Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:

SThree plc
London Stock Exchange April 20

SThree is an expert at filling staffing gaps, including for specialised skillsets such as financial expertise. At the company’s upcoming AGM, shareholders will have to consider whether the board itself needs to do some recruiting. In particular, there are questions surrounding audit committee chair Anne Fahy. Her CV includes a distinguished 27-year career at BP, where she departed as a divisional CFO – however, she has also chaired the audit committee at Interserve plc and Nyrstar NV, two companies that have been upended by recent accounting scandals.

Rising debt obligations and falling financial performance prompted Interserve to pursue a rescue deal from creditors, but in March 2019 shareholders rejected the move and the company instead entered a “pre-pack administration” and has subsequently delisted (however, the company’s handling of inside information and market disclosures remains under FCA investigation). Nyrstar is still around, but shareholders now control just 2% of the former business after an April 2019 capital structure review identified “very substantial” funding requirements and the board entered a deal that gave commodities trader Trafigura control – however that deal is now the subject of a shareholder lawsuit, and the company, whose upcoming meeting (delayed due to covid) is expected to focus on voluntary liquidation, is now under investigation by Belgium’s Financial Services and Markets Authority.

There are no indications of similar problems at SThree. Nonetheless, shareholders may have questions about director Fahy’s key oversight role on several boards that have undergone significant audit scandals and faced tough questions about oversight. Last year, Fahy’s re-election was opposed by ~10% of voting shareholders.

Sioen Industries
Euronext Brussels  April 24

This family-owned Belgian company dropped from mid-cap to small-cap over the course of 2019. At the upcoming AGM, the board is seeking shareholder approval of a variety of amendments to the company’s articles of association as part of opting-in to the new Belgian Code on Companies and Associations Code. The Code replaces the existing Belgian Companies Code and is intended to modernise and simplify Belgian company law – and opens the door for the company to issue “loyalty” double voting rights on shares held for at least two years, if more than two-thirds of shareholders approve. Another amendment would remove the existing 35% cap on general meeting participation, carrying significant consequences on minority shareholder rights given that the Sioen family still holds approximately 65% of the share capital – and potentially more of the voting power, if loyalty shares are approved.

Synovus Financial Corp.
New York Stock Exchange
April 22

Speaking of loyalty shares – Synovus Financial Corp. is one of the few U.S.-listed companies to employ a similar structure. The company’s “10-1 Voting Provisions”, which have been in place since 1986, entitle shareholders to ten votes per share for each share that they have beneficially owned continuously for over four years. The 10-1 Voting Provisions currently apply to all shareholders who satisfy the criteria for the increased voting power, including smaller shareholders as well as shares that meet any of the other criteria for being entitled to ten votes per share. However, the board has included a proposal to eliminate the provisions on company’s AGM agenda. The intention is to bring the company in line with the vast majority of other public companies that have a one share, one vote voting structure; fully align voting power with economic ownership; reduce confusion over the distribution of voting power among shareholders; reflect the reduced frequency of time-phase voting systems; and reduce administrative burdens.

Heineken NV & Heineken Holding NV
Euronext Amsterdam April 23

The AGM agenda for the brewer (and its holding company) includes an article amendment that would significantly increase the ownership threshold for shareholders to submit a proposal. As it stands, you can submit a proposal if your shareholding is worth €50 million, or if it’s equivalent to 1% of total share capital. If the proposal is approved, the reference to €50 million would be removed – resulting in a de facto 800% increase, given the company’s current market capitalization.

Its arguably an academic distinction, since no shareholder proposals have been submitted in over a decade. Moreover, the resulting 1% threshold would be in line with standard Dutch practice. Nonetheless, it will be interesting to see if shareholders vote in favour of an amendment that could potentially limit their rights in the future.

The proposed change has prompted an alert from Eumedion, the Dutch Corporate Governance Forum, which also highlighted concerns with Heineken NV’s remuneration policy, including quantum, questionable benchmarking practices, and the absence of shareholding guidelines or sustainability measures.

Johnson & Johnson
New York Stock Exchange April 23

In response to the American opioid crisis, opioid-related shareholder proposals have become a mainstay in the last few proxy seasons. Moreover, these proposals have typically received majority shareholder support. This proxy season, Johnson & Johnson became the latest recipient of a proposal requesting that the company report on the governance measures implemented in response to the opioid crisis. From shareholder engagement on the topic, five other companies have produced such a report.

The proposal is focused on Johnson & Johnson’s three opioid products. Marketing for one of the drugs was ceased in the U.S. in 2008, while the firm divested from the other two in 2015. According to Johnson & Johnson, it has shifted its attention to other areas of high unmet medical need and no longer promotes any opioid pain medications in the U.S. However, its liabilities related to these products haven’t disappeared.

From 2014 through the present, Johnson and Johnson and one of its subsidiaries, along with other pharmaceutical companies, have been named in more than 2,800 lawsuits brought by state and local governments related to the marketing of opioids. Additionally, there are over 2,500 federal cases coordinated in a federal Multi-District Litigation pending in the U.S. District Court for the Northern District of Ohio which allege a variety of claims related to opioid marketing practices including false advertising, unfair competition, public nuisance, consumer fraud violations, deceptive acts and practices, false claims, and unjust enrichment. The company has settled some of the cases, received a $465 million fine pending in Oklahoma, and has offered $4 billion to settle all opioid-related lawsuits in the U.S.

