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Upcoming Renault AGM results will be closely watched by investors

French carmaker Renault will be holding its AGM on 15th June and its voting results will be closely watched due to longstanding concerns about its governance and after its vote on pay was defeated last year.

The pay of Carl Ghosn, chief executive and president, was under scrutiny last year and only received 46% of votes in favour of his pay package. Manifest’s analysis of Renault prior to its AGM raised a number of issues in relation to Ghosn’s remuneration this year. Issues highlighted included the fact that Ghosn’s maximum potential incentive pay in respect of the year exceeds 867.1% of salary and that the level of long-term incentive performance awards (647% of salary) may be potentially excessive.

Renault’s largest shareholders are the French government with a nearly 20% stake and the Japanese carmaker Nissan which has a 15% stake – although no voting rights attached to this. Last year despite the vote against Ghosn’s salary Manifest noted that the company initially ignored the vote but then did cut his pay after the French government threatened to step in and force the issue.

Renault AGM results closely watched by investors

Renault’s CEO Carlos Ghosn is likely to face questions over pay and governance at AGM

Other governance issues raised by Manifest included the fact that the company’s articles provide that all shares held in registered form for more than two years will receive double voting. Manifest said that it considered that multiple voting rights, being a deviation from the one-share-one-vote principle are not in the best interests of shareholders as a whole and also multiple voting rights may make it more difficult for shareholders to remove entrenched management.

The French government and Renault entered an agreement in 2016 which capped the government’s voting rights in respect of certain decisions. Under this agreement, if the shareholders attending or represented at the AGM in question own at least 70% of the
shares with voting rights (either single or double voting rights), the French government’s voting rights are capped at 17.9% of the voting rights exercisable by the company.

Meanwhile, investors groups have written to the French markets regulator AMF voicing concerns about governance at the carmaker Renault according to a report from Reuters. French corporate governance adviser, Proxinvest, US activist CtW, and RAIR, an association of French pension fund trustees,  have argued for a review of the governance of the alliance between Renault and Nissan.

Renault stated that Renault-Nissan BV (RNBV) is owned 50% by Renault and 50% by Nissan, and is the alliance’s joint decision-making body for strategic issues concerning either group individually. Its decisions are applicable to both Renault and Nissan, the company stated. The alliance also means that they both have directors on each other’s boards.

According to Reuters the 24-page letter from the investor groups said a creeping transfer of power to the Dutch-listed RNBV venture has been taking place since 2002 without “adequate governance mechanisms or protections for Renault shareholders” or any new regulatory scrutiny.

Meanwhile, the proxy voting results from the UK advertising company WPP showed that there was a 20.8% vote against its remuneration report and an 8.3% vote against its remuneration policy at its recent AGM (7th June). In addition, the chairman of the remuneration committee, Sir John Hood, 4.4% vote against his re-election. The level of dissent for the remuneration report – which is focused on the level of remuneration received by its CEO Sir Martin Sorrell – was reduced from 33.5% last year.

What do you think?