- Two vital climate-related votes will take place at oil giant, Shell’s, Annual General Meeting (AGM) later this month
- Other key meetings at the end of May include insurance company, Prudential, and luxury car manufacturer, Aston Martin Lagonda
Shareholder activism is a powerful tool for creating long-term and meaningful change and is one of the tried-and-tested ways of holding large corporates to account on key issues such as climate impact, renumeration, executive pay, and diversity and inclusion. The opportunity set for private investors is therefore huge, but the key is harnessing their collective power.
As 2022’s AGM season continues, interactive investor, the UK’s second largest private investor platform, outlines the dates for your diary in the coming weeks and the issues which will be put to shareholders.
Lee Wild, Head of Equity Strategy, interactive investor, explains: “Having a say in the companies you have a stake in is another valuable and important aspect of investing, and this can be especially important on emotive issues such as climate change. Thankfully, we are saying goodbye to the days where companies could get away with paying lip service to shareholders on climate impact, and we’re finally seeing companies being challenged thoroughly on a public stage.
“Two key climate votes at one of the world’s largest corporates, Shell, are only a week away. The first vote is an advisory poll brought by the company, and the other a special resolution tabled by Dutch activist investor and campaign group called Follow This.
“A special resolution requires at least 75% of shareholders to vote in favour, for it to pass. In this instance, Follow This are calling on Shell, and other large corporates, to ensure they are properly aligned to the goals of the Paris Agreement. This will therefore be a brilliant opportunity for shareholder scrutiny, and not one to be missed!
“Other big names facing shareholders in the coming weeks are Prudential, Aston Martin Lagonda, and The Restaurant Group, which owns a number of UK restaurant chains including Wagamama and Frankie & Benny’s. This is one to keep an eye on – as the company is likely to have a tricky meeting following its payment of annual bonuses despite receipt of furlough money from the government – showcasing shareholder power at its finest!”
Shell’s green transition plan
The first resolution: Shell’s Energy Transition Strategy progress report
The performance in 2021 included an 18% reduction in absolute emissions from its operations, compared with a target of 50% by 2030 against 2016 levels.
It also achieved its first short-term target of a 2-3% cut in net carbon intensity by the end of 2021 compared with 2016.
The second resolution: tabled by Dutch activist investor, Follow This
Follow This is urging Shell to set and publish targets that are consistent with the goals of the Paris Climate Agreement.
The activist group believes these quantitative targets should cover short, medium, and long-term greenhouse gas emissions of the company’s operations and the use of its energy products.
When: 10am, Tuesday 24 May.
Where: Central Hall Westminster, Storey’s Gate, Westminster, London, SW1H 9NH.
How to participate: As a hybrid meeting, shareholders will have the ability to vote or ask questions through a virtual AGM platform. However, the company’s preference is for votes in advance of the meeting. The deadline for the receipt of proxy voting instructions is 10am on Friday 20 May. More AGM details can be found here.
Who’s in the chair? Sir Andrew Mackenzie was appointed in May 2021, having been chief executive of mining giant BHP from 2103 to 2019.
How did the company do in 2021? Shell generated more than $45 billion (£36.4 billion) of cash flow from operations as higher energy prices and improved trading margins helped underlying earnings rebound to $19.3 billion (£15.6 billion). Net debt reduced to $52.6 billion (£42.5 billion), an improvement of $23 billion (£18.6 billion) on 2020. Share buybacks of $3.5 billion (£2.8 billion) were announced in 2021 and a fourth quarter dividend of $0.24 a share was paid at the end of March, bringing the total for the year to $0.89 cents a share.
The oil giant simplified its dual share listing structure and relocated its chief executive to the UK.
How have shares performed? Up 25% to 1,621.8p (2,240.5p on Thursday).
How much is the boss paid? Ben van Beurden’s basic salary following his transfer to UK employment has been set at £1.42 million, which includes a 3.5% increase after no change in 2021. His total remuneration for last year amounted to 7.38 million euros (£6.3 million), which included cash and shares worth 2.6 million euros (£2.2 million) through the annual bonus scheme. This paid 64% of the maximum opportunity based on performance measures including progress in the energy transition and safety. The long-term incentive scheme generated the remaining 2.8 million euros (£2.4 million), reflecting free cash flow and energy transition targets. But Shell ranked fourth on total shareholder return and fifth on cash flow from operations and return on average capital employed over the scheme’s three-year period, meaning there was a nil vesting outcome on each of these measures.
How did last year’s AGM go? The annual remuneration report was supported with 95.9% of votes in favour. Shell’s Energy Transition Strategy, which outlined how the company will become a net-zero emissions energy business by 2050, was put to a vote for the first time and backed with 88.7% of votes.
