Shareholder resolutions: prepared to disagree

Given the importance of tackling difficult sustainability issues today, it's right that the actions of all stakeholders and their representatives – from activists to asset managers – should be scrutinised.

Recently there has been a growing focus on investors’ voting records, and in particular on shareholder resolutions. 

The process of tabling resolutions at the annual general meetings of companies exists in most major markets. Shareholder resolutions provide a way for equity investors to propose business changes for consideration by all shareholders, often focusing on social and environmental topics. 

We consider them an important tool for expressing our views and expectations to investee companies, especially for areas not covered in standard AGM votes.

We take our voting responsibilities very seriously. Every resolution is a specific ask of a specific company which we assess through our own fundamental research. We cannot treat resolutions as a statement of our general stance on an issue.

Every resolution is a specific ask of a specific company, which we assess through our own fundamental research. Detail is critical.

Often, we support the goal a resolution might be seeking to promote, but conclude that its wording will undermine its success. The detail is critical.

This situation is becoming more common as campaign groups turn to shareholder resolutions as a lever to drive change.

We looked at ten non-profit organisations which have been active in using shareholder resolutions to call for action on social and environmental issues. Our findings highlight the growth in their activity: as the chart below shows, these ten non-profit organisations are behind almost one third of shareholder resolutions focused on environmental and social topics.

We welcome engagement with those non-profit groups and their growing voice, and often share common aims. But we have to be mindful that some resolutions risk setting back delivery of the sorts of changes we are committed to and have detailed in our recent Engagement Blueprint.

Our main challenges with those resolutions are when they:

• Target companies that are relatively advanced in tackling challenges rather than the laggards that could do most to advance change;
• Emphasise specific actions we believe could impede delivery of goals;
• Make demands of companies that put their business models at risk without meaningful benefits.

While we have these concerns with some shareholder resolutions, we are entirely committed to pushing companies towards more sustainable business models and holding them accountable for delivery. 

Engagements – the day-to-day conversations with company executives – are crucial. Schroders has introduced a requirement for every fund manager and analyst to undertake a number of high-quality engagements annually, ensuring the firm’s collective weight and influence is directed into driving positive change.

On voting, we have historically supported more shareholder resolutions than many of our largest peers. But our support, or objection, will always depend on how well-focused and appropriately worded resolutions are and will be made based on a detailed understanding of a company’s business model and its progress to date on ESG issues.

We know that rankings of our support for shareholder resolutions will be created and publicised in coming months, perhaps with little context.

Any assumption that more support for environmental and social shareholder resolutions is always better is dangerous. Our industry has to be clear that the decisions we make are in the interest of clients and all stakeholders.