Why Woodside shareholders are rich but not happy

That was a protest vote directly on climate not previously seen in corporate Australia.

The company didn’t need to read the tea leaves to understand that shareholders wanted a big improvement.

As Woodside heads into its annual meeting this month, it has now been put on notice by some large shareholders and two proxy voter services that climate inaction has consequences.

The lightning rod for their frustration is Macfarlane, an eight-year veteran of the Woodside board, a former federal resources minister and a member of Woodside’s sustainability board subcommittee.

Macfarlane is not being singled out for personal reasons, other than he happens to be up for re-election this year, he sits on the sustainability committee and has a higher public profile.

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The sustainability advisory part of one influential proxy firm, ISS, is calling for a vote against all three directors up for re-election, but most agitators are focusing attention directly on Macfarlane.

And climate action group the Australasian Centre for Corporate Responsibility has found support from two large shareholders with interest in Woodside. Vision Super and Betashares, have co-filed members’ statements with Woodside, calling on directors to be held to account for the board’s repeated failure to present a credible climate strategy – a failure that they say “raises genuine governance concerns”.

There is no reason to disbelieve the company’s statements that it has engaged with shareholders over climate change issues but according to one proxy adviser, “it has not explicitly set out how each concern has been responded to or addressed. Instead, the company broadly claims the items are addressed in [last year’s] 2022 Climate Report.”

And the protest is also capturing chief executive pay, which Glass Lewis suggests is overly generous.

It noted Woodside’s chief executive, Meg O’Neill, could now earn a total of $12.48 million in fixed and discretionary payments. While this is less than the $18.68 million possible for BHP boss Mike Henry and the $18.26 million for Rio boss Jakob Stausholm, it’s about 40 per cent higher than Fortescue Metals.

Meanwhile, some shareholders have proposed their own resolutions to be put before the meeting in late April. This involves a request the company disclose, in its annual reporting, information that demonstrates how the company’s capital allocation to oil and gas assets will align with a scenario in which global energy emissions reach net zero by 2050, facilitating the efficient managing-down of these assets.

These types of proposals that have been sought by shareholders in several companies rarely get broader shareholder support, in part because they involve a vote to change the company’s constitution.

But it is a further wake-up call to Woodside that shareholders, particularly institutional investors who are answerable to their own clients, need a level of confidence about the company’s response to climate to retain these holdings in their portfolios.

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Interestingly, not all proxy firms have issued a call to arms against Woodside. Another influential group, Ownership Matters (which advises many Australian industry funds), has recommended a vote in accordance with Woodside.

This support will probably give the company some confidence that Macfarlane will retain his seat on the board.

And Goyder’s new concession on regular climate voting suggests he is willing to throw its growing number of climate-conscious shareholders some red meat with detail on climate progress or face an even bigger threat next year.

Depending on what happens to the price of gas, the company may not have the luxury of basking in super profits in the coming year.

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