Why pressure is mounting at BP ahead of annual general meeting

The growing chorus of opposing investors appears to be increasing the pressure. blood pressure Prior to the Annual General Meeting.

The Local Government Pension Funds Forum (LAPFF), the UK’s top pension fund body, announced late last week that it would encourage its members to vote against BP chair Albert Manifold and other resolutions supported by the board at its April 23 meeting.

The move follows recommendations from shareholders of Glass Lewis and ISS, two influential proxy advisory firms, and Legal & General Investment Management, one of Europe’s largest asset managers, to vote against BP’s intentions.

Glass Lewis and ISS have significant influence over how institutional investors tend to vote at shareholder meetings, and they rarely advocate voting against a company’s board of directors.

BP’s general meeting comes as the energy giant moves away from renewable energy and back to its core business of oil and gas, led by former Woodside Energy boss Meg O’Neill as CEO.

The London-listed company’s share price has soared since early April last year, when the company emerged as a strong takeover candidate. BP has gained nearly 32% so far this year, outpacing many of its rivals in the United States and Europe.

In a statement, LAPFF called on its members to vote against the re-election of BP’s Manifold, who only took over as chair in October, reject pressure from BP to withdraw two resolutions requiring company-specific climate change reporting, and vote against a resolution authorizing virtual-only shareholder meetings.

LAPFF said the recommendation was made amid “serious concerns about governance” and cited BP’s recent move to exclude a shareholder proposal put forward by Dutch activist group Follow This.

The motion, filed by Follow This, which has a long history of pushing big oil companies to step up efforts to combat climate change, would have required BP to share its long-term strategy under a scenario in which demand for oil and gas declines.

BP said its board had taken legal advice and concluded that the proposal was not valid and would not have been effective had it been passed at a general meeting.

In a Q&A with BP’s chairman late last month, Manifold said the company would seek to rescind the two climate-related resolutions because the world has moved on since they were passed in 2015 and 2019, and the requirements under these BP-specific resolutions are “largely redundant” with what the company discloses in other industry regulations.

Regarding plans to scrap these climate change resolutions, a BP spokesperson told CNBC: “Following extensive engagement with our largest investors, we are fully committed to building a simpler, stronger and more valuable BP. That’s why we are making these recommendations to provide transparent, standardized disclosures that support clear comparisons between companies.”

The company has also sought to make clear that withdrawing these resolutions will not change its net-zero goals.

Marc van Baal, founder of Follow This, which is backed by European investors and represents less than 0.3% of BP shareholders, said the company had “crossed a red line” by refusing to respond to the group’s offer.

“We’re just talking about value creation for shareholders. BP wants to give shareholders as little influence as possible, and they call it simplification. We want transparency,” Van Baal told CNBC in a video call.

“I think what’s at stake here is bigger than BP. What’s at stake here is shareholder democracy,” he continued. “If BP can escape exemption from the resolution, it will be a huge blow to shareholder democracy, because if BP can escape exemption from it, so can other companies.”

LAPFF said it also supports a proposal known as Resolution 24, put forward by climate change group ACCR, which calls for clearer disclosure about how BP assesses the cost competitiveness, execution risk and long-term value of oil and gas investments.

Glass Lewis advised investors to support Resolution 24 and oppose BP management on Resolutions 23 and 4, which respectively refer to climate change reporting requirements and the election of a chair, which were introduced several years ago.

ISS recommended a vote against BP management on resolutions 22 (moving to a virtual-only general meeting) and 23, while Legal & General Investment Management announced its intention to vote against BP on resolutions 22, 23, 24 and 4.

BP’s Manifold said ACCR’s proposed resolution would lead the company “in the opposite direction of what we want and need to be heading towards: towards simpler, standardized and comparable reporting.”

Manifold also said that many other large global companies are already holding virtual-only general meetings, and support from the company’s shareholders will allow BP’s board the option of holding similar general meetings from time to time.