Garuda Indonesia (Persero) Tbk
Indonesia Stock Exchange April 22

Garuda is facing headwinds from several directions. After having to re-audit and restate its 2018 financial statement, which was rejected by two commissioners due to aggressive revenue recognition, this year Indonesia’s flag-carrying airline saw its financial statements included a going concern due to negative working capital of $2,215 million and accumulated losses of $669 million, largely driven by a long-term $500 million “sukuk” loan with 5.95% annual interest, which comes due in June. However, the Indonesian government has indicated that the debt could be restructured due to the impact of the coronavirus pandemic, which has forced the airline to explore capacity rightsizing, discounts, cargo and charter opportunities, among other options. Amidst all this, there’s also some unexpected turnover in the C-suite — back in December, Garuda had to fire its CEO and four other executives following the discovery of a disassembled Harley Davidson motorcycle and Brompton folding bicycles smuggled on board in a new Airbus A330-900 plane being delivered to the airline from France.

Cigna Health
New York Stock Exchange April 22

As recently as 2018, Cigna used its proxy statement to proudly promote the practice of providing no excise tax gross-up severance pay upon change of control, part of its “Strong Compensation Governance and Controls.” However, the language was removed from the 2019 proxy statement, released shortly after the close of a merger with Express Scripts that saw Timothy Wentworth, formerly CEO of Express Scripts, join Cigna as President, Health. Now, in the 2020 proxy statement, the company simply highlights no gross-ups on perquisites – and discloses that it has newly agreed to ‘gross-up’ excise taxes which may be incurred in connection with payments received by Mr. Wentworth upon a change in control, as part of a retention agreement that also includes a total of $12 million in performance and time-based share awards. For the avoidance of doubt, *this* retention award is in addition to the $8.25 million deferred cash granted in 2018.

The AGM agenda also includes several shareholder proposals. One calls on the company to produce reporting on median gender pay equity, and the other would reduce the threshold for calling a special meeting to 10% of share capital. The latter comes just months after the board amended the company’s bylaws to permit shareholders with net long ownership of 25% or more of the Company’s outstanding common shares to call special meetings.

Taylor Wimpey plc
London Stock Exchange April 23

When Taylor Wimpey sent out notice of its 2020 AGM in mid-March, the UK homebuilder was coming off a strong year and, with no major governance or remuneration issues, looking forward to a fairly quiet shareholder meeting. Then the coronavirus spread, impacting all corners of the business. Operations have been shut down: on 24 March the company announced a number of measures taken in the interest of the safety and wellbeing of the employees and customers, included the temporary closure of all show homes, sales centres and construction sites. Shareholder returns have also been cut, as the company withdrew both a 3.80 pence per share final 2020 dividend and a 10.909 pence per share special dividend. And, it appears that executives will feel the pinch as well. On 1 April, the remuneration committee exercised its discretion to cancel 2020 bonus and implement a 30% reduction to salary and pension through at least 30 June.

COVID-19 Updates

In light of the dynamic nature of the ongoing crisis, we have compiled additional resources to help navigate the proxy season, including:

  • a tracker collecting all shareholder meetings that have been delayed or postponed; and
  • a market-by-market roundup of the impact on proxy voting. The most recent updates are below; for the full roundup, see our blog post.

Federal and regional agencies have issued a number of guidelines and directives aimed at curbing the spread of COVID-19 in Nigeria. Particularly, the Lagos State Government prohibited the gathering of more than 20 people, while the Corporate Affairs Commission (CAC) issued Guidelines on Holding AGM of Public Companies by Proxy. The convening and conduct of the AGM shall be done in compliance with these directives and guidelines. Companies are now providing a list of proxy nominees to pick from, with AGMs to be streamed live online.

On April 7, the Singapore Exchange Regulation (SGX RegCo) announced an automatic extension for issuers to extend their AGMs by 60 days. The extension will not be exclusive to issuers with a financial year-end of December 31, 2019. Issuers will need to email SGX RegCo to notify of the need for an extension, and provide an indicative timeline for the convening of their AGM. Issuers are strongly encouraged to provide a 21-day notice period leading up to the AGM, instead of the statutory minimum of 14 days.

SGX RegCo also announced that entry into the Financial Watch-List, which highlights struggling companies, will be suspended as many issuers are going to experience financial difficulties. In addition the limit on general share issuance mandates has been temporarily increased, from 50% to 100% of share capital for preemptive issuances, and from 20% to 50% for non-preemptive issuances.

Sri Lanka
The Colombo Stock Exchange has released guidance on the holding of general meetings. Currently, where an issuer seeks to delay or postpone their AGM, the payment of dividends will also need to be postponed until shareholders can approve the dividend. Issuers will also be able to dispatch their general meeting communications via electronic means. As for the holding of general meetings, issuers will have the option to hold a hybrid meeting whereby there may be a physical meeting and a virtual meeting taking place simultaneously, or have multiple locations to host televised meetings. Alternatively, issuers may also hold a virtual general meeting through teleconference mechanisms. For voting, issuers are encouraged to have shareholders vote by proxy. For shareholder questions, for hybrid or virtual meetings, questions must be submitted to issuers up until the day of the meeting, while issuers may include a response from the board to submitted questions.