Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
Bezeq the Israel Telecommunication Corp. Ltd.
Tel-Aviv Stock Exchange – April 26
There is already little doubt that Bezeq’s 2018 annual meeting, which was hastily combined with a special meeting called under severe minority shareholder pressure, will be remembered in future years as a watershed moment for the company, and quite possibly for Israeli governance standards as a whole. Here are some of the reasons: the first foreign activist (Elliott) foray into one of Israel’s (relative) stock market giants; a united campaign by Israeli institutional shareholders upset at alleged exploitation on the part of a “controlling” 26% stakeholder; a pick-and-mix of qualified director candidates proposed by numerous parties with a view to completing the board refreshment process started in August 2017; and finally, the small matter of corruption allegations against the company’s controlling shareholder, its CEO and public officials — allegations that stretch all the way up to Prime Minister Netanyahu’s office. Now that’s a spicy ketzitzot!
Telecom Italia S.P.A.
Borsa Italiana – April 24
Following a years-long effort to slowly consolidate influence at Telecom Italia, Vivendi now faces a sudden referendum on its role at the Italian telecommunications major from Elliott Advisors. The well-known activist argues shareholder value has clearly wilted under Vivendi’s creeping grip, allowing the de facto controller to push through unpopular directors, poorly structured compensation plans and a litany of dubious transactions that do not clearly serve the interests of Telecom Italia or its ordinary investors. These arguments have clearly found purchase with a range of stakeholders, including affiliates of the Italian government concerned with Vivendi’s cross-border effort to control a major portion of Italian communications infrastructure. Vivendi’s rebuke – effected through its majority board slate – has, to date, steered clear of any meaningful confrontation of Elliott’s more detailed position, and has instead dubiously focused on meeting mechanics and the use of other questionable governance architecture as a means to forestall or preclude consideration of Elliott’s resolutions. Thus far, those efforts have failed to clearly obstruct the April 24 vote, though it is worth noting Vivendi is already gearing up for a May 4 rematch that would pit full ten-member slates against each other in a bout to control Telecom Italia’s future.
Sekisui House, Limited
Tokyo Stock Exchange – April 26
A house divided cannot stand, and Sekisui House is no exception. On paper, the company had a great year —financial performance has been nothing short of stellar. However, the company has been in the spotlight for all the wrong reasons after getting defrauded in a land purchase scam, incurring damages amounting to approximately ¥5,550 million. Reports of a board scuffle between Isami Wada, long-time chair and CEO, and Toshinori Abe, then a representative director and president, resulted in an effective dismissal of Mr. Wada that has further complicated the situation. Despite calls for the full report, the company has disclosed only a summary of an investigation of the land purchase scam by a committee composed of two outside directors and two external statutory auditors. The company cited ongoing police investigations as a reason for not disclosing the full report. However, the committee reportedly believed that the company was only disclosing favorable parts.
While the company has implemented measures to improve its corporate governance structure, after years of consistent corporate tax misreporting, Sekisui House’s foundations are looking to be more like a house of cards. With biannual elections for the election of directors and a bonus proposal at the meeting including those found to be responsible in the summary report, shareholders must carefully assess if the company’s current financial performance justifies the pattern of a lack of transparency, lack of risk management and lack of appropriate internal controls.
Biglari Holdings Inc.
New York Stock Exchange – April 26
Just one year off an annual meeting at which unaffiliated investors delivered a stunningly sharp rebuke of the entire board, near-autocrat and unrequited Buffet acolyte Sardar Biglari has nevertheless elected to press on with his personal crusade to erect an insipid caricature of Berkshire Hathaway. The forthcoming special meeting asks investors to again consider a repeatedly rejected dual-class share structure. This time around, the proposal is expected to tilt toward approval almost entirely by virtue of Mr. Biglari’s transparent campaign to undertake circular purchases of Biglari Holdings shares through a company-funded investment vehicle over which he exercises sole managerial and voting control.
LCNB Corp. & Charter Communications Inc.
NASDAQ – April 24 (LCNB), April 25 (CHTR)
In the United States, companies don’t just need to hold an advisory say on pay vote – they also need to hold an advisory frequency vote to determine how often to hold the advisory say on pay vote.
At last year’s annual meeting, LCNB held both a say on pay vote, which was overwhelmingly supported, and a frequency vote, with a tiny plurality of shareholders favoring annual say on pay votes going forward. However as the advisory frequency vote was not binding, and the board decided to disregard the result and go with a triennial say on pay instead, meaning shareholders won’t get to weigh in on compensation until 2020. It will be interesting to see how shareholders react to the board’s decision. The company has historically received strong support on pay, so it’s not like the board was trying to avoid a difficult situation; nonetheless, they may just have created one by going against the outcome of the frequency vote.
