsey (‘Block Head and Chairperson of the Board of Directors’) who personally wields 10% of the votes, this seems a peculiar description, and a peculiarly low opposition when compared to the other votes. In addition, 4% of investors backed a call for a board-level technology committee; at 11% of the non-founders this is unusually high support for that form of structural governance resolution and perhaps reflects concerns about a lack of oversight of cyber and AI risk and other emerging issues.

An example of more typical voting on a shareholder proposal to add a board committee on a specific topic was the 6% support at East Japan Railway (AGM 19th June) for the establishment of a board safety advisory committee. Rival West Japan Railway (AGM 18th June) faced two shareholder proposals, both essentially on community relations and both also receiving around 6% support.

That’s it for this edition, and for this run, of MSVs. We’ll return in October with more Most Significant Votes, particularly from the Southern Hemisphere voting season.

Do remember to subscribe so as not to miss an issue when we return!