Reflections on the proxy voting season: Q2 2021

If we look back on the trends in a very busy second quarter in the UK corporate AGM calendar, the one that stands out is pay. And the message being sent to companies is very clear: shareholders are not going to let you get away with discretionary pay decisions (which only seem to be upwards in nature) in the current climate.

This voting season was very different – the period under scrutiny was 2020, a time when different companies and sectors faced different challenges and opportunities.

Voting in action

  • It may feel counterintuitive to vote against the pay package at AstraZeneca for example – of course the company should be applauded for its vaccine work. However, does that mean that the chief executive’s variable pay opportunity (this consists of an annual bonus and a long-term incentive scheme for the CEO in this instance, and is in addition to fixed pay such as his salary)  should increase from 650% of salary to 900%?  Nearly 40% of shareholders who voted were against the proposal.
  • At the Wm Morrison AGM, just over 70% of shareholders voted against the remuneration report. The supermarket felt that exercising discretion was justified given the actions that it had taken during the pandemic and of course as consumers, we are all very grateful to the supermarket workers who kept us supplied with pasta and toilet rolls. However, whilst Wm Morrison’s actions were laudable, the decision to exercise discretion over bonuses was out of step with the wider sector.
  • It was a slightly different decision for us at the Whitbread AGM.  We decided to support management, whilst a significant proportion of other shareholders chose not to. In this case, Whitbread, who had a very different challenge to AstraZeneca or Morrison during this period (hotels and eating places weren’t exactly open for business through a lot of this period) – decided to roll over the 2020/21 bonus to 2021/22 and set specific metrics around its payment. The company is not entirely off the hook – our view is that we will give it the benefit of the doubt and see what happens next year.

Covid-19: a valid reason or lingering excuse?

The clear message to companies was that we’re all bored of the excuse being given as Covid-19 – how often do you still hear that when you’re trying to get through to a call centre? It’s also not as simple as saying we didn’t accept furlough money and so on; companies cannot be seen by investors to be using this situation to ‘game’ the already complex remuneration frameworks.
For shareholders, the AGM season can sometimes feel ineffectual – significant votes against companies do not necessarily mean that the action is rescinded. However, the key elements are engagement, and showing boards that certain behaviours will be scrutinised and will not be tolerated.

To read more on the objectives and outcomes of our engagements and votes over the last quarter, you can view the full report here.

Written by

Gemma Woodward
Executive Director and Director of Responsible Investment
Greg Kearney
Responsible Investment Analyst
Nicholas Omale
Responsible Investment Analyst

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