How has Shell responded to the special resolution? Shell believes its targets are already aligned with Paris goals. It warns that setting more ambitious targets to reduce Shell’s net absolute Scope 3 emissions (greenhouse gas emissions are categorised into three groups or ‘Scopes’) before its customers have changed the way they use energy would mean shrinking Shell’s customer base, mainly its marketing business.
As well as handing over to competitors who would likely continue to meet demand for oil and gas products, Shell says this would mean reducing its participation in the energy transition.
What’s the view of voting agencies? Glass Lewis is recommending shareholders abstain from the company’s advisory vote on its energy transition report. It believes the proposals challenge a basic premise of corporate governance, where shareholders elect the board and the board then oversees management and execution of the strategy.
Allowing shareholders to vote on this strategy, however, would remove some level of accountability from directors. Glass Lewis recommends shareholders vote in favour of the annual remuneration report and against the Follow This resolution on the climate change goals.
How has Shell responded to criticism of its energy transition progress vote? Shell said last week that the purpose of the vote is to provide shareholders with a vehicle to express their views on whether the company’s strategy, and progress against it, is reasonable in the current environment. It added: “Shareholders are not being asked to take responsibility for approving or objecting to Shell’s strategy, since that legal responsibility lies with the board and the executive committee.”
How is the company doing on diversity? The board composition is 55%-45% in favour of women. The company is satisfied that it currently meets Parker Review recommendations for at least one board member from an ethnic minority background.
When: 10am, Thursday 26 May.
Where: Queen Elizabeth II Centre, Broad Sanctuary, Westminster, London SW1P 3EE.
How to participate: Shareholders can join the meeting, vote and ask questions through the Lumi platform. Questions may also be submitted in advance of the AGM to firstname.lastname@example.org. The deadline for proxy voting instructions is 10am, Tuesday 24 May. More AGM details can be found here.
Who’s in the chair? Former government minister Shriti Vadera, who was appointed in January 2021.
How did the company do in 2021? Annual premium equivalent sales of $4.2 billion (£3.4 billion) were up 8% on a year earlier and lifted adjusted operating profit by 16% to $3.2 billion (£2.6 billion). Prudential demerged US-based Jackson Life in order to focus solely on Asia and Africa. Its second interim dividend of 11.86 cents a share, which is being paid today, took the total for the year to 17.23 cents a share for the full year, an increase of 7%.
How have shares performed? Down 2.5% to 1,274.5p (914.6p on Thursday).
How much was the boss paid? Mike Wells, who stepped down as chief executive on 31 March, received total remuneration of $6.6 million (£5.3 million). As well as his basic salary of $1.6 million (£1.3 million), he got $3 million (£2.4 million) based on 96.7% of the maximum opportunity in a short-term bonus scheme and $1.3 million (£1.05 million) from the vesting of long-term incentives. Chief operating officer Mark FitzPatrick, in charge while the company searches for an Asia-based boss, got a total of $3.9 million (£3.15 million).
What’s happening to remuneration after the strategy overhaul? Performance metrics have been adjusted to account for the Jackson demerger in September. Prudential is planning a new remuneration policy for the 2023 AGM, which will focus on the recruitment and retention of top talent in Asia and Africa within the constraints of a primary UK listing.
What’s the view of voting agencies? Glass Lewis recommends shareholders vote in favour of the annual remuneration report.
How did last year’s AGM go? The directors’ remuneration report was backed with 94.7% of votes in favour.
Is there a climate-related vote? No. As an asset manager and owner in regions forecast to be severely impacted by climate change, Prudential has a major role to play in the transition to a low-carbon economy. Last year, it announced plans to decarbonise its portfolio of assets held on behalf of its insurance companies, with a goal of becoming net zero by 2050.
How is the company doing on diversity? Board composition at the end of last year was 40% female, although this is due to fall to 33% following the AGM. The company meets the Parker Review recommendation to have at least one director from an ethnic minority background.
The Restaurant Group
When: 11am, Tuesday 24 May.
Where: Company head office, 5-7 Marshalsea Road, London SE1 1EP.
How to participate: Proxy voting forms must be returned by no later than 11am, Friday 20 May. More AGM details can be found here.
Who’s in the chair? Ken Hanna, the former Inchcape and Aggreko chair, has been in the role since January.
How did the company do in the year to 2 January? The Wagamama, Frankie & Benny’s and Brunning & Price business reported market outperformance in the period since it reopened to diners in May last year. Total sales of £636.6 million compared with £459.8 million the year before and led to adjusted profits of £16.6 million, up from a loss of £47.9 million in 2020.
How have shares performed? Up 47% to 94.3p (51.2p on Thursday).
