Minority shareholders, unite!
The 2019 AGM season has just ended. It was the scene for numerous shareholder uprisings and was, to say the least, turbulent. More than ever, investors have taken to heart their responsibility to defend their clients’ interests, who are the ultimate owners of the companies in which they invest. By raising their voice at General Meetings, investors have the power to change things and work towards better governance practice. The age of deference now looks to be definitively over.
Few AGMs hit the headlines like that of German chemist Bayer. It should be said that the Monsanto acquisition is one of the most value-destructive deals ever done. After a thirteen-hour debate, shareholders voted massively against the resolution asking to discharge the management, something rarely heard of. On paper, this has no consequences, but the message of defiance it sends to the supervisory board and management is unmistakable.
Activists, too, are, more frequently, breaking into meetings and are more than willing to put down resolutions. True, they can sometimes be guilty of opportunism or excessive aggression. However, these investors have at least the merit of highlighting governance issues (in a public forum). Take SCOR for example. Even if the CEO Denis Kessler can point to an impressive record as head of the reinsurance group, it is still fair to ask about checks and balances and a succession plan.
United we stand
Minority shareholders also took to the barricades at EssilorLuxottica. The managers, who had promised a merger of equals between the global leader in ophthalmic lenses and the world’s biggest frame-maker, have so far failed to merge their egos! A coalition of minority shareholders, worried about paralysed decision-making in the midst of this executive warfare, proposed appointing two independent directors to try and sort out the crisis. Sadly, their resolutions failed to carry the day, but did attract between 34% and 44% of votes. Given that Leonardo Del Vecchio, leading shareholder in the new group, holds 31% of votes, this means that a big majority of minority shareholders voted to support these resolutions from the floor.
Prevention is better…
The “minorities’ spring” is a sign that investors are increasingly engaged not only with questions of governance but also with environmental and social issues which have attracted a growing number of resolutions. It also highlights the need to avoid companies with poor governance. This is one of the conclusions reached by the study on the compatibility of SRI and performance [1] we published a few months back.
At La Financière de l’Echiquier, an SRI investor for more than a decade, we give prime importance to companies’ governance. We take very seriously our responsibility as an investor. Our approach to ESG – Environmental, Social and Governance criteria – includes regular meetings with companies’ management, implementation of agreed areas for progress and systematic exercise of voting rights for 100% of the shares in our active management funds – an effort that involves the whole management team.
While our approach is generally considerate, we never hesitate to flag up our disagreement with management when we consider it necessary. For instance, in 2018 we put down a resolution in partnership with another investor at the Latécoère AGM. We have shown, in words and deeds, our willingness to be more than ever a responsible and committed investor!