May 26, 2021

Proxy Contest: BlackRock Reportedly Backs Several Dissident Nominees

Back in December, I blogged about whether sustainability concerns would lead to more proxy contests. At that time, Engine No. 1 LLC launched a campaign to name four directors to Exxon Mobil’s board. We didn’t know then whether the campaign would continue gathering steam but it has and yesterday, Reuters reported that BlackRock intends to back three of Engine No. 1’s director nominees to join Exxon’s board. It’s not too often that you hear of a large asset manager backing dissident nominees and here, BlackRock is Exxon’s second largest shareholder, holding a 6.7% stake in the company.

Exxon’s annual shareholder meeting is scheduled for today. This Politico article takes a deeper dive on this proxy contest and says ISS and Glass Lewis made recommendations that favor Engine No. 1. Other shareholders that are reportedly supporting Engine No. 1 include CalSTRS, CalPERS, the New York State Common Retirement Fund, Legal & General and Federated Hermes. Engine No. 1’s focus of attack has been about the company’s financial performance and decision making around investment in cleaner energy and many are watching to see which way votes are cast by large asset managers. Here’s an excerpt with more:

The vote will also be watched for how certain shareholders cast their ballots. Vanguard, BlackRock and State Street, three of the world’s largest asset managers, are Exxon Mobil’s biggest shareholders. Those companies haven’t indicated how they’ll vote, but all have drawn complaints from other investors and environmentalists such as the Sierra Club, who say they have failed to deliver on their own pledges to put a premium on environmental, social and governance, or ESG, metrics.

‘I am tracking the voting records of BlackRock and Vanguard, and expect full transparency and sufficient explanations regarding the reasoning and justification for the votes BlackRock and Vanguard cast,’ Wisconsin State Treasurer Sarah Godlewski said in a written statement. ‘It is critical for the financial resiliency of our funds that asset managers hold corporate boards accountable and stop at nothing less than a guaranteed commitment to address systemic climate risk.’

The article notes that even with the support of BlackRock, Engine No. 1 doesn’t have an easy path because nearly half of Exxon’s shares are held by retail shareholders, which tend to vote with management. The article says Exxon’s 20 largest shareholders only hold 35% of the vote.

Glass Lewis Recommends Ouster of Female Board Chair Due to Board’s Gender Imbalance, Huh?

With eyes on board diversity, a recent article in the Guardian caught my eye as the headline said shareholders have been urged to vote out a board chair due to gender imbalance.  As I read a little further, I was surprised to see that Glass Lewis has recommended the ouster of the board chair although the board chair happens to be a woman.  Although the company, Playtech is a constituent of the FTSE 250 and UK based, the situation sends a message about how Glass Lewis could view a similar situation should it arise here.

Should Playtech’s chair be ousted, its board will be left with an even greater gender imbalance.  What gives?  According to the article, the board makeup includes 7 members, 2 of which are women, which is below the 33% target for board gender diversity. Although the target is voluntary, Glass Lewis takes a tough stance in holding the board, and in this case the board chair, accountable for lack of progress on improving the company’s diversity:

While the government-backed 33% target is voluntary, Glass Lewis reprimanded Playtech for its failure to follow its peers and improve its boardroom gender diversity. The company is adding another male director at its upcoming meeting, which means women would only occupy a quarter of Playtech’s board positions. Women represented just 19% of senior management, while 39% of the firm’s employees were female.

Glass Lewis criticised Playtech’s stance on improving diversity at the company, saying that it had ‘failed to adequately outline any measurable diversity objectives, instead opting for boilerplate language which provides little insight into what strategy the board is employing to enhance diversity’.

The advisory group added: ‘The board has not disclosed any commitment to achieve the Hampton-Alexander Review targets within a defined time frame despite the company failing to achieve the same by the 2020 deadline.’

There’s likely more to the story than the Guardian was able to pull together for its article. Word to the wise for companies thinking that placing a woman in a board leadership role will appease Glass Lewis to the point of looking past other diversity shortcomings, that move probably won’t help win over the folks at Glass Lewis. Also, ISS takes a similar stance for racial diversity, they’ll vote out a board leader even if they themselves are from an underrepresented community – see Liz’s blog from a couple weeks back.

Annual Meeting Season: Wild Ride in UK Too

Many will probably agree that this year’s annual meeting season is turning out to be a bit of a wild ride. Liz and I have been blogging on our “Proxy Season Blog” about some of the early vote results as several shareholder proposals have received majority shareholder support, while others, despite being first-year proposals have received over 30% shareholder support.  Meanwhile, Liz blogged not too long ago about increased opposition to say-on-pay proposals this year.

For more on this year’s wild ride, last week Reuters reported that over in the UK, Lloyds Banking Group had to temporarily adjourn its annual meeting due to a shareholder repeatedly shouting complaints.  According to the story, the chairman adjourned the meeting and after 15 minutes of disruption, in which the shareholder was removed and the webcast suspended, the meeting was restarted. With most companies holding annual meetings virtually, it was somewhat surprising to read about the interruption, but the FT reported that Lloyds made a last minute shift and decided to allow up to 100 shareholders to attend. Although the article says only 10 investors attended, it only takes one to bring an element of disarray to a meeting.

To help plan and prepare for any sort of disruption at your annual meeting, see our checklists that are available to members online.  Here are a few relating to annual meetings that can help ensure your meeting runs smoothly: Adjournment & Postponement, Rules of Conduct & Procedure, Meeting Surprises, Security for Annual Meetings, and Virtual Annual Meetings.

– Lynn Jokela