How much is the boss paid? A pay rise of 2.4% awarded in April has taken Andy Hornby’s basic salary to £658,000. A short-term bonus worth £578,000, half of which is deferred into shares with a three-year vesting period, took his total remuneration to £1.2 million.
What’s the view of voting agencies? Glass Lewis recommends that shareholders vote against the annual remuneration report. It said: “We remain concerned by the payment of a bonus award given the overall stakeholder experience over the period and the company’s receipt of furlough money from the UK government during the year which, to the best of our knowledge, has not been repaid.”
How has the company responded? Restaurant Group said its bonus awards reflected the successful debt refinancing and strong trading since reopening. It reduced the awards earned by 40%, capping them at 60% of the maximum to reflect the pandemic and receipt of significant support from the UK government. It pointed out that 2019 bonuses, which were already earned and about to be paid, were voluntarily waived by executive directors in March 2020 and that no bonuses were awarded in respect of 2020 trading.
How did last year’s AGM go? The remuneration report was approved with just over 80% of votes in favour.
Is there a climate-related vote? No. Details of the company’s environmental policies and practices and commitment to sustainable and ethical sourcing are contained in the annual report.
How is the company doing on diversity? The board comprised five men and two women at the start of 2022. The company has pledged to ensure it is in compliance with Hampton-Alexander recommendations during 2022. The business also has no director from an ethnic minority background, either on the board or among its divisional heads. It has pledged to develop a pipeline of candidates and mentoring schemes in order to work towards compliance with the Parker Review recommendations.
Aston Martin Lagonda
When: 10am, Wednesday 25 May.
Where: Freshfields Bruckhaus Deringer LLP, 100 Bishopsgate, London EC2P 2SR.
How to participate: The deadline for the return of proxy voting forms is 10am, Monday 23 May. More AGM details can be found here.
Who’s in the chair? Canadian billionaire Lawrence Stroll, the F1 financier who became executive chairman as part of significant investment by a consortium in April 2020.
How did the company do in 2021? Revenues rose 79% to £1.09 billion after significant growth in the Americas and record sales in China, driven by strong DBX demand. The operating loss reduced to £76.5 million despite increased investment in brand and marketing activities, while the bottom-line loss narrowed by 54% to £213.8 million.
How have shares performed? Down 33% to 1,353p (689.2p on Thursday).
How much was the boss paid? Tobias Moers, who left the company earlier this month, was on an annual salary of £875,000. He did not receive a bonus for the last financial year as the threshold level for underlying earnings was not achieved. His successor is ex-Ferrari boss Amedeo Felisa, whose appointment as chief executive was disclosed after the publication of the annual report.
How did last year’s AGM go? The directors’ remuneration report was approved with 81.8% of votes in favour, with some shareholders reportedly unhappy that Moers received £142,000 or 20% of his maximum bonus opportunity after the remaining financial element of the scheme was removed due to the impact of Covid-19.
What’s in the new remuneration policy? The company is not proposing to make any changes to the quantum and incentive limits, which will include a short-term bonus of 200% of salary for the role of chief executive. This rises to 300% for the long-term incentive scheme, which will this year return to having a two-year post vesting holding period.
What’s the view of voting agencies? Glass Lewis has recommended shareholders support the advisory vote on the remuneration report and the binding vote on the new three-year remuneration policy.
Is there a climate-related vote? No. A report under the Taskforce on Climate-Related Financial Disclosures appears in the annual report. The business is committed to being net-zero in its manufacturing facilities by 2030.
How is the company doing on diversity? The company admits that gender balance on leadership positions remains an area for further improvement. It has set a target that at least 25% will be occupied by women within the next five years. There are currently three women on its 11-strong board, or 27%. It has pledged to meet the Parker Review recommendation for at least one director from an ethnic minority background by the end of 2024.
Where are the barriers to voting?
As part of ii’s ongoing shareholder activism campaign, the platform explored where the biggest barriers are for private investor access to AGMs.
Voting at AGMS has never been easier for interactive investor customers since the platform opted in customers to its voting and information service in November 2021, where previously customers had to proactively opt in (they can still opt out, if they wish).
ii customers are notified when they are eligible to place a vote via ii’s ‘voting mailbox’ service online (unless you unsubscribe from the service), as well as being notified of shareholder events, such as AGMs.
But ii argues that much more work is needed to make AGMs more accessible to retail investors.
In a flash poll* conducted on ii’s website between 30 March – 01 April, over 1,000 people were asked what would make it easier to vote at AGMs. Over a quarter of respondents (26%) believed online investment platforms should step up and make it easier to vote.
A further 26% of respondents felt that listed companies themselves need to start communicating better to help investors understand the issues: ‘more information on the resolutions themselves’, and ‘simpler language to make resolutions clearer’, got 16% and 13% of the vote, respectively. Some 6% said voting by app would make things easier.