Interactive Investor

Your vote counts: a FTSE 100 pair breaking new ground

30th April 2021 10:05

Graeme Evans from interactive investor


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Several blue-chip companies stage AGMs next week, but two of them really stand out. Here’s why.

Annual meetings for Unilever (LSE:ULVR) and Aviva (LSE:AV.) will next week see the FTSE 100 companies break new ground by asking shareholders to vote on their approaches to tackling climate change.

The Ben & Jerry's and Hellmann's maker Unilever says that its AGM on Wednesday will be the first time that a major global company has voluntarily put its climate transition plans before a shareholder vote.

Its plan sets out the steps the company is taking to reduce emissions within its operations and across its supply chain. It also describes how the company is integrating climate change considerations into its products and brands.

The plan will be updated on a rolling basis and Unilever will seek an advisory vote every three years on any material changes made or proposed to the plan. The first year the company will report on its annual progress will be 2022.

The company's science-based targets include zero emissions from its own operations by 2030 and a 50% reduction in the average footprint of its products by 2030. A further net zero target has been set for 2039 relating to the emissions from sourcing to point-of-sale.

The Anglo-Dutch company believes that the increased transparency and accountability will strengthen dialogue with shareholders and encourage other companies to follow suit.

Chief executive Alan Jope told shareholders recently: "Climate change is the most pressing issue of our time and we are determined to play a leadership role in accelerating the transition to a zero carbon economy.”

Aviva leads the way for insurance industry

Aviva, which holds its AGM on Thursday, will be the first insurer to put its climate-related financial reporting before a vote of shareholders.

The company's Aviva Investors division has been a strong advocate for listed companies to publish consistent information on climate risks and the impact on their businesses.

Aviva's own 2040 net zero plan involves a 25% cut in the carbon intensity of investments by 2025 and 60% by 2030, the same year as it is seeking net zero emissions on its own operations and supply chain. Progress towards this target will be tracked through annual, public reporting and the company has also signed up to the international Science Based Targets initiative.

The AGM vote will focus on the company's adherence to the Financial Stability Board’s Taskforce for Climate-related Financial Disclosure, which Aviva Investors was involved in shaping in 2017.

Voting advisory group Institutional Shareholder Services (ISS) has recommended that shareholders vote in favour of the resolution.

It said: “The company has provided thorough information concerning its climate-related considerations and provided shareholders with a basis to understand how it is managing its climate-related risks and opportunities.”

Barclays faces climate change challenge

Meanwhile, the Barclays (LSE:BARC) AGM on Wednesday will see the banking giant face a challenge on fossil fuels for the second year in a row.

This year's special resolution, which is being coordinated by environmental lobby group Market Forces, calls for the bank's financing and exposure to coal, oil and gas to fall in line with the Paris Agreement’s climate goals.

Despite several alterations to policy related to climate change made after last year’s AGM, Markets Forces says that Barclays hasn’t gone far enough. Between January and September 2020, it said the bank financed another $24.6 billion (£17.7 billion) to fossil fuels, an increase on the equivalent time period the previous year.

Last year's resolution by ShareAction was supported by 24% of the votes cast, although a separate motion concerning Barclays's commitment to climate change was unanimously passed in favour of the company's approach.

Recommending that shareholders vote against this year's resolution by Market Forces, Barclays chairman Nigel Higgins said the bank needed to adopt a consistent approach with clients, allow time for dialogue and to monitor the effectiveness of its approach.

He added: “We are not in favour of policies which “phase out” energy clients, in particular those whom we expect to play a major and beneficial role in the energy transition.”

Several other FTSE 100 companies are due to stage AGMs next week, with the meetings of GlaxoSmithKline (LSE:GSK) and Anglo American (LSE:AAL) among Wednesday's highlights and the AGM of InterContinental Hotels Group (LSE:IHG) taking place on Friday.

Glaxo's pay report is flagged for approval by ISS, with the advisory group noting that bonus outcomes for chief executive Emma Walmsley and other directors are at an appropriate level following the company's underwhelming earnings performance last year.

Recent votes saw big protests at British American Tobacco (LSE:BATS) and London Stock Exchange Group (LSE:LSEG), with the tobacco manufacturer suffering a big AGM revolt for the second year running.

More than 38% of votes cast at BAT's AGM were against the remuneration report following a big jump in the pay of chief executive Jack Bowles. At LSE, the new £1 million base salary of CEO David Schwimmer was the trigger for 24% of shareholder votes going against the company.

BAE Systems (Thursday 6th May)

Fears that chief executive Charles Woodburn might leave for another big FTSE 100 company have prompted the defence giant to put in place a “golden handcuffs” pay deal.

BAE Systems (LSE:BA.) says its additional efforts to retain his services are justified by the challenge of finding a new leader who is British and with the experience to play an important role in the defence and security interests of the UK, US, Australia and Saudi Arabia.

A two-step adjustment has increased Woodburn's salary by 13.5% to £1.1 million, while he also stands to receive a £2 million long-term share award if he stays at BAE for three years.

Institutional Shareholder Services noted the complexity and intricacies behind the special arrangement but said the measures put in place were still well outside market norms.

It added: “One-off pay awards to address retention concerns have frequently been shown to be ineffective, and are therefore not typically supported.”

Woodburn has been at the helm since 2017, over which time the company said that considerable progress had been made in meeting BAE's strategic priorities. The board decided to review Woodburn's pay arrangements after he received an approach in the final quarter of 2020, reportedly from mining giant Rio Tinto.

BAE said: “The offer, which resulted from a discussion regarding a potential non-executive role, was unsolicited, attractive, and provided a material opportunity to expand his career horizon and improve his immediate and long-term financial reward.”

The company said it was mindful that two other senior roles had only recently been filled in the last 12 months and that the UK government's Special Share meant that the chief executive must be a British citizen and have the highest level of security clearance.

BAE says its subsequent engagement with leading shareholders representing about 60% of shares had shown them to be positive and broadly supportive of the decision.

However, another proxy voting advisory service Glass Lewis has recommended shareholders vote against the company's remuneration report, arguing that the arrangements should be subject to additional performance criteria.

Indivior (Thursday 6th May)

The appropriateness of long-term share awards due to the pharmaceutical company's imprisoned former chief executive is an unusual matter for shareholders to consider.

Shaun Thaxter is nearing the end of his six-month jail term in the United States after pleading guilty to a misdemeanour charge relating to the company's marketing of its blockbuster opioid addiction treatment Suboxone Film.

He stepped down as Indivior (LSE:INDV) CEO days before the guilty plea, with his lawyer telling the court in Virginia that his client had not been aware of the mis-statements when they were made.

In July, Indivior agreed a $600 million (£431 million) settlement with US authorities, on top of the $1.4 billion (£1 billion) already secured from former parent company Reckitt Benckiser.

Indivior continues to treat Thaxter as a good leaver, which means he stands to retain share awards estimated to be worth £2.2 million.

Voting advisory body Glass Lewis has recommended a vote against the remuneration report and said shareholders will have to make their own judgment about whether the pay committee’s treatment of Thaxter is appropriate.

“On the one hand, Mr Thaxter’s willingness to offer himself as a sacrificial lamb is about as far as one could take the concept of commitment to the company. On the other, it’s a bit odd to say that the buck stops with the CEO, but not the equity awards.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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