Switzerland’s pension fund-created Ethos Foundation and several institutional investors have taken legal action after France’s TotalEnergies excluded their governance-challenging shareholder resolution from the annual general meeting (AGM) agenda.

On 18 April, Ethos and a coalition of 19 international investors – including pension funds AP7, Lothian Pension Fund and ERAFP and backed by the French Sustainable Investment Forum (SIF) – filed an advisory resolution ahead of the oil and gas giant’s AGM calling for roles of chair of the board and chief executive officer to be separated.

At TotalEnergies, both titles have been held by Patrick Pouyanné since 2015.

However, on 26 April, the TotalEnergies board said that, having examined the draft resolution submitted by a group of shareholders, which it said represented less than 0.9% of the share capital, it had unanimously decided not to include it on the agenda of the 24 May AGM.

Citing the provisions of the French commercial code, the TotalEnergies board said it invited shareholders to consider submitting items, without voting, to provoke a debate at the AGM, but that it “will not support the advisory resolutions route in any matter”.

The board also said it had decided “unanimously and with conviction at its meeting on 21 September 2023, to continue to combine positions of chairman and chief executive officer”.

The Ethos Foundation said the coalition of investors and asset managers behind the resolution regretted the decision by the TotalEnergies board.

“Faced with what they consider to be an infringement of shareholder democracy, the Ethos Foundation and several co-filers have decided to file an appeal with the Nanterre Commercial Court to assert shareholders’ rights and allow all shareholders to express their views on a material corporate governance issue at the upcoming AGM,” the organisation said.

Storage trays and units of the TotalEnergies Port Arthur refinery, Texas

Source: @Total_GuillaumePerrin

The TotalEnergies board said that having examined the draft resolution submitted by a group of shareholders, it had unanimously decided not to include it on the agenda of the 24 May AGM

The shareholders filing the appeal believed there was no legal argument or provision in the French commercial code that would prohibit shareholders from filing an advisory resolution for the agenda of a general meeting, the foundation said.

Vincent Kaufmann, CEO of the foundation, said: “Voting on this proposed resolution would have had no other consequence for the company than to allow shareholders to share their views, and in doing so to send a signal to the board of directors as it reflects on corporate governance.”

The foundation argued that the separation of roles was now widely recognised as good corporate governance practice.

“It separates responsibilities for management and control, ensures a balance of power within the company and strengthens the board’s ability to take independent decisions and supervise management,” it said.

“In light of the board of directors’ flagrant disregard for shareholder rights, the Ethos Foundation and several co-filers felt compelled to turn to the commercial court for protection,” the Swiss organisation said.

They now await a court ruling before the AGM so the proposed resolution could be submitted to a shareholder vote, the Ethos Foundation said.

AP7 in Sweden told IPE it was not among the co-filers of the resolution which had joined the appeal, but was disappointed by TotalEnergies’ decision.

Johan Florén, chief ESG and communication officer at the SEK1.1trn (€94.6bn) national pension fund, said: “We were surprised and regret the decision not to include the resolution on the agenda for the general meeting.”

“The separation of the functions of CEO and chair protects the shareholders’ interests in the company’s operations and is seen as good corporate governance. AP7 cannot participate in the appeal now, but there will be many opportunities to revisit the issue,” he said.

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