Highlights from the world of Proxy 
Papers you can’t afford to miss: Eletrobrás, Chico’s FAS, Telecom Plus, and Dow/DuPont.
Centrais Elétricas Brasileiras S.A. – Eletrobrás
Bovespa – July 22
Even beyond being caught up in Operation Carwash –Brazil’s largest corporate scandal – there is plenty of room for scrutiny at Eletrobras’ upcoming meeting. First, shareholders will have the opportunity to vote on consequential concession agreements with subsidiaries. Second, shareholders voting by proxy will be given the relatively unusual opportunity to vote on director candidates individually thanks to an early request for cumulative voting submitted well before the deadline of 48 hours prior to the meeting. This may be particularly welcome by some shareholders in light of the previous finding of a breach of duty of care against one director at another company, as well as the standing accusation that another recently-elected director faces an unreasonable conflict of interest. The last minute nomination of a new independent candidate – quite possibly with more to follow – may provide some relief for shareholders who find themselves questioning the suitability of other candidates.
Chico’s FAS Inc.
New York Stock Exchange – July 21
Women’s apparel retailer Chico’s FAS finds itself in the crosshairs of retail-focused activist investor Barington Capital, which is seeking two seats on the Company’s board. Following a multi-year period of underperforming shareholder returns, amid a slump in comparable store sales and hampered by relatively high expenses, the Company would appear to be vulnerable to an activist campaign. However, even before the proxy fight began, the board had taken action to right the ship through the introduction of cost-cutting measures, the divestment of a poorly performing brand and the ushering in of new executives and directors. In her first six months on the job, the newly-appointed CEO, a former merchandising officer at Walmart who has experience turning around another retailer, crafted a new comprehensive strategic growth plan and implemented additional cost-reduction initiatives.
Telecom Plus plc
London Stock Exchange – July 22
Having received fairly sizeable shareholder backlash in 2015, remuneration practices and committee responsiveness were clearly going to be under the spotlight at Telecom Plus’ 2016 AGM. While the committee addressed the fact that over one-fifth of voting shareholders opposed last year’s remuneration report, it maintains the belief that the reissuance of options to the CFO with an exercise price above the prevailing market price was in the best interests of shareholders and the Company. Nonetheless, the committee has since acted to alter the Company’s approved remuneration policy and will seeking to obtain shareholder approval of the addition of another LTIP, in an effort to ensure retention of key personnel.
The Company’s incentive arrangements have always stood out from the crowd, with no bonuses generally being paid, and long-term equity awards being granted on a somewhat ad hoc basis, at varying sizes; despite recent changes the remuneration structure remains distinctive, with the new LTIP based on a share price metric to start and (in the event that the share price hurdles are not met over time), a second chance to earn value through EPS growth over the same three-to-ten year performance period. While the targets employed under the new LTIP are certainly challenging (requiring share price growth of 500% over the ten-year period, or EPS growth of 3.5x), it remains to be seen if such a break from the norm at a UK issuer will be acceptable to investors.
Dow Chemical Company; E.I. du Pont de Nemours and Company
New York Stock Exchange – July 20
Two iconic American companies, Dow Chemical and DuPont, intend to combine in a $130 billion merger of equals, only to split into three new, more-focused public companies roughly 24 months later. While critics say the massive multi-step transaction tests the limits of corporate deal-making, the industrial logic is compelling as the companies seek to capitalize on business and market conditions in the agriculture and materials industries. The potential to unlock and create substantial incremental shareholder value had two prominent activist investors clamouring for the potential break-up of each company, among other changes, in separate campaigns last year. Now, all the pieces appear to be in place for a super-charged version of the scheme. After DuPont late last year appointed a new CEO, a deal veteran who oversaw the split-up of Tyco International, Dow and DuPont hammered out the structure and terms of the pending transaction shortly thereafter. Shareholder approvals on each side are among the few remaining conditions before the merger and three-way split can be implemented.