Charter also held say on pay and frequency votes last year. Unlike LCNB, there’s a much higher level of historical shareholder concern over the actual pay structure – but the company is insulated by a ~38% voting bloc. Absent the votes of Liberty Broadband and Advanced/Newhouse, less than a majority of unaffiliated investors supported the company’s executive compensation, and most asked for say on pay votes to be held annually. But including the bloc’s votes, the say on pay passed easily and will be held triennially going forward; moreover, there are no material changes to the pay structure. It will be interesting to see if investors take issue – and if so, how they direct their opposition in the absence of a pay vote.
SCOR SE
Euronext Paris – April 26
As investors look more closely at board composition, director tenure is getting more attention. It usually pops up as an issue when supposedly independent directors have been around so long that cobwebs are taking hold. But is it possible to have too much board renewal, and not enough tenure? It’s a question that SCOR SE investors may be asking, after extensive recent turnover has caused the average tenure of independent directors to drop in half, to 2.7 years, since 2012. In contrast, the company’s chair and CEO, Denis Kessler has been around for quite some time, 16 years. The discrepancy in duration may explain why the board has not provided much pushback on the topic of executive pay. Mr. Kessler’s remuneration has consistently exceeded peers, and both his payments and the company’s broader remuneration policy received significant voting opposition at last year’s AGM — but the board has not made any material changes, or even acknowledged these concerns.
General Electric Company
New York Stock Exchange – April 25
Consistency can be important — but sometimes you need a shakeup. It’s finding the right balance that gets tough. GE has certainly seen plenty of change recently, with a new chair/CEO appointed and the board size reduced from eighteen to twelve directors. But as the annual meeting approaches, shareholders are pondering whether further changes are appropriate. For one thing, there’s the question of whether to reappoint KPMG as the company’s auditors for what would be their 110th year. Besides just tenure, investors will consider what the company’s recently announced $15 billion shortfall says about KPMG’s oversight, along with a significant uptick in fee levels and the company’s reported involvement in SEC settlements with KPMG. Beyond the audit, the company’s traditional leadership structure, under which the positions of chair and CEO are combined, is again facing criticism. As in prior years, a shareholder-requisitioned proposal challenges this structure, calling for the board to phase in a split between the roles of managing the company and managing the board; last year, a similar proposal received 24.3% support.
Icade
Euronext Paris – April 25
Caisse des Depots et Consignations (CDC), owned by the French state, controls 39% of the Icade’s capital and holds a disproportionate number of board seats. This year Credit Agricole Assurances, who increased their shareholding to about 18%, put forward 3 nominees, 2 reps and one “independent” (cough-affiliated-cough) as SHPs. Five days later the board met, thought about it, and not only rejected the minority shareholder nominees, but decided to coopt an extra CDC representative onto the board. How will this play out? CDC’s stake and dominance of the board would seem to preclude any outcome against their interests, but their brazen disregard for other shareholders could act as mobilising force for a resistance.
Wells Fargo & Company
New York Stock Exchange – April 24
More than a year on, and Wells Fargo is still surveying the damage. The number of “potentially unauthorized” customer accounts that were opened as a result of improper sales tactics has increased by 67% to 3.5 million; the related federal investigation has expanded to take in the company’s wealth management business; and there is speculation that additional sanctions will be levied in relation to auto insurance payouts. In all, the bank now faces state and federal investigations into its practices in auto-lending, mortgages, wealth and investment management and foreign exchange. Looking ahead, improvements to the board’s oversight and governance, and to compliance and risk management at all levels, are due to be implemented by September of this year. As part of a Federal Reserve consent order, the company’s total consolidated assets growth will be subject to restriction until third-party reviews of the enhancements are complete. The board continues to undergo significant overhaul, with four new directors joining since last year’s annual meeting (and seven departing), and Elizabeth Duke appointed as the new independent chair. Shareholders will note two changes that didn’t get made: John Baker remains on the corporate social responsibility committee, where he has sat since 2011 (that is, throughout the scandal), and KPMG has been reappointed as Wells’ independent auditor for an 87th consecutive year.
OTHER NOTABLE MEETINGS:
- Midea Group (Shenzhen Stock Exchange – April 23)
- Citigroup Inc. (New York Stock Exchange– April 24)
- International Business Machines Corp. (New York Stock Exchange – April 24)
- AXA S.A. (Euronext Paris – April 25)
- Bank of America Corporation (New York Stock Exchange – April 25)
- Johnson & Johnson (New York Stock Exchange – April 26)
- Lockheed Martin Corporation (New York Stock Exchange – April 26)
- Petrobras Brasileiro S.A. (B3 – April 26)
- Pfizer Inc. (New York Stock Exchange – April 26)
- AT&T (New York Stock Exchange – April 27)
- ADO Group (Tel-Aviv Stock Exchange – April 29)