Just 6% of investors – including Californian giant CalPERS and PGGM of the Netherlands – supported the resolution at Qantas calling on the Australian airline to review its involvement in deportations by the Australian government at its annual meeting last week (26 October).
CalSTRS – the other giant public Californian pension fund – did not follow its neighbour in supporting the resolution but joined the likes of Norges Bank Investment Bank (NBIM), APG, and Local Government Super (LGS) in opposing it.
PGGM said it “should not be unduly burdensome” for Qantas to implement and “enable shareholders to assess the potential reputational and financial risks the company faces related to the involuntary transportations of immigrants”.
The resolution was one of a flurry filed on ESG issues this year at ASX-listed companies by the Australasian Centre for Corporate Responsibility (ACCR), the not-for-profit association promoting ethical investment. It called on Qantas to heighten its due diligence regarding its involvement in deportations on behalf of the Australian state.
It argued that without implementing safeguards the airline is exposed “to the probability of complicity in serious human rights violations” which – moral concerns aside – could have a “material” impact on the company.
Risks around deportations are particularly acute in Australia, according to the ACCR, due to changes in the law around the country’s “non-refoulement obligations”, which came into effect in 2014. As a result, the ACCR says the Australian legal system “can no longer be relied upon to ensure compliance with international human rights law in this area”.
Bill Hartnett, Head of Responsible Investment at Local Government Super, the A$11bn (€7bn) Australian superannuation fund, told RI that LGS opposed the resolutions as it felt that engagement on the issue “is the best way forward”, following concessions made by the company ahead of the meeting last Friday to enhance its disclosures.
Proxy advisors were also split on the issue. US firms ISS and Glass Lewis joined with Australian advisor Regnan in recommending a vote against the resolution.
But UK-based global proxy services provider PIRC supported the resolution arguing that the ramping up of the company’s due diligence on deportations is “likely” to create shareholder value in the “long-term” because of the positive effect on the company’s reputation.Glass Lewis did, however, agree in its advice with the substantive ask of ACCR’s resolution, namely, that the company should conduct a “thorough review” of how it handles the risks associated with the deportations. But it concluded that a resolution was not currently warranted and took issue with the stipulation that the review should be conducted prior to any further involvement in the removal of refugees.
Brynn O’Brien, Executive Director at the ACCR, described the seriousness with which the proxy advisors treated the issue as a “very significant shift”.
“Enable shareholders to assess the potential reputational and financial risks the company faces”
She added: “What is clear from this engagement is that the Australian government has continued its pattern of outsourcing the risks of its abusive detention and deportation system to companies, and corporate Australia has continued to fall for it. These are fraught and unprofitable contracts, and they expose Qantas and its shareholders to the risks of complicity in serious human rights abuses.”
Even fewer investors – just 4% – supported ACCR’s supplementary resolution to amend Qantas’s constitution so that the non-binding resolution on deportations could be heard at the AGM.
Currently, shareholders who want to raise an issue at an Australian AGM must also propose a supplementary “constitutional amendment” – with a high threshold of 75% – that must be passed or the original resolution will be withdrawn.
Hartnett described this additional hurdle as a “deterrent”.
He said: “LGS has been a strong advocate on the need to amend Australia’s Corporations Act to make filing shareholder resolutions easier and not requiring a change in the company’s constitution.”
Last year, the Australian Council of Superannuation Investors (ACSI), the investor membership body whose 37 members collectively manage over A$1.6tn (€1trn) in assets, called for the introduction of an “ordinary” shareholder proposal system in Australia. It argued that Australia’s current corporate governance framework is a barrier to ESG resolutions.