How disappointing that one of the most keenly awaited AGMs of 2023 was abandoned. It was surprising that the Sasol board pulled the plug so readily on it, given how stoic it has been at previous shareholder meetings.
Not only was Sasol one of the first companies to provide in-person, hybrid AGM facilities after Covid, in recent years the board has held firm in the face of many hours of haranguing by angry environmentalists and community members who attended these meetings. Perhaps environmental movement Extinction Rebellion takes it up a scary notch or two.
Still, it is regrettable that an exciting initiative from two major institutional investors was not allowed to play out (Old Mutual Investment Group, or OMIG, and Ninety One disclosed how they were going to vote). The Sasol directors now have at least three weeks to try to change their minds though it’s unlikely to succeed. The board also has the extra time to persuade its other institutional shareholders not to follow the lead of the two who had made their intentions known.
We’ll have to wait a few more weeks, perhaps until early in the new year, to find out who prevailed. And then we’ll have a few more weeks’ wait for each of the institutional shareholders to disclose how they voted. Only once we know that will we be able to match the voting with the various proxy voting policy initiatives each institution might have signed on to. Any discrepancies could prompt allegations of greenwashing.
It’s remarkable that Sasol became so agitated by the OMIG-Ninety One initiative; the targeted resolution relates to the vote on Sasol’s climate policy and is only an advisory vote. It seems like a reasonably easy way for OMIG and Ninety One to signal they do take seriously their commitments to environmental and climate initiatives.
The alternative for the institutions would presumably be to dump their Sasol shares. That seems a bit extreme though it’s worth remembering that a number of international investors are blocked from investing in Sasol.
The unprecedented move by the two institutions might hamper Sasol’s long-held ambition to be included in the Dow Jones sustainability index, which could explain some of the agitation. Inclusion in the index would help with the international investors.
It’s remarkable that Sasol became so agitated by the OMIG-Ninety One initiative; the targeted resolution relates to the vote on Sasol’s climate policy and is only an advisory vote
However, my enthusiasm for the OMIG and Ninety One initiative is not about Sasol, though for the sheer incomprehensibility of its reports it deserves rebuke. My enthusiasm is that the two institutions tip-toed, just a smidgen, mind you, outside the apparently strict “institutional investor-corporate investee” enclave. They ventured into no-man’s-land. In doing so they showed disrespect for some long-held traditions.
The most significant of those traditions is that engagement between the institutions, who hold the shares on behalf of the investing public, and corporate executives takes place behind closed doors and that there should never be any visible signs of tension between the parties. It’s what is known as an engagement or exit strategy; if you can’t nudge management to change its behaviour, sell the shares. Mind you, this is easier said than done in the context of Sasol’s size on the JSE.
The investing/saving/working population has to accept that the asset managers who are taking care of its money are looking after its interests and engaging vigorously with company management behind closed doors.
But the agitated response to the OMIG and Ninety One initiative suggests corporates and institutions expect those engagements to be cosy affairs — certainly far from vigorous.
If this is the case, 21st-century shareholder-based capitalism has a problem. If the institutions, in the role of shareholders, are not acting as a check on management, then who is ensuring that management does not run the company for its own benefit rather than for that of the owners?
Shifting corporate behaviour through shareholder action becomes almost impossible in such an environment; even holding corporate executives to account becomes a futile task. The cosiness is particularly evident in the out-of-control remuneration — highly paid asset managers want us to believe that nonadvisory votes will enforce some restraint on their excessively well-paid corporate peers.
If the public believes that large, listed companies that affect our lives, such as Sasol, the banks or retailers, are not held to account by institutional shareholders, they will look to more extreme action.
Which is why it’s little wonder that near-anarchic organisations such as Extinction Rebellion are gaining more traction globally.
And it is why OMIG and Ninety One deserve credit for reminding us that institutions are capable of some vigour in their engagements.
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