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

Wienerberger AG Wiener Börse – May 6

Two major shareholders submitting competing director nominees to address perceived shortcomings in board composition sounds like the setup for a bitter proxy contest. Yet when that scenario played out at Wienerberger last year, rather than reacting defensively, the board was extremely responsive. Supervisory board chair Regina Prehofer underlined the board’s commitment to transparent board refreshment and highlighted the board’s intention to develop a skills and experience profile to guide the candidate nomination process. While the shareholder proposals were ultimately withdrawn prior to the meeting, Ms. Prehofer also invited all shareholders to submit proposals for future candidates.

It does not appear to have been a token gesture. In its recent public filings, the supervisory board has substantially improved the quality of disclosure provided around the composition of the board and the skills and experience of its members. A skills and experience profile is included in the annual report, which displays the board’s assessment of how key skills and experience are distributed among its incumbent members, and additional insight into the core competencies of new nominee Oswald Schmid has been included in the CV disclosed on the company’s meeting website. Furthermore, the supervisory board has provided insight into the outcome of its governance evaluation process and how the board intends to address points that have been raised by stakeholders.

Axalta Coating Systems Limited New York Stock Exchange – May 1

Timing’s a funny thing. Thanks to a classified board structure, only two of Axalta’s directors will stand for re-election at this year’s meeting – Deborah Kissire, chair of the governance and nominating committee, and Elizabeth Lempres, chair of the compensation committee. Both should probably expect to face some pointed questions after a year that saw a botched CEO transition and millions in one-off and retention payments.

Just months after being appointed, CEO Terrance Hahn resigned by mutual agreement with the board following an investigation by outside counsel into conduct “unrelated to financial matters” that the company believes was “inconsistent with Company policies.” The exact conduct leading to Mr. Hahn’s departure has not been disclosed or otherwise uncovered – nor is it likely to. Under the terms of a separation agreement, Mr. Hahn was allowed to retain sign-on cash and equity awards totaling $3 million. The board states that it considered the benefits of obtaining a complete release and avoiding the risk, expense and distraction involved with any potential dispute or litigation with Mr. Hahn. Beyond the cost of Mr. Hahn’s short-lived tenure as CEO, during the year other executives received a total of $7 million in one-off, non-performance-based equity grants, most of which are released after just two years. These things do happen – but Mlle Kissire and Lempres may have some explaining to do.

Schroders plc London Stock Exchange – May 2

When family-controlled FTSE100 asset manager Schroders appointed Leonie Schroder in March of this year, it was noted for being somewhat unusual: previous Schroder family members on the board have all had extensive experience in financial services. Ms. Schroder, by comparison, has worked in the charity sector, including a directorship on the Red Squirrel Survival Trust. Increasing expectations of the involvement of directors in setting strategy and challenging management has led to concomitant increased shareholder expectations of nomination committees. More nom-co’s are explicitly describing the vital contribution each individual director makes to the performance of the board as a whole. Adding another dimension is the broader corporate governance profile of the company, considering the nom-co chair is a former CEO (in direct contravention of the UK Corporate Governance Code at the time of appointment). Schroders’ AGM will be a good test case for the limits of independent shareholders’ deference to family-founders – and whether, much like the red squirrel, the once prevalent but now far more scarce instances of passenger directors are truly a thing of the past.

Allergan plc New York Stock Exchange – May 1

Brenton L. Saunders has served as Allergan’s chair and CEO since October 2016. In each of the past two years, the company has received shareholder proposals regarding an independent board chair, receiving 20.6% and 42.3% support in 2017 and 2018, respectively. Third time’s the charm? This year, a similar shareholder proposal put forth by activist investor Appaloosa LP urges the company to adopt a policy and amend its governing documents in order to require that the chair of the board be an independent director. Regardless of how the vote shakes out, the board has responded to the growing shareholder pressure. While pushing back on calls for immediate changes to Mr. Saunders’ role, in late March the company disclosed that the board has adopted a policy requiring an independent chair phased in with the next CEO transition. Specifically, the policy provides that, phased in within a reasonable period of time in connection with the next CEO transition, the chair of the board shall be an independent director, whenever possible. That wasn’t enough to satisfy Appaloosa, which has issued a further statement in response, but it will be interesting to see if year-on-year support for the shareholder vote continues to grow.

