Issue link: https://digital.shearman.com/i/1512772
Shearman & Sterling LLP U.K. Corporate Governance Developments | 62 Climate Change-Related Resolutions Although U.K.-listed companies are not currently under an obligation to seek shareholder approval or votes for any climate change or energy transition plan that they may have, beyond asking shareholders "to receive" the annual report which, under the Listing Rules, must contain certain climate change risks (TCFD) disclosures, a very small number of companies have proposed to shareholders their own climate change risk/sustainability resolutions. Two of those companies had to put to shareholders a climate change resolution requisitioned by climate-activist shareholders. In both cases, the company's own climate change resolution was passed but in one case with more than a 20% vote against (and so this was noted on the Investment Association's Public Register—see below). Both requisitioned resolutions were defeated but each were nevertheless supported by more than 20% of shareholders voting (and so also noted on the Public Register). Disapplication Of Pre-Emption Rights As discussed above, U.K.-listed corporates can now make much larger non-pre-emptive issuances. However, so far, a little over a half of listed issuers have not taken advantage of this increased flexibility, perhaps reflecting institutional shareholder dislike of non-pre-emptive issuances and the need to be able to present a compelling case for wanting to be able to issue significant amounts of new equity over the heads (so to speak) of existing shareholders. Method Of Workforce Engagement The Code requires companies to disclose in their annual reports the mechanism they have adopted to engage with their workforce and suggests three possible methods—a director appointed from the workforce, a formal workforce advisory panel or a designated non-executive director. Most companies— roughly around 60% reporting in the first half of this year—seem to opt for a designated non-executive director, despite the concerns that have sometimes been expressed that this might be seen as limiting the role and focus of either (or both) the director concerned (who will have all the other responsibilities of a director) or the rest of the board (who will still have to take into account employees' interest in discharging their duties as directors). The next most favored mechanism seems to be some form of workforce advisory panel and one company has a director appointed by its workforce. Resolutions Triggering Shareholder Dissent— Investment Association's Public Register If a company receives a 20% or more vote against any resolution proposed at its AGM, the Code requires it to explain what actions it intends to take to consult with shareholders to understand why they voted as they did when announcing the result and to update progress on this within six months and again in the next annual report. In addition, the Investment Association—a trade body and industry voice for U.K. investment managers—maintains a Public Register on which it records all these shareholder dissents. When looking at the Public Register for AGM dissent recorded in the first half of this year, it comes as no surprise to see that the most common resolutions that faced shareholder dissent related to directors' remuneration (36) followed by director re-election (the Code requires directors to be re-elected annually) (19) and then the disapplication of pre-emption rights (13). Interestingly, in the equivalent period in 2022, there were more directors' remuneration resolutions (41) and many more director re-election resolutions (33) receiving a 20% or more dissenting vote but fewer disapplication of pre-emption rights resolutions (10). Shareholder Democracy Campaigns U.K. company law currently provides rather limited ways for indirect shareholders (typically small retail shareholders with holdings in investment funds or via investor platforms) to engage directly with the companies they are invested in. In recent years there have been growing calls for the law to be modernized to enable all shareholders (and especially small retail shareholders) to have much easier access themselves to the exercise of their rights—voting and information rights—and so improve shareholder democracy in listed companies. One such example is the "Share Your Voice" campaign, which is being led by the U.K.-listed retailer Marks & Spencer plc. This campaign is calling