Most Significant Votes (w/e 21st November)

By Paul Lee

Welcome back to Most Significant Votes! Normal service is resumed as we look back over the past fortnight to identify the key AGM decisions that matter to asset owners and on which they may wish to hold their fund managers accountable. This is the Southern Hemisphere voting season and we consider votes from there, as well as the smaller number of Northern Hemisphere companies holding meetings at this time.

Probably the fortnight’s most interesting meeting wasn’t in Australia, though the management retains an Aussie twang through the company’s American drawl. Even following the $3.3 billion buy-out of three Murdoch siblings, US media firm Fox (AGM 14th November) remains firmly in family control, with economic ownership of around 19% of the capital but 36% of the votes through a dual share structure. Lachlan Murdoch, now chair and CEO of the company, nonetheless faced a 17% vote against his re-election, which looks more like 29% of shareholders other than his own family vehicle (named LGC for himself and his two young half-siblings Grace and Chloe). Long-term Murdoch business associate Chase Carey holds the role of lead independent director but it appears that 18% (32%) of investors have questions about his independence. And Paul Ryan, as chair of the corporate governance committee, seems to be being blamed for the dual-class share structure: 24% (41%) opposed his election. Ryan, former speaker of the US House of Representatives, is one of two former leading politicians on the board; Tony Abott, budgy-smuggling ex-prime minister of Australia, fared much better, with only 3% (6%) votes against. A shareholder proposal urged that the pay ratio between the CEO and the average worker (currently 327:1 even though median pay exceeds $100,000) be considered as part of executive pay structures. This garnered just 4% (7%) support.

Smaller Australian media player Nine Entertainment (AGM 7th November) also faced opposition on pay. Its remuneration saw an 18% vote against – or more like 25% if the shareholding of Bruce Gordon and associates are excluded (just under 20% – we assume they cannot vote the shares attaching to the swaps that bring their economic interest to 25%). The headline vote against Nine’s remuneration report last year was 37%, meaning it faced a potential vote to remove the whole board, but was saved from this by the headline result being under 25% this year. The 16% vote against pay awards to the newly appointed CEO look more like 21% of institutional investors. Mike Stanton, the new CEO, appointed as part of the clean-up of a culture crisis at the firm, will receive A$5.2 million for on-target performance, an increase on his predecessor’s pay.

Media is also among the activities (which also stretch to building materials and equipment rental) of Australian conglomerate SGH (AGM 13th November). SGH faced a significant vote against its remuneration report, with 20% opposition. However, setting aside the 51% shareholding of Kerry Stokes and his associates, this looks more like 49% opposition from institutional investors. In a similar way, the opposition to the proposed award of shares to the MD and CEO – who just happens to be Stokes’ son Ryan – looks rather worse once the Stokes votes are put to one side: 18% rather than the headline 7%. Stokes fils received his maximum incentives, both short- and long-term, leading to a total A$7.6 million reward.

The reverse happened at miner Northern Star Resources (AGM 18th November). Even though its remuneration report was passed with only 4% opposition, the two resolutions regarding incentives for CEO Stuart Tonkin faced significant votes against: 36% against the long-term award and 31% against the short-term. Tonkin’s total reward might reach nearly A$10 million, and 20% of the A$4.4 million long-term award has no performance hurdle and only requires that Tonkin is still employed at the end of the 3-year period.

There was an oddity at miner New Hope (AGM 20th November), which only two weeks ago made the unusual step of splitting a resolution proposing changes to its constitution in two, separating out a proposal to enable virtual AGMs which was facing opposition from investors. The aim was clearly to ensure that the broader changes weren’t stymied by that opposition. In the end, both resolutions passed with the required 75% majority – but the one specifically on virtual meetings only did so because of the support of 39% shareholder Washington Soul H Pattinson, as the headline 13% opposition looks more like 35% of those other than that company.

There were two so-called ‘say-on-climate’ proposals this week – management resolutions seeking investor backing for climate plans or reported progress. South Africa’s Sasol (AGM 14th November) remains one of the world’s most carbon-intensive companies, principally through its heavily emitting coal-to-liquids Secunda plant. The company this year put its climate change mitigation and adaptation strategy up for shareholder vote, which faced 33% opposition (including 21% abstentions). Australian power producer Origin Energy (AGM 15th November) sought support for its climate transition action plan. 18% of investors were not prepared to back this, 14% of them abstaining.

Like Woolworths, its Australian supermarket peer that we reported on last time, Coles Group (AGM 11th November) faces NGO allegations that its sourcing of salmon from Tasmania’s Macquarie Harbour threatens the extinction of the Maugean Skate. A shareholder resolution calling for the company to adopt a seafood sourcing policy that meets global best practices received 14% support.

Finally, there were ugly vote results at a pair of US beauty firms. Coty (AGM 6th November) has not been one of the finest investments by JAB Holdings – the vehicle for the Reimann family, which prospered as it built Reckitt Benckiser but has delivered less well since – which holds 52% of the shares, with the share price more than halving in the last year. The discrepancy between performance and the pay for CEO Sue Nabi – who received just shy of $20 million last year, 412 times the average worker, probably drove the large vote against pay: 24%, or 71% of the investors other than JAB. Nabi is still within the life of a $150 million incentive award from 2023, which will continue to be released until 2027. She herself faced the largest opposition of any director, which is extraordinary for a CEO: the 8% vote against her looks more like 24% of non-JAB shareholders. Coty chair, and eminence grise of JAB, Peter Harf, faced a very similar level of opposition.

The Lauder family controls both the board and the votes at rival beautician Estee Lauder (AGM 13th November) – through the 10 times voting power Class B shares, it wields 84% of all votes. Thus, the 5% vote against the election of scion and chair William Lauder is around 41% among those who don’t share his surname. Family member Eric Zinterhofer has newly joined the board; 4% (34%) of investors weren’t supportive. And the 9% vote against the pay for executives looks more like 68% once the family votes are excluded. Even without receiving a bonus, new CEO Stephane de La Faverie was paid $9.6 million last year; investors clearly struggle to understand how this makes sense in the face of falling sales, share price, and losses. Reported as $13.4 million on an annualised basis, La Faverie's pay is 352 times that of the average worker at the company.

That’s it for this fortnight. We’ll be back with Most Significant Votes in two weeks’ time, on December 5th.

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