In what is perhaps a first, Norges Bank Investment Management, the manager of the huge Norwegian Government Pension Fund Global, has aligned itself with “gadfly” investor James McRitchie.
McRitchie – publisher of the corpgov.net website – is one of a group of private investors who target US companies with corporate governance resolutions. Sometimes dubbed the ‘Chevedden Group’ after one of their number, John Chevedden, other members of the group include McRitchie’s wife Myra Young and Kenneth Steiner.
RI reported late last year that the group was increasingly looking at environmental and social (E&S) shareholder proposals.
Now McRitchie, writing on corpgov.net, describes his “good governance proposal” at cornflake giant Kellogg calling for board declassification (i.e. removing staggered voting).
On Wednesday, Norges Bank announced its intention of supporting this resolution, the first voting pre-disclosure it has made this year.
NBIM first started pre-disclosing its voting intentions back in 2015 when it said it would support shareholder resolutions on climate reporting at BP and Shell – though it has pre-disclosed its voting sparingly since then, notably at Boliden, Imperial Oil and TransCanada last year.
McRitchie’s site indicates that Calvert, Everence, British Columbia Investment Management Corporation and CBIS have also indicated that they will support the resolution, though more may have signaled support by now.McRitchie quotes proxy advisor Egan-Jones: “We believe that staggered terms for directors increase the difficulty for shareholders of making fundamental changes to the composition and behavior of a board. We prefer that the entire board of a company be elected annually to provide appropriate responsiveness to shareholders. We recommend a vote FOR this Proposal.”
McRitchie also notes that 89% of the S&P 500 have declassified their boards and that BlackRock and Vanguard voted for shareholder proposals to declassify boards eight times out of eight in 2018 as of early August. “It is important to note,” he says, “the Board of Kellogg does not oppose the proposal. Instead, it takes no position.”
In announcing NBIM’s voting intention, Chief Corporate Governance Officer Carine Smith Ihenacho said: “The board represents the company’s shareholders. For board accountability to be effective, shareholders must be able to participate in frequent election of all members of the board, with our preference being annual elections.”
With this level of predicted support and the company’s lack of opposition, it seems likely that the proposal – though non-binding – will receive a majority of votes in support. McRitchie also recommends voting against Kellogg’s Say on Pay resolution and against the members of the remuneration committee up for election because median pay should not be paid out for poor performance. He also recommends voting against auditor ratification on the grounds of long tenure.