Your vote counts: Lloyds Bank AGM, Shell and Next

After last week’s revolt at AstraZeneca, investors will be holding more big companies to account in the days ahead.

Lloyds Banking Group (LSE:LLOY) is now able to accommodate up to 100 shareholders at its AGM this week after Scotland's Covid-19 restrictions were relaxed to permit limited attendance at indoor events.

In a switch only disclosed very recently, Lloyds has moved Thursday's event to Edinburgh's International Conference Centre with a view to some shareholders being present subject to social distancing and other safety requirements.

A pre-registration system is in place, with preference given to those who register first. Lloyds still intends to live stream the 11am meeting on its website.

Lloyds has already held an engagement event, enabling shareholders to hear from the chair and board members in time for their votes to be cast on the various AGM resolutions.

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The return of face-to-face meetings is an important step for shareholder democracy after more than a year of events being held behind closed doors — often in unusual locations and with only a quorum of two investors in attendance. The Smith & Nephew (LSE:SN.) 2020 AGM, for example, was held outdoors on Sheethanger Common in the Chilterns.

Some companies have enabled online voting, but many more preferred to ask company shareholders to vote via proxies and to lodge their questions in advance.

A report this week on the Corporate Governance Code by the Financial Reporting Council (FRC) said that remote meetings had taken away the richness of debate around remuneration policies. It added: “In normal circumstances the board would be able to understand the details of any shareholder dissent on pay via discussions at the AGM.”

Overall, however, the FRC believes that companies are getting better at aligning their board remuneration policies and practices with long-term shareholder interests.

That view comes despite plenty of controversies in the current AGM season, notably in relation to the pay of AstraZeneca (LSE:AZN) boss Pascal Soriot following a year when the drug giant developed a not-for-profit Covid-19 vaccine and delivered on financial targets.

This week's Astra AGM saw almost 40% of votes cast against the company's remuneration policy, where the potential maximum long-term share award for Soriot increased to 650% of his £1.3 million base salary, from the 550% agreed at last year's AGM.

The AGMs of Rentokil Initial and National Express also saw more than 20% of votes go against their respective remuneration policies.

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There are fewer potential AGM flashpoints next week, although the board of Standard Life Aberdeen (LSE:SLA) might have some explaining to do after announcing plans to change identity. 

The switch to Abrdn, which is due to take place before half-year results in August, has been mocked for its lack of vowels. However, chief executive Stephen Bird calls the brand “modern, agile and digitally enabled” and one providing a single identity for five different trading names.

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The company needs a new name because the Standard Life part of its title is being sold to life insurer Phoenix. It is keen to retain the Aberdeen connection, but as most domain names are linked to the Scottish city it has been forced to consider something different.

Tuesday afternoon's AGM will be webcast, with questions in advance or during the meeting.

Other meetings taking place next include Royal Dutch Shell (LSE:RDSB), Greggs (LSE:GRG) and Metro Bank (LSE:MTRO) on Tuesday, Next (LSE:NXT), Legal & General (LSE:LGEN), Fevertree Drinks (LSE:FEVR), 888 Holdings (LSE:888) and Computacenter (LSE:CCC) on Thursday and Croda International (LSE:CRDA) on Friday.

Royal Dutch Shell (Tuesday 18th May)

Shell's energy transition strategy will go before an advisory vote of shareholders as the oil giant takes its first steps towards becoming a net-zero emissions business by 2050.

The Anglo-Dutch giant intends to update the strategy every three years, with an advisory vote on its plans and targets being held every year from 2022.

Chief executive Ben van Beurden set out the strategy in February, outlining a focus on low-carbon operations such as wind, solar, biofuels and hydrogen over the next decade.

For the foreseeable future, Shell sees upstream operations continuing to deliver the energy supplies and cash needed to accelerate the transition towards low carbon businesses.

The CEO told shareholders: “The best way for Shell to contribute to the energy transition is to work with our customers to help shape demand for low-carbon energy products and services. In turn, the increasing need to supply low-carbon energy products and services will accelerate Shell’s transition to net zero.

“Ending our activities in oil and gas too early when they are vital to meeting today’s energy demand would not help our customers, or our shareholders.”

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The plan was disclosed a week after Shell swung to a 2020 loss of $21.7 billion (£15.4 billion) during a year in which it cut its dividend for the first time since the Second World War.

Progress on cutting debt means share buybacks are already back on the horizon and a progressive dividend policy has also returned after a 4% increase was declared in the wake of last month's first quarter results.

The pay of van Beurden fell by 42% to 5.8 million euros (£5 million) last year after no bonuses or other short-term incentives were paid. Advisory group Institutional Shareholder Services said the remuneration report posed no significant concerns, while it also recommends a vote in favour of the energy transition plan.

Shareholders have been encouraged to vote in advance of the AGM, although voting is enabled during the meeting.

Lloyds Banking Group (Thursday 20 May)

This year's meeting is unlikely to be as contentious as the 2020 event, when only 63.8% of votes were cast in favour of the company's new remuneration policy. Lloyds says it has since made some tweaks to how it intends to implement the policy.

The meeting will be the first in a decade without Antonio Horta-Osorio at the helm after the chief executive left at the end of April to become chairman of Credit Suisse (XETRA:CSX).

This year's annual report reveals he received a total of £59.5 million in pay and bonuses across his decade in charge, including £3.44 million for last year. Shares were 61p on his first day on March 2011 compared with 45p at the end of his tenure, having faced a perfect storm of Covid-19, Brexit uncertainty and a prolonged period of low interest rates.

He hands over a leaner and more digital-ready Lloyds to former HSBC (LSE:HSBA) executive Charlie Nunn, who takes over as chief executive from August. He will be paid a base salary of £1.12 million, which is 13% lower than his predecessor, as well as a fixed share award of £1.05 million.

No decisions have been taken about how much Horta-Osorio will receive in variable pay for 2021. He withdrew from consideration for a group performance share award in 2019 and 2020. 

Advisory group Institutional Shareholder Services has recommended votes are made in favour of all the resolutions at the AGM.

Next (Thursday 20 May)

The company's continued place among the top performing London-listed retailers ensured long-time chief executive Simon Wolfson pocketed £3.34 million for the last financial year.

In a period when no annual bonus was paid, Wolfson's single-figure remuneration was lifted by awards from the company's long-term incentive plan, which is in two parts over the year.

For the three years to July, Next's total shareholder return ranked fifth in the comparator group to mean 90% of his 2017 grant vested. The second award covering up to January scored 100% after Next finished fourth in the comparator group as the retailer finished the period with better-than-expected trading in the face of pandemic headwinds.

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Wolfson's fixed pay in 2020/21 was just over £1 million after directors voluntarily waived 20% of their salaries and fees during the initial period of the pandemic from April to June last year.

The terms of the long-term incentive plan were changed at last year's AGM to 225% of salary from 2020/21, with the awards still vesting subject to a total shareholder return (TSR) metric.

Advisory groups ISS and Glass Lewis have recommended that shareholders support this year's remuneration report. However, they question whether just focusing on TSR means insufficient alignment between pay and company performance, particularly given the impact of Covid-19.

Glass Lewis said: “We believe measuring a company's performance with multiple metrics serves to provide a more complete picture of the company's performance than a single metric.

“This compensation strategy may focus too much management attention on a single target.”