Highlights from the world of 
Proxy Papers you can’t afford to miss: McDonald’s Corporation, Loudong General Nice Resources (China) Holdings Limited, Nexity S.A., Twitter Inc, Chevron Corporation, Best Denki Co., Ltd
McDonald’s Corporation
NYSE – May 26, 2016
There’s just no escaping politics in an election year, is there? Issues related to corporate political spending have been one of the most frequent topics of shareholder proposals for over five years. One of the issues of concern to many shareholders is how companies are ensuring congruency between their corporate values and their corporate political spending. Historically, these proposals have usually been submitted by socially and environmentally progressive investors, including Harrington Investments and NorthStar Asset Management. However, over the past several years, the National Center for Public Policy Research (“NCPPR”), a “conservative think tank and public policy institute covering Congress, insider political information, global warming and the environment, legal reform, Social Security, and campaign reform,” has made corporate values & political spending one of its signature issues.
At McDonald’s Corporation’s May 26th annual meeting, shareholders will vote on two proposals, submitted by two proponents on opposite sides of the ideological coin, but in each case requesting more information on how the firm incorporates its corporate values in its political spending. The proposal submitted by John Harrington (of Harrington Investments) is concerned that the Company is undermining its stated core values by opposing an increase in minimum wage and contributing to politicians who deny the existence of climate change or who oppose GMO labeling of food. However, in a similar proposal submitted by Amy Ridenour (the chairman of NCPPR), the supporting statement expresses concerns that the Company “artificially raised wages for some of its employees at the behest of leftist agitators,” and also takes issue with the firm’s exit from the American Legislative Exchange Council — an action that is advocated by many shareholder proponents of political spending and lobbying disclosure proposals. Given these two similar proposals with significantly contrasting supporting statements, shareholders concerned with how companies are ensuring their values are aligned with their corporate political spending may want to pay particular attention to how they are voting on these proposals.
Loudong General Nice Resources (China) Holdings Limited
Hong Kong Exchanges and Clearing – May 30, 2016
Within the Asian markets, it is common for a company to be traded in one market, such as on the Hong Kong Stock Exchange, and for a subsidiary to be traded elsewhere, such as on the Singapore Exchange (“SGX”). In such circumstances, what happens in one market doesn’t necessarily stay in that market. Case in point: Hong Kong-listed Loudong General Nice Resources (China) Holdings Limited (the “Company”). Specifically, the Company’s executive chairman, CAI Sui Xin (“Mr. CAI”) and CEO, Mr. LAU Yu (“Mr. LAU”), were found to be in violation of the SGX Listing Rules and were issued a public reprimand for failing to report on matters relating to a proposed acquisition by the Company’s listed subsidiary, Abterra Ltd. (SGX: L5I), where Messrs. CAI and LAU served as executive chairman and CEO, respectively. Because of the violation of the SGX Listing Rules and the ensuing reprimand, SGX-listed companies have been asked to consult with the exchange should they seek to appoint either Messrs. CAI or LAU as a director or member of management going forward. Further, both Messrs. CAI and LAU were stripped of authorities relating to investment and mergers and acquisition activities by the board of Abterra. In light of the SGX’s actions, it will be interesting to see whether the Company’s shareholders decide to hold these executives accountable for transgressions at a related entity, albeit in a different market.
Nexity S.A.
Euronext Paris – May 31, 2016
French mid-cap real estate company Nexity SA has seen its fortunes continue to improve in 2015, as its share price progressed steadily toward pre-crisis highs. Moreover, shareholders may find themselves satisfied with the company’s combative financial performance during the year – which saw operating income rise by 29%, EPS triple, dividends steady at €2, and increased market share. Whether shareholders will be similarly satisfied by the company’s executive pay, however, is a question that will have to wait until the AGM on May 31st. While the company’s CEO, Mr Alain Dinin, may feel justified in receiving a near maximum bonus payout, its quantum is likely to raise some eyebrows in a country where shareholders are becoming increasingly strict on executive pay. Mr Dinin’s bonus surpasses peers, but may not be the worst offender for opponents of high pay, as the company plans to introduce a new long-term incentive that could double the CEO’s overall remuneration. Although the lack of a long-term incentive may have caused strong opposition to the top man’s pay in 2015 (26.3%), it remains to be seen whether this new plan – with its undisclosed targets and high payout potential – is what shareholders had really wished for.
Twitter Inc
NYSE – May 25, 2016
Twitter’s management team has been under relentless pressure from the media and Wall Street since its IPO in late 2013. Shortly after last year’s annual meeting, CEO Dick Costolo stepped aside and the board began a CEO search process. The hunt ended in October when the board re-appointed co-founder and chairman Jack Dorsey to the chief role after being impressed with his leadership as interim CEO in the wake of Mr. Costolo’s exit. Some observers have questioned Mr. Dorsey’s ability to serve as the CEO of two separate publicly-traded companies (he also leads Square Inc., which recently held its IPO), however, after shaking-up the Company’s management earlier this year Mr. Dorsey can hardly be accused of inaction. Nonetheless the Company’s stock is down roughly 40% since the beginning of the year following disappointment with the pace of growth of revenue and users. At the upcoming meeting, shareholders will for the first time have a chance to weigh in on the Company’s pay practices through an advisory vote and an unusual equity compensation proposal: an authorization to issue 6.8 million shares of common stock, which were effectively donated to employees by Mr. Dorsey from his own holdings, under a new incentive plan. The issuance of these shares therefore will not dilute current shareholders, although the Company’s equity compensation has raised eyebrows in the past; new CFO Anthony Noto received over $70 million in sign-on awards during 2014.
Chevron Corporation
NYSE – May 25, 2016
Facing an ongoing slump in commodities prices, this year companies in the oil industry have had to consider whether to adjust longstanding compensation practices to accommodate the operating environment, and if so, how. Shareholders of Chevron will have to carefully consider the company’s decision to maintain overall compensation levels for its executive team at a time when many of its peers, most notably Exxon Mobil, are actively reducing compensation levels in recognition of weak performance results and outlooks.
Best Denki Co., Ltd.
Tokyo Stock Exchange – May 26, 2016
The archipelago of Japan is no stranger to natural disasters, and their resulting impact on society. In the case of the Japanese island of Kyushu, which is recovering from a magnitude 7.0 earthquake on April 14, the impact will affect the financial performance of companies whose headquarters, factories, offices or retail outlets are in the affected area. Best Denki Co., Ltd., a home appliance and electronics retailer that will hold its AGM on May 26, saw two of its stores close while others in the nearby area are only open on shortened hours in temporary locations.
Beyond day-to-day operations, the timing of the disaster has the potential to complicate the highly-concentrated May/June Japanese AGM season. The extent of the damage in the city of Kumamoto and the surrounding areas may force companies that have a large presence in the region to revise their forecasts and operations for future years based on expected recovery timelines. Although many issuers have already released their financial statements for the fiscal year ending March 31, 2016, the Tokyo Stock Exchange announced on April 19 that listed companies with headquarters or main manufacturing facilities in areas affected by the earthquake may postpone the release of their earnings statements in light of the damage. Similarly, companies may decide to postpone their AGM if the earthquake makes it difficult to hold.
Given Japan’s history of rebuilding from previous devastation caused by earthquakes, we at Glass Lewis extend our sympathies to all who have been affected and hope for a swift recovery for Kumamoto and all of Japan.