Highlights from the world of Proxy Papers you can’t afford to miss!
Cypress Semiconductor Corporation
NASDAQ – March 24
Cypress Semiconductor’s annual shareholding meeting has yet to be scheduled, but it’s already contested. Earlier this year founder and former president and CEO, T.J. Rodgers, filed suit against the company to obtain information regarding the current executive chairman’s dual employment at a Beijing-backed private equity firm that focuses on semiconductor acquisitions, alleging that it presents a “serious conflict of interest”. Mr. Rodgers subsequently submitted two nominees for the upcoming annual meeting. In a statement, Mr. Rodgers also voiced concerns over Mr. Bingham’s “excessive and unnecessary compensation” for the executive chairman role. The board initially sought to avoid a proxy contest by offering to appoint one of Mr. Rodgers’ nominees if he would drop his demands; after getting rebuffed, it is now soliciting consents in lieu of a meeting of shareholders to obtain approval to eliminate cumulative voting for all director elections. Notably, amendments to bylaws to establish majority voting for uncontested director elections and proxy access for 3%/3-year shareholders, were made contingent on the passage of the current proposal.
The move to remove cumulative voting just ahead of a proxy contest may be simply a coincidence – Cypress states that it already intended to eliminate cumulative voting after receiving a shareholder proposal along those lines back in December 2016 – but shareholders should nonetheless note that the change may benefit the status quo by impeding Mr. Rodgers’ ability to shake up the board at the contested AGM still to come. Time may be short for Cypress shareholders, as once the executed consents approving the proposal reaches a majority of outstanding shares, the consents will become effective.
London Stock Exchange – March 21
The FTSE 250 gold miner’s board continues to be comprised solely of male directors, five years after the publication of the first Women on Boards report. Shareholder concern in this regard is sure to be heightened by the board’s failure to deliver on its previously stated intention to identify a female candidate when a board vacancy next arose. However, following the subsequent retirement of Kevin Tomlinson as an NED in 2016, the nominations committee determined that no changes or additions to the board were necessary at that time. Further, Centamin has declined to disclose any measurable diversity objectives, instead opting for boilerplate language that provides little insight into what strategy the board is employing to enhance diversity. Centamin’s lack of movement on this front is all the more puzzling given the public drubbing to which fellow miner Glencore was subjected for being the last FTSE 100 company to appoint a female director back in 2014.
Lotte Chemical Corporation & Lotte Shopping Co., Ltd
Korean Exchange – March 24 (both meetings)
Earlier this year, the Lotte Group announced its intention to adopt a holding company structure. On the face of it, streamlining the Korean conglomerate’s shambolic chaebol structure, which features over 400 cross-shareholding units, sounds like a win for transparency and investors. However it’s unclear whether the restructuring is being pursued in the interests of good governance, or as a means of resolving the ongoing fight for control between group chair SHIN Dong Bin and his brother SHIN Dong Joo. The Group is also dealing with a significant scandal; in October 2016 both brothers, along with other family members, were indicted for tax evasion and embezzlement, among other charges. With annual meetings for Lotte Chemical Corporation and Lotte Shopping coming up, independent shareholders will have to see if the restructuring brings about improvements in governance, or simply a clearer view of the Shin family’s ongoing control.
Hewlett Packard Enterprise Company
New York Stock Exchange – March 22
As part of a continued effort to sharpen its strategic focus, the Hewlett Packard Enterprise Company (HPEC) is undergoing a series of significant corporate upheavals. First up is the spinoff of certain non-core software assets in a transaction with Micro Focus PLC which, notably, will include the divestment of the assets remaining from the former-Hewlett Packard company’s toxic acquisition of Autonomy in 2011. Similarly, HPEC will be spinning off and merging its enterprise services business into Computer Sciences Corporation forming a new public company, DXC Technology, in the process. Though the announcements have been a stock price boon, the transactions have also drawn attention to HPEC’s one-time transaction bonuses, which totaled nearly $40 million for its top executives in the past year. At the annual meeting, shareholders will have to dissect these spinoff transactions while also assessing the ballooning outside commitments of HPEC directors, which include Ms. Whitman’s anticipated appointment to DXC’s board and Lip-Bu Tan’s ongoing board membership reshuffling. Meanwhile, Mr. Kleinfeld is juggling his three directorships while facing off against an activist campaign to oust him as chairman and CEO of Arconic, Inc..
Samsung Electronics Co., Ltd.
Korea Exchange – March 24
For multinationals, maintaining a compensation program that’s in line with local norms but competitive with the wider market can be tricky. Many provide a relatively high level of disclosure compared to their local peers in an effort to appease international investor expectations. This year, Samsung Electronics proposes to keep the general compensation limit the same as the previous year, but it is asking to raise the long-term incentive limit from 9 KRW billion to 25 KRW billion; moreover, it has failed to set out certain details, such as the constituents of the Company’s peer comparison group, that had previously been disclosed. The request for more compensation while providing less disclosure comes at a uniquely difficult time in Samsung’s recent history. Earlier this year, director LEE Jae Yong was arrested on bribery charges relating to the political scandal involving former President PARK Geun-Hye and her confidante, Choi Soon Sil. Given the turbulence generated by the Company’s circumstances, shareholders will have to carefully weigh the request for an increase in long-term compensation costs.
Kobayashi Pharmaceutical Co. Ltd. and DMG Mori Co., Ltd.
Tokyo Stock Exchange – March 30 (Kobayashi) and March 22 (DMG)
Is charity good for business? It’s a question that some DMG Mori and Kobayashi Pharmaceutical shareholders may be asking at the companies’ upcoming annual meetings. Both issuers have joined the emerging trend amongst Japanese commercial enterprises of disposing treasury shares through a private placement to a company charity foundation. In general, such companies explain that the activities of the foundation are in line with the company’s management philosophy, and as such the ‘donation’ contributes to increase medium to long-term corporate values. There are, however, some criticisms from investors, namely dilution and management entrenchment. In terms of dilution, companies usually set the number of shares to be disposed at approximately 1% of share capital; and many companies, including both DMC Mori and Kobayashi Pharmaceutical, prepare a plan to repurchase the equivalent or higher amount of their own shares from the market. To eliminate doubts of regarding entrenchment, the companies state that the voting rights of the disposed shares are exercised by an independent trust bank. Shareholders will voice their opinion on whether these protections are sufficient.
OTHER NOTABLE MEETINGS:
Hyundai Motor Company (Korea Exchange – March 17)
SGS SA (SIX Swiss Exchange – March 21)
Starbucks Corporation (NASDAQ – March 22)
Bankia SA (Bolsas y Mercados Españoles – March 24)
Hanjin Kal Corp. (Korea Exchange – March 24)
KIA Motors Corporation (Korea Exchange – March 24)
Korean Airlines Co. Ltd. (Korea Exchange – March 24)
SK Holdings Co., Ltd. (Korea Exchange – March 24)