From extensive share pledging to incomplete disclosure of related party transactions and an approach to executive “incentives” that eschews both performance criteria and holding requirements, shareholders have many reasons to be concerned with GFL’s governance – but little recourse, thanks to the company’s multi-class share structure.
With thousands of companies holding shareholder meetings during proxy season, it’s hard to know where to start. Glass Lewis’ Controversy Alert service can help, identifying the most crucial meetings globally and allowing investors to make better informed voting decisions with the latest information in hand.
In this post, we provide a roundup of the meetings taking place this week that were previously highlighted by Controversy Alerts, and look deeper into the situation at GFL Environmental. To get alerted ahead of time, get in touch and sign up for Glass Lewis’ Controversy Alert service.
Controversy Alerts May 12 — May 18, 2025
5/12 QXO, Inc. (Controversy Alert issued 4/25)
5/14 bpost NV (issued 5/1)
5/14 GFL Environmental Inc. (issued 4/25)
5/14 Harley-Davidson, Inc. (issued 5/8)
5/14 Southwest Airlines Co. (Issued 4/29)
5/15 adidas AG (issued 4/29)
5/16 Macy's, Inc. (4/29)
5/16 PT Vale Indonesia Tbk (issued 5/1)
5/16 Thales S.A. (issued 4/29)
Deep Dive: GFL Environmental Inc.
If a tree falls in the forest and nobody hears it, does it make a sound? Replace falling lumber with ordinary shareholders objecting to egregious governance practices at a company with a multi-class share structure, and GFL Environmental’s answer appears to be “no”.
Investors have identified a number of concerns at GFL, including significant deviations from market practice like non-disclosure of related party transactions and extensive pledging of shares under margin loans, along with more standard fare like combining the CEO and chair roles and a misalignment of pay and performance.
However, despite significant voting opposition – including 36% opposition to last year’s Say on Pay and over 20% opposition to four directors on the board committee responsible for governance and compensation – the company is largely insulated by its ownership structure, and agreements providing nomination and pre-emption rights to a core group that includes BC Partners, Ontario Teachers, and private Singapore holding corporation Magny Cours Investment Pte Ltd. While each of those investors has economic exposure equal to their voting power, much of their bloc’s power comes from the company’s founder, chair and CEO, Patrick Dovigi. He controls 25.5% of the votes despite owning less than 6% of the company, thanks to full ownership of a special class of shares that carry 10 votes each.
While multi-class share structures are not considered good governance because they distort voting outcomes and arguably disenfranchise ordinary investors, many investors are OK with them as a temporary measure. To that end, best practice is to apply a sunset provision phasing them out in seven years, or less if other conditions are met. While GFL’s multi-class share structure is subject to a sunset provision, it won’t kick in until 2040, two full decades after the company’s IPO, unless Dovigi leaves or his ownership drops below 2 per cent.
Whereas the company’s multi-class share structure appears to be in place for the long haul, much of its executive compensation arrangements are decidedly short-term in nature, including twice-yearly grants under the curiously named “NEO Retention Plan” – curious, because the “Retention” awards vest immediately and carry no further holding obligations.
Nor is compensation the only area of concern. For example, all of the multiple voting shares held by the CEO have been pledged as collateral to secure obligations under a margin loan -- potentially creating a significant incentive to boost the short-term stock price in unsustainable ways that could ultimately damage long-term investors.
Another potential conflict of interest relates to the C$10.5 million in leases the company entered with related parties during fiscal year 2024 (C$9 million in 2023). The company has failed to identify one of the directors involved, or to provide line-by-line details regarding those transactions; all investors know is that the multi-million dollar leases involve entities controlled by affiliates of Patrick Dovigi, as well as entities controlled by another unnamed director, and that all current leases are on "arm’s length and commercially reasonable terms".
Looking for More?
Don’t wait until the vote deadline has passed. Glass Lewis’ Controversy Alert service allows you to leverage the local market expertise of our highly knowledgeable research teams to identify the significant ESG votes that really matter for your organization ahead of time.
Receive crucial controversy alerts during the height of proxy season, fully integrated into our Viewpoint voting platform, so you don’t miss important votes. Our timely alerts are designed to provide the details you need to understand the biggest controversies at a glance, giving you time to analyze and take action through voting and engagement. You can read about the methodology, or click here for a sample.
