UU����ֱ��

As the 2022 AGM season draws to a close, Market Tracker has reviewed AGM voting results to form a holistic picture of shareholder dissent as the season progressed. In this analysis, shareholder dissent is calculated using the quantifiable concept of the ‘significant no vote’, which is a resolution tabled at an AGM that received at least 20% of votes cast against it. This threshold of 20% is shared by the Investment Association (IA)’s public register of shareholder dissent and Provision 4 of the for the purposes of reporting investor opposition to resolutions.

The number of significant no votes can either be examined at the ‘company’ level or the ‘resolution’ level. The company level examines companies that have suffered at least one significant no vote at their respective AGMs, irrespective of the number that they have suffered. In contrast, the resolution level takes into account that companies can suffer multiple dissenting votes at their AGMs. As of 31 July 2022, out of the 65 companies that received at least one significant no vote during the 2022 AGM season, 26 of them (40%) suffered multiple. The resolution level therefore counts the number of resolutions receiving significant no votes, rather than the number of companies receiving at least one.

Dissenting votes at the company level

One of the main findings from Market Tracker’s recently published Trend Report: was that the percentage of FTSE 250 companies receiving at least one significant no vote was likely to fall below that of the FTSE 100. Market Tracker’s earlier 2021 AGM season Trend Report: The evolving AGM: adapting to change - Market Tracker Trend Report also found that the gap was closing between the FTSE 100 and FTSE 250 with regards the percentage of companies receiving at least one significant no vote.

As of 31 July 2022, 26 out of 98 FTSE 100 companies (26.5%) had received at least one significant no vote at their AGMs. In comparison, for the FTSE 250 it was 39 out of 168 (23.2%). This finding therefore corroborates the predictions of our last two AGM Trend Reports, marking the first time in four years that dissent at the company level has been higher for the FTSE 100 than the FTSE 250.

The main reason as to why this is seems to be a sharp decline in the number of FTSE 250 companies suffering significant no votes (39 compared to 53 during the 2021 AGM season), as opposed to any increase on behalf of the FTSE 100, which also saw a percentage point decline in companies suffering significant no votes. Of particular note is that during the 2021 AGM season, FTSE 250 companies made up 78.9% (30 out of 38) of those that had received at least one significant no vote against director re-elections. During the 2022 AGM season so far, this has fallen to 52.9% (9 out of 17).

Individual resolutions and dissent ratios

As of 31 July 2022, there were 36 significant no votes against resolutions at the AGMs of 98 FTSE 100 companies. In comparison, the FTSE 250 received 64 significant no votes against resolutions at the AGMs of 168 companies. In order to compare the two indices, it is possible to calculate a ‘dissent ratio’ by dividing the number of significant no votes by the number of companies that have disclosed their AGM results. This gives a dissent ratio of 0.367 and 0.381 for the FTSE 100 and FTSE 250 respectively for the 2022 AGM season so far. In other words, both the FTSE 100 and the FTSE 250 suffered just over one significant no vote per every three companies that disclosed their AGM results.

Although a dissent ratio for the 2022 AGM season makes it possible to contrast shareholder opposition within the FTSE 100 and FTSE 250, it is also interesting to break down this ratio on a monthly basis in order to make it easy to see where the main spikes of investor dissent per meeting were during the season. If the monthly dissent ratio is taken cumulatively (ie takes into account the months that came before it), it is possible to get an overall picture of FTSE 100 and FTSE 250 dissent, as AGM results were being disclosed.

It can be discerned from the graphs above that there have been multiple times during the 2022 AGM season where the cumulative dissent ratio per month of the FTSE 100 was higher than that of the FTSE 250. As a general trend for the season so far, it seems that FTSE 250 overtook the FTSE 100 in early 2022, before falling back to roughly equal as the season started to pick up in April–May 2022. The initial FTSE 100 spike was due to ’s AGM on 17 September 2021, which saw three significant no votes against its remuneration report, remuneration policy and long-term incentive plan during a month when only four FTSE 100 AGM results were disclosed. In comparison, the FTSE 250 peak in February 2022 was due to an especially poor month for the index, in which it suffered a dissent ratio of 1 (11 significant no votes at 11 disclosed AGMs). Four of the FTSE 250 companies saw multiple significant no votes, including three at , and and two at .

There are many ways that dissent ratios can be applied. Perhaps more useful than the difference between the indices, is examining the dissent ratios for the respective industry sectors during the 2022 AGM season.

Travel, Hospitality Leisure & Tourism was at the head of the pack, with a dissent ratio of 0.944 (ie, the industry sector suffered almost one significant no vote per disclosed AGM result). In contrast, the dissent ratio for the sector during the 2021 AGM season was a massive 1.773, largely owing to shareholder revolts at the and AGMs, which saw the companies suffer 11 and 9 significant no votes respectively.

This result echoes the findings of Market Tracker’s earlier 2021 AGM season Trend Report: The evolving AGM: adapting to change - Market Tracker Trend Report, which discerned that Travel, Hospitality Leisure & Tourism had been the industry sector with the most companies suffering at least one significant no vote for the past three AGM seasons running (2019: 9; 2020: 8; 2021: 14). The 2022 AGM season has so far seen 17 significant no votes at eight companies for the Travel, Hospitality Leisure & Tourism sector, once again putting it at the top of the list this year, albeit by a smaller margin than the 2021 AGM season.

