Published on 13 May 2019

SUSTAINABLE FINANCE

Shareholders rebel against top companies ahead of annual meeting season

Bayer, Barclays, UBS...annual meeting season is already in a state of turmoil, with shareholders voting against corporate leadership and asking them to be more responsible. Shareholder activism is strengthening to hold companies more responsible, particularly on the climate issue. Businesses are starting to listen...and now they must take action.

Wermer Brauman PDG Bayer AG GuidKirchner DPA
Bayer shareholders voted against discharging the company's management.
@Bayer / GuidKirchner

A sense of rebellion is being felt from the shareholders of major companies. The annual meeting season is just beginning, and some leaders have already received severe warnings from shareholders. Bayer’s annual meeting on April 26th ended with a vote sanctioning company management, after a gruelling 13-hour process. The acquisition of the American Monsanto group, and its multiple controversies concerning its negative impact on the environment, resulted in a 40% decline in the price of the Bayer shares. The shareholders did not cope well with the news and voted 55% against giving any discharge to management.

The same occurred at UBS. The discharge of the Swiss bank’s managers was not voted upon at their May 2nd annual meeting. This time, it was the record fine of €3.7 billion imposed by the Paris regional Court to UBS for facilitating the tax evasion of wealthy French citizens, that sparked much outcry from smaller investors.

In both cases, the shareholders took the power in their own hands by voting against the corporate leaders. They sanctioned practices that they considered irresponsible and that had a direct impact on company value. More examples could follow in the coming weeks. Such is the case for EssilorLuxottica, where investors and employee shareholders filed a resolution to appoint independent directors and put an end to the governance crisis. This action is rarely taken in France, where it takes at least 0.5% of the capital of a CAC40 company to file a resolution, whereas in the United States, holding the equivalent of $2,000 in capital is enough.

An increase in shares

The climate issue has already solidified shareholder engagement for several years, and the trend is only getting stronger. "There is no doubt that we are seeing an increase in the number of shares and the number of shareholders involved," says Louise Rouse, a British investor engagement consultant and formerly part of ShareAction. Businesses can no longer remain insensitive to this pressure, especially since it is multiplying (as evidenced by numerous citizen-based climate movements).

"The leaders see these movements and worry about the social acceptability of their activities," says Rouse. Barclays’ annual meeting, which was held several days after climate demonstrations in London, demonstrates this very well. "There were about ten questions on climate change and this is the first time the CEO has spoken about it," she says.

The substantive work of responsible investors and NGOs has paid off. "We have received a positive response to one of our questions at Axa's Annual Meeting," says Lucie Pinson, Friends of the Earth's Private Finance Campaigner. “Axa will extend its 2017 divestment policy to the management of third parties." For their part, oil companies such as BP and Shell now claim to want to align with the commitments of the Paris agreement.

Efforts still to be made

Not all companies have responded positively to this shareholder activism. American companies are often more reluctant than European ones. "This is the same for policy makers," says Rouse. "In the United States, businesses are under less pressure concerning the climate issue." ExxonMobil did not hesitate in reaching out to the SEC to prevent a resolution filed by shareholders relating to climate. Far from being discouraged, these same shareholders started a campaign with other shareholders to vote against the board of directors.

Even amongst those who listen to their engaged shareholders, there are still efforts to be made. Despite commitments aligning themselves with the Paris agreement, BP and Shell continue to invest in new oil fields. "We are coming to a point where companies are starting to talk about their strategy," says Rouse, "now we are waiting for action."

Arnaud Dumas @ADumas5


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