Board directors risk shareholders turning against their re-election for many reasons, but figures on voting patterns seem to suggest the pressure is easing.

Analysis by Board Agenda reveals that in 20219 the number of UK directors who sustained significant shareholder votes (20% or more) against their reappointment rose to a five-year high of 89. Since then the votes have been tailing off. At the half-way point for 2021 there were 38 significant votes against individual directors, the lowest six-month total in four years and an indication that shareholder behaviour is changing.

Notable directors to find themselves feeling the ire of shareholders this year include Richard Cranfield, chair of investment advisory business Integrafin, who saw a 38% vote against his re-election in March. Elsewhere Stephen Davidson, chair of the remuneration committee at Informa, the research and events business, suffered a 46.56% vote against holding his boardroom seat.

The largest vote against a director so far this year is the 53.28% against Denis Alexandrov, the chief executive of Petropavlovsk, who joined the gold mining business in December from rival Highland Gold.

Engagement and accountability

But after the 2019 spike, the number are reducing. According to Amin Aboushagor, corporate governance adviser at the Institute of Directors, the cut in activity is not unexpected.

“The number of full-year significant votes against directors over the past five years… has stabilised, which does not surprise us. It is important to note that each vote has its own unique context. However, investors vote on different resolutions in different ways with a wide variety of motivations.”

Heloise Courault, co-head of ESG research at advisory firm SquareWell, says recent reasons for voting against reappointment include insufficient diversity in boardrooms, remuneration reports—especially chief executive pay during lockdowns—and ESG issues. She adds that pressure on individual board members may have dropped off last year and in 2021 in response to the pandemic and the demands it made on management time.

But Courault suggests there may be other reasons, among them an improvement in shareholder engagement allowing directors to “identify and answer potential investor concerns well ahead of the AGM.”

That doesn’t mean investors will now start taking it easy on board members. “As we expect accountability to intensify, board member opposition will likely remain significant at companies which are still failing take into account their investors’ expectations.”

Say on climate

One area more votes against directors could take place is over the quality of climate action plans. Chris Hohn of the Childrens’ Investment Fund Foundation and founder of the “say on climate” campaign for shareholder votes on climate plans, has suggested poor quality preparation could lead to votes against individual directors. However, few of the world’s listed companies are currently running such votes.

Executive pay is a topic still attracting a good deal of focus from shareholders. Analysis by Board Agenda shows that shareholder revolts against remuneration reports is up 51% on the first half of last year.

So far in 2021 the AGM season has seen fresh dynamics emerge. Pressure on individual directors may be easing but shareholder focus on pay remains intense. And there is still the second half of the year to go.