In focus

Shareholder power: our approach to resolutions and voting at AGMs


The votes we cast on behalf of clients are critical to our ability to push for positive changes that create value. How we use our influence over the companies in which we invest is a vital component of our role as active managers. 

Although voting occurs only once a year, our analysis and dialogue with companies takes place all year round.

Assessing and engaging with companies on their management of ESG challenges and opportunities is becoming more and more important to investment processes. Investors no longer have a choice over whether to seek exposure to them; all companies and portfolios are impacted.

The opportunities we have to influence the companies we invest in through engagement and voting help us to ensure the portfolios we manage are better prepared for those impacts.

While engagement continues through the year, each annual general meeting season provides opportunities to send clear and public signals of our expectations to businesses. Last year we voted on almost 70,000 resolutions.

As long-term stewards of clients’ capital, we have a duty to protect them from the impacts of financial and non-financial risks. The overriding principle governing our approach to voting is to act in line with the interests of our clients.

As part of Schroders, our approach to voting incorporates what we’ve learnt from more than 20 years of embedding ESG analysis across asset classes and geographies as active owners.

Small but powerful: the role of “shareholder resolutions”

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Scrutiny of asset managers’ voting has intensified, and we are rightly held accountable for the decisions we make. 

Although shareholder resolutions – proposals submitted by investors for a vote at the company's annual meeting – represent a small share of the votes we cast every year (two per cent in 2020), they have been increasingly attracting attention. This year’s AGM season has seen a glut of climate-related shareholder resolutions.

A recent example was ExxonMobil’s AGM, where Schroders supported – along with US pension funds and other major investors – proposals led by hedge fund Engine No.1 to replace four directors with candidates well-placed to pursue a climate transition.

Shareholder resolutions can be used to ask management to act on ESG issues – areas not typically captured by standard management resolutions. For example, a very common shareholder resolution theme in the past year has been demands for more transparency around corporate lobbying activities.

Rules covering the rights of shareholders to propose resolutions, or the degree to which they are binding on management, vary across countries. But all provide a mechanism to push management teams into making changes.

Investors are increasingly voting in support of shareholder resolutions. The average percentage of support for ESG resolutions almost doubled between 2012 and 2020 from just over 30% to just under 60%, according to data provider Proxy Insight.

Sometimes shareholders come under pressure from activist groups or non-governmental organisations to support shareholder resolutions, almost as a matter of principle rather than recognising the individual attention and evaluation they deserve.

Shareholder resolutions come in many shapes and sizes. They can reflect specific campaign goals or political priorities that may contradict fiduciary responsibilities or a company’s strategic goals. 

The best course of action is often not clear cut. Many of the resolutions that we vote on are nuanced and complex. The principles or intent of a resolution may be admirable and attractive, but the details may undermine that intent. For example, perhaps a resolution is asking for changes on an impractically short deadline. Or for strategic changes that pay little attention to the action companies have already taken. Votes represent specific asks of specific companies, which in many cases require management teams to take concrete steps.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.