Catena Media plc NASDAQ Stockholm – May 2

Shareholder proposals are fairly common in Sweden. But the proposal submitted at Catena Media plc by Bodenholm Capital AB and Rune Cunniff and supported by AB Öresund, who hold a combined 26.7% of the company, would be unusual in just about any market: they’ve proposed a new (and potentially fairly generous) executive incentive plan. Whereas the company’s own structure provides the CEO with 200,000 share options and warrants that vest based on performance against ROCE and average annual organic growth targets, the shareholder-proposed plan would provide the CEO with… basically 300,000 more of the same. While the plan does include a third performance metric (EBITDA), it appears to allow for full vesting of each component on achievement of a single target, rather than a range of vesting outcomes based on performance within a target range.

Verizon Communications Inc. New York Stock Exchange – May 2

Once again, Verizon shareholders will vote on a bevy of shareholder proposals at this year’s annual meeting. That includes a proposal seeking an independent board chair, which received 47.6% support in 2018, along with a series of compensation-focused items (covering executive deferrals, severance approval, and links to cybersecurity) and a request for disclosure regarding online child protection. However, two items won’t be on the agenda thanks to no-action relief from the SEC, which allowed the company to exclude proposals requesting (a) that Verizon establish a board-level public policy and social responsibility committee, and (b) VZ shareholders receive the same pricing perks and special services as company employees. While the latter delved into the company’s ordinary course of business (and was frankly a stretch – though it could have made the company’s shares more attractive), the former touched on an area of significant concern, both amongst the broader marketplace and in relation to Verizon specifically, given public supply chain concerns. However, the company argues that it has substantially implemented the proposal through its corporate governance and policy committee, its audit committee, and its policies, practices, procedures, and public disclosures.

SNC-Lavalin Group Inc. Toronto Stock Exchange – May 2

For years, the company has been under investigation in relation to corruption and bribery, particularly in Libya. If those allegations, and the potential consequences, weren’t bad enough, SNC now finds itself in the center of a political firestorm due to its (alleged) efforts to avoid prosecution. The company is accused of approaching officials in Ottawa, including members of Prime Minister Justin Trudeau’s office, to secure a deferred prosecution agreement instead of facing criminal and corruption charges, and to pressure prosecutors to offer a remediation agreement after changes to the criminal code came into effect in late 2018. That scandal isn’t the only bit of bother hanging around SNC-Lavalin’s neck. Earlier this year, former CEO Pierre Duhaime plead guilty to breach of trust in relation to payments totaling $22.5 million that were made to secure a contract for McGill University’s ‘superhospital’. The company is now suing Mr. Duhaime to repay the $22.5 million, along with $17.5 million in damages.

The actual business of SNC’s annual meeting may not match that level of drama, but the agenda does include two shareholder proposals regarding the link between compensation and ESG criteria, and board disclosure. In addition, shareholders should be mindful of a material weakness identified in the company’s internal controls, specifically that controls over the reporting of estimated costs and related assessment of variable consideration on a particular project were not operating effectively because project management did not appropriately consider the terms and conditions of the project contract and their impact on the overall project forecast. It’s not likely to bring down a government, but it may prompt questions on the audit committee’s plan to address control deficiencies.

UBS Group AG SIX Swiss Exchange – May 2

It’s been a year of ups and downs for UBS, which reported a year-on-year 10.5% increase in operating profit before tax and, excluding the impact of the write-down of deferred tax assets in Q4 2017 following the passing of the US Tax Cuts and Jobs Act, an increase in consolidated net profit of approximately 16%. At the same time, the company’s share price declined significantly. After climbing to its highest level since 2015 at the start of the fiscal year, subsequent declines – particularly in the fourth quarter – saw them close the year at $12.44, the lowest they have traded since July 2016. Since November 2018, the shares are trading below book value. To be fair, the share price performance is broadly aligned with industry peers – particularly in Europe – and the company ascribes the decline to macro fears. One thing that remained fairly consistent was remuneration. While the total variable compensation (TVC) pool determined by the board went down 3.2% and the average pool for the executive committee decreased from 350% to 320% of fixed compensation, the CEO’s total pay was only reduced by 0.7%, from CHF 13.9 million to CHF 13.8 million. Shareholders will have to consider whether that outcome is appropriately aligned with their own experiences – and whether it takes sufficient account of the significant fines the company is facing from myriad legal and regulatory risks across Europe.