- Management given a hard ride at general meeting
- Shareholder group calls for break-up of the bank
- Vote defeated as UK institutions give their backing
Annual general meetings (AGMs) aren’t generally the sort of events which grab headlines, but today’s gathering of HSBC (HSBA) shareholders in Birmingham was one for the record books.
Aside from repeated interruptions by climate activists, who labelled the bank’s chairman Mark Tucker ‘chief arsonist’ due to the bank’s role in financing fossil fuel projects, the management faced two contentious resolutions from a shareholder group as well as hard questions over its financial backing of companies involved in deforestation in Latin America and gas development in the Philippines.
MAKE UP OR BREAK UP
A group of investors under the banner of the ‘Spin Off HSBC Asia Concern Group’, represented by Mr Lui Yu Kin and presumed to include major shareholder Chinese insurance group Ping An (2318:HKG), put forward two special resolutions for shareholders to vote on at the meeting.
Resolution 17 asked that HSBC ‘do devise, implement and report quarterly on a plan and strategy aiming at increasing its value by structural reforms including but not limited to spinning off, strategic reorganisation and restructuring its Asia businesses’.
Resolution 18 asked that the bank ‘devise and implement a long-term and stable dividend policy that for and as long as there are sufficient distributable profits, HSBC should distribute dividends to its members at the pre-Covid-19 pandemic level i.e. not less than US$0.51 per share per annum (to be paid quarterly)’.
MANAGEMENT RESPONSE
In both cases, the board recommended investors vote against the resolutions.
In terms of its strategy and structure, the bank argued it had reviewed its options last year and decided that spinning off the Asian business ‘would materially destroy value for shareholders and put the dividend at risk’ in the words of the chairman.
As the world’s leading trade finance bank, a break-up would ‘create uncertainty for customers and shareholders’ added chief executive Noel Quinn.
With respect to the second resolution, to set a fixed dividend and not to repeat the dividend cut of 2020, both the chairman and the chief executive described the proposal as ‘not financially prudent, sensible or workable’.
At the end of the meeting it was revealed both resolutions had failed, with a majority of UK institutional and retail shareholders following the directors' recommendation to reject them.
However, by no means should the bank think it has assuaged minority shareholders' concerns, particularly when it comes to financing energy or infrastructure projects in developing countries or in terms of its corporate strategy.
