Most Significant Votes (w/e 7th November)

By Paul Lee

Welcome back to Most Significant Votes! For the second time this voting season we bring you 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’ll consider votes from there, as well as the smaller number of Northern Hemisphere companies holding meetings at this time.

Greedy for attention as well as money, Elon Musk will have been delighted by events yesterday at Tesla (AGM 6th November), and by the media coverage they garnered. We know that the world record shattering, extraordinary $1 trillion incentive scheme for Musk passed, reportedly with 75% support, as that was announced (and celebrated) at the AGM, but we await the formal release of the overall results. We’ll cover those fully next time.

To move to meetings where we do have details of the results, we’ll start with a scarcely less remarkable AGM. James Hardie (AGM 30th October) still operates as an Australian company even though it is legally incorporated in Ireland these days, and speaks with an increasing American accent. Until now, the building materials firm has perhaps been best known for being wrapped up in asbestos scandals for many years; now, it has the further dubious distinction of seeing 6 management resolutions defeated at a single AGM. Its latest controversy is of its own making: a A$14 billion merger with US decking firm Azek, which was not put up for shareholder approval as many thought it should have been and which has been a major cause of the share price plummeting by a third this year. Further, the board has done little to assuage investor anger and concern. Their frustration boiled over at the AGM, with no fewer than 3 directors, including the chair, ousted (Anne Lloyd, the chair, facing 67% votes against). Two of the three who were elected faced more than 40% opposition. It’s extraordinarily rare to see individuals voted off in the absence of rival candidates, and generally they choose to step aside ahead of the meeting rather than face the embarrassment of the formal vote. Whether Lloyd, Rada Rodriguez and Peter Davis regret their decisions is uncertain. Against that cataclysm, the defeat of 3 further resolutions, all related to pay, seems more mundane, but seeing a remuneration report opposed by 66% of investors remains remarkable; 51% opposed share awards to the CEO based on ROCE performance; and 59% declined to support an increase in the fee pool for non-executive directors (though with fewer of them now in place, there will be more money to go around in any case!).

Though in comparison it may not seem it, there was a stunning vote on pay at biotech firm CSL (AGM 28th October), with 43% opposing the remuneration report. This was an extremely rare occurrence – a second vote above 25% against the report in two years (it was 27% last year), meaning that Australia’s so-called ‘board spill’ resolution was triggered, which could have led to the ousting of the entire board. The vote to support this, though, was a damp squib, with only 2% backing it. Furthermore, with only 5% voting against the share awards for CEO Paul McKenzie (it was 23% last year), it seems that investor concerns are more backward- than forward-looking: they tend to the view that the company has been excessively generous in a year when the it has hit strategic problems, not least with a recent profit warning and the pulling of a planned separate listing for CSL’s vaccine business. McKenzie was paid US$9 million last year, 10% more than the prior year – which the company reports as around 70% of median CEO pay at (predominantly US) peers.

The chunky 17% opposition to the remuneration report at Woolworths (AGM 30th October) is limited by comparison. But the Australian supermarket chain also faced 4 substantive shareholder resolutions, all of them seeking greater nature protections in the retailer’s supply chains. Two were regarding salmon sourcing from Macquarie Harbour in Tasmania, where fishing threatens the survival of the Maugean Skate; the resolution seeking more reporting in this regard was by far the most welcomed by investors, gaining 35% backing, while a resolution seeking a change in policy to meet leading practices was supported by 16%. A call that beef be acknowledged as a significant deforestation risk in Australia won 14% support. Least well backed, at 7%, was the request to remove the Program for the Endorsement of Forest Certification as an acceptable mark of timber that the store will purchase, because of alleged weaknesses in that particular standard.

The headline voting on the remuneration report at miner Fortescue (AGM 31st October) is also striking, with 32% abstaining – but this is predominantly the major shareholding of executive chair Andrew Forrest (such key management personnel must abstain). This means that the 10% votes against the share awards to each of the co-CEOs (each paid A$7.5 million), were stronger messages from investors: assuming all the shares attributable to Forrest and his family voted in favour, these look more like 18% opposition from institutions.

Just as was the case at ASX in our last issue, a new director at insurer Insurance Australia Group (AGM 23rd October) – more usually known as IAG – was welcomed with a sizeable vote against. Around 13% of investors voted against the appointment of JoAnne Stephenson; and, just as at ASX, it appears that this was mostly down to independence concerns given her history at KPMG, the company’s auditor. Meanwhile, 24% of shareholders opposed an increase in the pool of money available to pay non-executives, from A$4 million to A$4.7 million.

Elsewhere, South Africa’s Impala Platinum (AGM 30th October) – more usually known as Implats – also faced a big vote against pay, with 33% against the remuneration report and 11% against the policy. CEO Nico Muller was paid R53 million; 78% of staff earn less than one-hundredth of that. Shareholders may also have been disquieted at the payment of significant incentives in spite of 8 fatalities at the company’s operations (even if this was a reduction on the prior year’s 19 deaths). Unusually, the company discloses the Gini coefficient (an economics measure of inequality) of its overall pay distribution: at 0.3 it says this is below its mining peers (nearer 0.4), and the national benchmark of 0.44, indicating that Implats is more equal than others in what is a deeply unequal society.

The data centre world doesn’t do things by half. Current multi-billion investments into that infrastructure, to power AI activity and cloud computing, make it the world’s centre of investment attention. Excitement about the opportunity blew off course a proposed all-share merger between two of the globe’s leading providers, worth $9 billion at announcement but rather less after share price falls. A remarkable 92% of Core Scientific (EGM 30th October) investors opposed the proposed deal with peer CoreWeave – including 9% abstentions – and were even less on the fence about pay for the executives in relation to the deal: 96% opposed (2% of those abstaining).

That’s it for this fortnight. We’ll be back with Most Significant Votes in two weeks’ time, on November 21st.

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