Sample Research
The following are examples of Proxy Paper reports that demonstrate our expertise across multiple capital markets in the areas of board governance, executive compensation, mergers and acquisitions, contested meetings, and shareholder proposals.
As Apple entered the post-Steve Jobs Era as one of the world’s most valuable and iconic companies, guided by a reputable and operationally-minded CEO, Tim Cook, we urged shareholders not to overlook the board’s failure to implement a shareholder proposal that was approved by shareholders at the 2011 annual meeting. Specifically, over 73% of shareholders supported a measure requesting the board to adopt a majority voting standard in director elections. However, rather than accept the will of shareholders, the members of the nominating and corporate governance committee continued to argue against the measure and recommend voting against a similar shareholder proposal at the 2012 annual meeting. The basis of their argument involved complexities under California law that could make the proposal difficult to implement. Nonetheless, having considered the well known benefits of majority voting and the clear momentum to make it standard practice at large U.S. companies (even those incorporated in California), we urged shareholders to not only support the shareholder proposal at the annual meeting, but to withhold votes from the members of the nominating and corporate governance committee who failed to fulfill their obligations to shareholders.
Cisco Systems found itself in a rather awkward and unusual situation. First of all, director Carol Bartz, the former CEO of Yahoo, served on the board alongside Yahoo’s co-founder and director, Jerry Yang, who reportedly maintained a key role in Yahoo’s decision to fire Ms. Bartz. Given the apparent acrimony between Ms. Bartz and Mr. Yang, as well as their evident inability to co-exist at Yahoo, we questioned whether their dual presence on Cisco’s board was in the best interests of shareholders. In our view, Cisco’s nominating and governance committee chair, Richard Kovacevich, had failed to appropriately address the governance issues posed by these two directors’ presence on the board, and shareholders would have been well served to vote against Mr. Kovacevich on that basis alone at the 2011 annual meeting.
Secondly, the Company’s dealings with the Chinese government called into question its commitment to human rights. Given the nature of prior lawsuits brought on behalf of Chinese prisoners, we felt that shareholders would benefit from increased disclosure on the Company’s efforts to ensure that its operations are not contributing to or encouraging the violation of human rights. As such, we urged shareholders to support a shareholder proposal requesting the board to publish a report on the steps it was taking to ensure that it was not contributing to Internet fragmentation.
Between 2008 and 2011, Zoran incurred significant operating losses, saw its revenues decline dramatically and generally underperformed relative to its peers. It is in this context that Ramius, LLC initiated a consent solicitation to replace the independent directors of Zoran’s board with six of its own nominees. One of Ramius’ main points of contention appeared to lie with Zoran’s strategy and decision to remain in the DTV business. In an effort to quell the growing discontent, Zoran took various cost-cutting measures and even entered into a merger agreement with British firm CSR plc. However, given the long-term ineffectiveness of the incumbent directors, we felt that it was the right time for shareholders to change the makeup of the board.
In what was poised to be one of the most dramatic annual meetings in recent memory, News Corporation attempted to pacify shareholder discontent rising from the phone hacking scandal that led to the resignations of top company executives, multiple arrests, shareholder derivative actions and the withdrawal of the company’s takeover bid of BSkyB. Ultimately, Glass Lewis felt that at the crux of this matter is the board’s structure and independence. At the 2011 annual meeting, we urged shareholders to carefully consider the nature of each director’s relationship with the company and its controlling shareholder, the Murdoch family, in order to establish a board with proper independence levels and strong oversight. Moreover, we felt that shareholders should have seized the opportunity to voice their dissatisfaction with the Company’s bloated and misaligned executive compensation program by voting against the inaugural say-on-pay resolution.
London Stock Exchange Group plc and TMX Group Inc.
A US$3.2 billion transatlantic “merger of equals” that would have combined the Toronto Stock Exchange and the London Stock Exchange (LSE) sparked nationalistic concern that Canada might lose its place in global financial markets. Such concern set the stage for a competing all-Canadian offer to buy TMX for US$3.7 billion. Maple Group, a collection of 13 banks, financial firms and pension funds, including Ontario Teachers’ Pension Plan (which owns Glass Lewis), made the bid to spoil the LSE deal and keep TMX Canadian owned. Though Maple’s offer initially topped LSE’s, the value gap had diminished significantly after Maple’s May 2011 announcement. Also, we discounted Maple’s offer on the basis that 30% of it would have been paid using Maple’s unlisted, hard-to-value stock. While both proposals had uncertainties, particularly from a regulatory perspective, we saw more total risk in Maple’s offer. Therefore, we felt the LSE-TMX merger was the best alternative for shareholders.
The 2011 annual meeting was the first after the controversial deal to collapse Magna’s dual class share structure and the Stronach family’s control over the company. Shareholders questioned whether the members of the special committee that oversaw the deal that placed a 1,799% premium on the class B shares without a recommendation or fairness opinion were acting in their best interests. In addition, Glass Lewis noted numerous concerns regarding the compensation of Magna’s top executives, who were paid $127.5 million in 2010.
In early 2010, former executives of Vivendi were the subject of seemingly conflicting legal rulings under different jurisdictions. The former Vivendi CEO and CFO were exonerated of charges including misleading investors in the US, while they were later fined and sentenced to prison in France on charges of fraud and embezzlement. A 2008 settlement with the SEC required them, along with Vivendi, to pay millions for misrepresenting Vivendi’s financial position. At the 2011 meeting, one of the audit committee members who served during the period of fraudulent financial reporting was finally up for election–Glass Lewis recommended voting against him.
UBS made headlines for several years for its generous pay packages to executives who brought the company to the brink of collapse, requiring a government bailout. New executives continued to profit despite their poorly designed compensation plans, which were revised year after year to ensure payments for mediocre performance, or worse. Beyond being criticized for its controversial pay decisions, UBS’ board continued to find itself in the hot seat as a result of the decision not to seek damages from former executives, despite a historic vote at the 2010 annual meeting against the ratification of acts of those responsible for UBS’ near downfall.
Between 2009 and 2011, Toyota was subject to scrutiny for its massive global recalls, numerous lawsuits, and multiple regulatory investigations. The company had historically maintained a sizeable board with 27 members until as recently as 2010, an issue which had long been of concern to Glass Lewis. However, in February 2011, the Company announced its intention to reduce its board size to 11 members, a step that Glass Lewis commended as critical towards improving efficiency in the decision-making process. However, we noted that the board did not meet our independence threshold, which raised significant concerns regarding its independence, objectivity and effectiveness in exercising proper management oversight. We felt it was imperative for the company’s board to have some level of independent representation so as to ensure protection of minority shareholder rights, particularly in light of the aforementioned scandals.