Saturday, 3 December 2016

ASOS AGM action!

This week saw some great campaigning by the GMB as part of their ongoing battle against poor working practices within ASOS, which has had a particular focus on the distribution centre in Barnsley run by XPO. The GMB had a "Catwalk of Shame" outside, and a workers' annual report was handed out to shareholders. On the same day there were also claims that ASOS may not be playing by the rules in terms of pay for new warehouse staff.

Interestingly, on my turf, the company was also hit by a sizeable vote against executive pay, with 33% opposed. This generated further negative media coverage. The vote against was also double the level of opposition (16%) at the 2015 AGM, so there might be something significant going on. Notably, ASOS has not commented on the size of the vote or how it will respond. As a reminder, the UK Corporate Governance Code says (E.2.2):
When, in the opinion of the board, a significant proportion of votes have been cast against a resolution at any general meeting, the company should explain when announcing the results of voting what actions it intends to take to understand the reasons behind the vote result.
In practice, larger listed companies seem to make statements when they get votes against of about 20%+. ASOS is AIM-listed so it does not need to follow the Code. Nonetheless you might think that given all the adverse commentary - and the scale of the vote - it would be a sensible thing to do. And actually ASOS does make commentary about shareholder support for remuneration in this year's annual report (page 47):

At the AGM last year, 84% of shareholders voted in favour of the Directors’ Remuneration Report, providing an important level of public accountability for the Board with the suitability of our remuneration policy and its implementation. We hope that you find this year’s Remuneration Report equally informative around how ASOS leadership is remunerated, and some of the changes that we have made during the year. I look forward to seeing shareholders at the AGM, and hope that I can count on your continued support on our pay arrangements.

So it looks like they may have something to say in future reporting.

Finally, we can dig into the voting data a bit. One thing that looks likely is that the company's major shareholder, Danish retailer Bestseller, did not oppose the remuneration report. According to the list of major shareholders disclosed on the ASOS IR site, Bestseller owns 23m shares. And according to the RNS statement on the AGM, just under 14m were voted against the remuneration report. I think it's likely Bestseller either voted all of its shares or none.

If Bestseller DID vote for the remuneration report, then a very large majority of the remaining shareholders who voted will have voted against. The RNS statement shows a bit under 28m shares supporting the remuneration report, if you take 24m out, you are left with 4m in favour and 14m against.

Just to complicate things, it's worth registering that former ASOS CEO Nick Robinson owns 7m shares. Which means that it does not look possible that both he and Bestseller voted their whole holdings (23m + 7m) in favour of the remuneration report. I suppose it's possible one or both has sold down a bit, but it looks a bit strange on first glance. If Bestseller didn't vote at all, but Robinson did, and voted for, then the level of independent shareholder opposition must have been around 40%.

It's too early to get any public voting data on this AGM, but looking back to the 2015 AGM, we can see that Baillie Gifford, the largest shareholder after Bestseller, voted against the remuneration report. (PDF here, if that doesn't work then look for Q4 2015 voting disclosure report here - you will need to accept terms and conditions). You can also see that ASOS was part of Baillie Gifford's engagement in the same quarter (look at the Engagement Report for Q4 2015). My gut feeling is that, given the increase in opposition this year, Baillie Gifford probably took the same position, but that is just a guess.

We can also see that one of the UK's local authority pension funds - West Yorkshire - also opposed the remuneration report at the 2015 AGM. See page 119 here, from the fund's voting disclosure site. Here's the blurb explaining the vote:

For Nick Beighton’s promotion to the role of Chief Executive, the Committee determined that the annual base salary level should be set at £550,000, which is £50,000 higher than his predecessor, and the annual bonus opportunity increased from 100% to 150% of base salary. The increases have not been adequately justified. Likewise, to secure the recruitment of Helen Ashton the Recruitment Committee bought out a proportion of her current long-term incentives from her existing employment, by making a one-off cash payment of £204,000 and a grant of a long-term incentive award under the ASOS Long-Term Incentive Scheme, worth £340,000 as at the date of grant. The awarding of a cash payment on recruitment, without any performance conditions attached, is not considered appropriate. 
I will keep digging around for info on how shareholders have voted this year and last, and why. I will post up what I find.

So, to sum up, we have a high-profile retailer whose working practices in one of its warehouses have been subject to critical media coverage. We also see, despite a large chunk of shares accounted for by insider ownership, the same company experience significant shareholder opposition over corporate governance concerns at multiple AGMs. Remind you of anyone?

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