Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:
Australian Securities Exchange May 8
After a few years in the glaring limelight of a falling stock price following Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, AMP’s AGM will again be one to watch. This year it is the remuneration packages being offered to executives that is likely to warrant thought from shareholders.
In the 2019 remuneration report, AMP’s CEO has received generous adjustments to his sign on arrangements, however shareholders are likely to support such changes if they accept the argument that these changes are needed to keep the awards properly motivating. However, the size of the LTI grants this year are likely to be another matter. This year the Company has described its LTI awards as “transformation awards” and while it seems appropriate that AMP’s remuneration arrangements should be tied to a transformation, shareholders may not find the targets tied to these awards particularly transformative. The awards commence vesting at 75% of a benchmark index return, with full vesting at 110% of index return. As those held the stock across 2019 lost 20.5% of their investment, future returns at 75% of a benchmark index over the next few years is not going to be considered reflective of a satisfying transformation. Adding to this is the quantum: this year the MD/CEO received twice his contractual LTI and other executive KMP received around 4.5x of their fixed remuneration on face value.
Euronext Paris May 5
Lagardère upcoming general meeting will mark yet another skirmish in the ongoing battle between the French media multinational’s head, Arnaud Lagardère, and Amber Capital, its largest shareholder. Since first acquiring a stake in 2016, Amber has called for an overhaul of the group’s governance and an acceleration of its reorganisation around the travel retail and publishing divisions, and accused management of trying to intimidate and discourage shareholders. Last autumn, the conflict spilled over into the courtroom, with the company filing a lawsuit seeking €84 million in compensation for the damages caused by Amber’s “destabilization campaign”, including smears and acts of harassment, and Amber taking legal action to force the Lagardère family’s personal holding company to release its accounts, which had not been published since 2010.
It’s not the first time that Amber has made its case to other shareholders – back in 2018, they proposed two nominees to the board, garnering 15% support – but this time around they have expanded the scope of their proposals, and the level of public disclosure explaining their position. Arnaud Lagardère has responded by gearing up for a conflict. Recent board changes reshuffled leadership and saw the appointment of new directors including Nicholas Sarkozy, who has reportedly used his influence to encourage Vivendi’s Vincent Bollore to take a significant stake in an effort to insulate management. With company’s the share price at a consistent discount to the CAC 40 index, it will be interesting to see whether other shareholders are persuaded.
New York Stock Exchange May 6
Continuing a recent trend that began in the 2019 proxy season, Berkeley, California-based proponent As You Sow has once again come to an oil and gas company operating on the Gulf Coast to request that it report on the public health risks of expanding petrochemical operations in the environmentally risky region. The targeting of this year’s proposal is somewhat unique. Submitted to both Chevron and Phillips 66, it is primarily focused on the operations of Chevron Phillips Chemical LLC (“CPChem”), a joint venture formed by the two firms. The board’s perspective on the proposal is largely from the point of view of CPChem, and the distinction between the main company and its joint venture evidently was not sufficient to warrant the SEC to grant Phillips 66 no-action relief. Hurricane Harvey (2017) was the first major hurricane to hit the Gulf Coast since the petrochemicals boom. A chemical plant operated by CPChem was the site of one of the largest chemical releases due to the storm. As You Sow submitted the proposal to CPChem’s owners out of concern that such unplanned chemical releases would become more common as climate change intensifies flooding and storm strength. As CPChem is planning to build an $8 billion petrochemical plant on the Gulf Coast in partnership with Qatar Petroleum, it does not appear to be wavering amidst the region’s natural disaster risk.
London Stock Exchange May 7
Barclays’ shareholders are in a unique position this year, having two climate-related resolutions on which they may vote at the company’s upcoming AGM. One was submitted from management, and the other from a group of shareholders coordinated by ShareAction.
Both proposals seek to guide the company towards its alignment with the Paris goals – but the specific details are a little different. Management’s proposal seeks to hold Barclays to: (i) setting an ambition to reach net zero emissions by 2050; (ii) reporting on the strategy and targets it intends to use to reach its ambition; and (iii) reporting annually to shareholders concerning its progress on these goals. In contrast, ShareAction is requesting that Barclays set and disclose Paris-aligned targets to phase out the provision of financial services to companies in the energy sector and gas and utilities sector that are not aligned with Paris.
