Corporate brick walls: The 2024 AGM season reviewed

The 2024 AGM season has again highlighted the limitations of shareholder resolutions in changing company behaviour.

Despite a renewed emphasis on environmental, social, and governance (ESG) issues and an increase in the number of resolutions, investors – including pension savers – have not seen meaningful outcomes from their votes.

Thousands of resolutions have been presented globally, targeting major corporations such as Shell, Alphabet, Amazon, Meta, and McDonalds. However, these high-profile companies have consistently resisted shareholder demands to address critical issues. Instead of responding to increased pressure, we continue to see intransigence.

For instance, management at Shell opposed a resolution aimed at reducing its greenhouse gas emissions and urged shareholders to do the same, of which 81% of shareholders did.

Similarly, Alphabet, Amazon, and Meta also dismissed resolutions urging them to address risks related to artificial intelligence (AI) more effectively. Meanwhile, McDonalds faced down calls to limit its excessive use of antibiotics in its industrial meat production.

These outcomes have left many who backed the resolutions feeling frustrated and uncertain about their next steps.

Pension savers’ views matter

To understand the views of pension savers – whose pensions are heavily invested in these global giants – PensionBee has conducted a range of surveys, both of savers across the country and its own customer base.

The findings revealed strong customer and non-customer support for some of the resolutions at Alphabet, Amazon, McDonalds, and Meta. Approximately 60% supported the Shell resolution, while 72% backed the AI-related resolutions at Alphabet, Amazon, and Meta. The McDonalds resolution garnered support from nearly 74% of respondents.

Despite this support, a minority did not endorse the resolutions, possibly due to differing priorities or concerns about financial performance. Some told us they think these issues should be left to management. Others felt they lacked sufficient knowledge to form a strong opinion, which is an important point since sometimes resolutions can be complex.

These varying viewpoints highlight the diversity among shareholders and their engagement levels with sometimes complex ESG issues. Nonetheless, our survey does indicate a misalignment between how pension savers’ money is voted at AGMs, and their voting preferences.

In many cases, PensionBee’s data has shown that voting records and savers’ views can be diametrically opposed to each other, suggesting that new proxy voting options such as ‘Voting Choice’ – which show great promise in correcting this misalignment – remain nascent.

Empowering shareholders or diluting AGMs?

Many resolutions failed in the past year due to recent changes to the Securities and Exchange Commission (SEC) rules, which led to a significant increase in resolutions at AGMs.

While this rule empowers individual shareholders, it has also resulted in a rise in resolutions considered inappropriate by company management.

In the 2023-24 voting season, we saw the first legal action by a company against investors, with ExxonMobil suing two of its own shareholders who were seeking to force proxy votes on climate change issues.

Disputes over whether a resolution should have been filed in the first place distract and divert attention from critical issues, creating additional noise and preventing investors from focusing on the issues of serious concern.

The effectiveness of shareholder resolutions is further hindered by current voting dynamics. Despite the increase in resolutions, most are unlikely to pass under the existing system.

US asset managers, who control the majority of shares in most of the companies we looked at, tend to support management in most cases, even when that position may contradict the views of most of their ultimate customers: pension savers.

Take Alphabet for example. This year, all 12 shareholder resolutions were rejected. As a result, voting outcomes may not reflect the broader shareholder base's true intentions.

The disconnect between individual savers' wishes and the voting actions of asset managers represents a significant barrier to meaningful change and to broader engagement with pensions.

Making votes count

There are several steps that could address these issues. Increasing the adoption of ‘pass-through’ voting mechanisms – where the voting rights are passed to the actual beneficial owners of the shares – can ensure that individual shareholders’ voices are more accurately represented.

Allowing shareholders to directly influence the voting process, rather than relying on asset managers, can lead to outcomes that better reflect the collective will of the shareholder base. Numerous options have come to market in recent years, while index managers now all offer Voting Choice through ISS and Glass Lewis.

Providing shareholders with better education and resources about the voting process would also help. More evidence on the implications of votes can empower people to make more informed decisions. This could foster a more engaged and active shareholder community.

Finally, enhancing regulatory oversight and imposing stricter guidelines on the types of resolutions that can be tabled may help mitigate the proliferation of less pertinent resolutions.

It could reduce the prevalence of resolutions outside of the scope of corporate interests, or those being used to advance what have been described as “anti-ESG” causes such as restricting reproductive rights and access to abortion. This would ensure that AGMs remain focused on addressing significant and relevant issues.

What’s next?

Our data demonstrates high levels of support for historic resolutions on critical themes, including adequate pay, human rights and tackling climate change. This suggests that pension savers and other concerned shareholders will continue advocating for responsible business practices.

Although this year’s resolutions did not always achieve their intended outcomes, ongoing engagement and pressure from shareholders must persist. The dialogue is evolving, and while resolutions may not pass every time, each new iteration lays more groundwork.

Our data also shows that using Voting Choice or other pass-through voting solutions brings alignment between savers’ views and votes.

Shareholder resolutions remain a crucial tool for advocacy, even if immediate results do not align with desired outcomes. The path to significant corporate change is often incremental and continued vigilance and advocacy are essential in making progress towards more sustainable business practices.

Clare Reilly is chief engagement officer at PensionBee.