General trends of shareholder dissent

Much of the above analysis alludes to an AGM season that has seen less shareholder dissent than the one that preceded it. This was another of the main predictions of the Trend Report, which stated that ‘shareholder dissent for the 2022 AGM season is likely to be considerably lower than that of the 2021 AGM season’. This is indeed likely to be the case, with the FTSE 350 suffering a total of 100 significant no votes as of 31 July 2022, as the 2022 AGM season draws to a close—a 35.9% decline on the 2021 AGM season, which saw 156 significant no votes. Even the average percentage opposition for significant no votes is lower for the 2022 AGM season than its predecessor—31.8% compared to 34.0%. The 2022 AGM season is unlikely to close these gaps with the few remaining AGMs that are yet to take place later this year.

There is a myriad of possible reasons as to why dissent may be lower this season. Following the coronavirus (COVID-19) pandemic, it is possible that it is representative of a slow return to corporate governance normality in the UK, as the increased investor scrutiny that accompanied the winding-down of the pandemic ends along with the temporary restrictions imposed to combat the virus. Taking executive pay as an example, the 2022 AGM season has so far seen 27 significant no votes against remuneration reports and eight against remuneration policies. This is much more in line with the 2020 AGM season’s respective 26 and 15 than the 2021 AGM season’s 37 and 18. Many shareholders took issue with executive bonuses during the 2021 AGM season if the companies in question had posted poor results, withdrawn dividends or had failed to pay back furlough payments and other monetary support provided by the government during the pandemic.

David Pudge, Partner at Clifford Chance, provides his own analysis of the 2022 AGM season:

‘Given the predictions for increased shareholder opposition at AGMs in 2022, many companies were braced for a bumpy time but the reality turned out to be less challenging than many of them had anticipated. In large part this was due to more companies being perceived to be striking the right balance on remuneration and to a lesser extent companies taking a more proactive approach in relation to climate-related issues, by engaging with climate interest groups to address their concerns and proposing their own say on climate resolutions. The Russian invasion of Ukraine also resulted in less institutional shareholder support for more "prescriptive or extreme" climate-related resolutions, reversing the trend that we saw in 2021 where institutional shareholders increasingly supported shareholder proposed climate-related resolutions. [Although] the 2022 AGM season saw more shareholder proposed climate-related resolutions than in prior years as well as significant disruption by climate protesters at the AGMs of certain large financial institutions and oil and gas majors, something that is likely to be a feature in years to come.’ 

The 2022 AGM season has seen three shareholder requisitioned resolutions on climate change reporting fail to pass with the requisite majority at BP plc (BP), Standard Chartered plc and Shell plc (Shell), the percentage of support they each received being 14.9%, 11.8% and 20.3% respectively (an average of 15.7%). In comparison, the 2021 AGM season also saw three shareholder requisitioned resolutions on climate change reporting fail to pass at BP, Shell and Barclays plc, with 20.7%, 30.5% and 14.0% support respectively (an average of 21.7%). The average level of support for such resolutions therefore indeed did fall in 2022. However, as Will Chalk, Partner at Ashurst, pointed out in The evolving AGM: adapting to change - Market Tracker Trend Report, the fact that these resolutions failed creates a ‘misleading impression’:

‘First, there would have been more shareholder-requisitioned resolutions were it not for the fact that, after engagement, several morphed into board proposals. Second, two of the resolutions [(BP and Shell)] received sufficient support from voting shareholders such that the companies in question have to seek feedback to understand the reasons for the “dissent” and explain any actions they will take as a result.’

HSBC Holdings plc (HSBC)’s 2021 AGM is good example of this first point, with the bank to pressure from a consortium of investors led by ShareAction calling on the bank to set and publish a strategy and targets to reduce its exposure to fossil fuel assets on a timeline aligned with the goals of the Paris agreement. After what HSBC termed as ‘constructive and extensive dialogue and engagement’, the bank agreed to table its own resolution at its 2021 AGM on the subject in return for the withdrawal of the consortium’s initial shareholder requisitioned resolution. However, the following year, ShareAction HSBC of ‘breaching the spirit of the agreement’. For more information on the HSBC-ShareAction dispute, see: The letter versus the spirit—the pitfalls of resolution interpretation.

In relation to remuneration, Pudge continues:

‘Despite the general trend this year, a number of companies did find themselves on the receiving end of significant shareholder opposition with remuneration and the re-election of directors being the most contentious resolutions. The reasons for shareholder opposition to remuneration-related resolutions were more varied in 2022 than was the case last year; whilst they did still include some of the usual and Covid-related reasons, in many cases the reason was a company-specific issue.’

A good example of this is RS Group plc (RS Group)’s recent , which saw 39.2% of votes cast against its remuneration policy. It seems shareholders were unimpressed with the company’s new vision, as its name change from Electrocomponents plc was accompanied by a one-off ‘Journey to Greatness award’ (J2G award) for RS Group’s senior executives. This was in essence a long-term incentive plan (LTIP), linked to what the company termed as ‘super stretch performance targets based on EPS and strategic delivery’ and paying out up to 750% of base salary. Moreover, it was in addition to the company’s standard LTIP and bonus. For more information on the shareholder revolt at RS Group, see: RS Group’s rebranding fails to impress shareholders.

Pudge also notes that social and workplace issues have risen up the agenda this AGM season, commenting:

‘Another new development in the 2022 AGM season was interest and activism around social and workplaces issues, for example the Living Wage resolution that was proposed at the AGM of Sainsbury's plc, which is perhaps another trend to watch.’

The living wage shareholder requisitioned resolution at J Sainsbury plc received only 16.7% support at its , with the supermarket’s Board stating in its that ‘fundamentally, we believe it is right for the Company and our stakeholders to make independent decisions regarding pay and benefits, rather than have them determined by a separate external body’.

Market Tracker will continue to monitor the 2022 AGM season as its last AGM results are disclosed. A full summary of the 2022 AGM season will be published in our Trend Report later this year.