Notably, while the board has made it clear that it does not support the proponents’ resolution, management is not going so far as to recommend that shareholders vote against it. Both parties claim that engagement was fruitful, though ShareAction was not satisfied with management’s plan. For example, ShareAction argued that Barclays’ policies on fracking, oil sands, and coal were insufficient, while also noting that the proposed use of the International Energy Agency’s Sustainable Development Scenario under the management proposal would put the firm on a pathway to net-zero emissions by 2070, rather than Barclays’ Paris-aligned commitment to be net-zero by 2050. While ShareAction’s resolution addresses its key issues with management’s proposal, Barclays has committed to providing additional granular detail regarding how it would achieve its objectives by the end of this year.
Singapore Airlines Limited
Singapore Exchange April 30
Earlier last month, in what feels like an age ago in our current timeline, you might recall that the government of Singapore took relatively bold steps to tackle the spread of COVID-19. The state acted quickly to set up mass testing, rapid hospitalization, tracing and quarantine in an effort to contain the virus. Among the measures were restraints on movement, which included air travel restrictions, initially from highly infected countries and eventually broadening to encompass most global destinations.
The impact of COVID-19 sent shockwaves through Singapore’s aviation sector, and Singapore Airlines (“SIA”), the country’s dominating airline by market share, may have taken the brunt of the blow. After cancelling all its flights from Northern Italy in early March, a few weeks later SIA made the decision to slash its capacity by half, with CEO GOH Choon Phong noting that the company had lost a large amount of its traffic in a short period of time. One week later it was reported that SIA would be cutting 96 per cent of it scheduled capacity, in addition to mass stand-downs for operational staff and salary cuts for senior executives and directors.
With its primary revenue stream up on standby, the board made the decision to undertake an unprecedented capital raising, amounting to S$15 billion, consisting of rights issues of shares and mandatory convertible bonds. Shareholders are facing significant dilution, with the company proposing to issue 260% of share capital through a rights issue and 194% through the mandatory convertible bonds. The proposals’ passage is not in question, as controlling shareholder Temasek Holdings (Private) Limited has signaled its intention to support; however the capital raising nonetheless signals the potential trouble ahead not only for Singapore’s flagship airline, but for airlines globally in these extreme economic times.
New York Stock Exchange May 2
“Woodstock for capitalists” will be a virtual-only festival this year. In a letter, Berkshire Hathaway chair Warren Buffet explained that all special events would be cancelled, and that attendance at the meeting itself would be limited to Mr. Buffett along with “possibly Charlie [Munger, vice chair], and several Berkshire employees who will deliver proxy votes” – along with, potentially, several journalists who would serve as shareholder surrogates and ask questions on their behalf.
While the move towards a virtual-only format isn’t unusual in this upside down proxy season, the decision to go with indirect shareholder participation via journalists is raising eyebrows. That said, Berkshire Hathaway has accumulated more shareholder trust and goodwill than most publicly traded companies, and shareholder questions would probably focus on the company’s succession planning. It’s unlikely that any news gets announced regarding Mr. Buffett’s future, but board-level recruitment is a topic that will come up at the meeting regardless, thanks to a shareholder proposal calling for initial lists of new director nominees and CEOs brought in from outside the company to include female and racially/ethnically diverse candidates.
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.
On April 9 the Belgian Government issued a Royal Decree in response to the pandemic, which allows companies with a shareholder meeting scheduled between 1 March and 3 May to either (a) postpone their meeting by up to 10 weeks after the normal deadline, or (b) hold a remote general assembly, so long as shareholder are able to ask questions, either during or prior to the meeting, and clear voting procedures are in place. The decree makes the remote meeting an option regardless of whether it is provided under the company’s articles of association, and gives the board the power to prohibit any physical presence at the GM if the company cannot guarantee compliance with the measures in place. In such cases the board should provide for electronic means of communication in order to facilitate electronic participation.
Following the publication of Provisional Measure 931/20, the CVM published several instructions (part of a set of measures adopted to reduce the adverse effects of the pandemic on the country’s economy). After a public consultation, which ended on April 13, the CVM published Instruction 622/20. Said instruction partially amends Instruction 481/09, and foresees that shareholders may participate remotely in shareholders’ meetings held (100% or partly) digitally.
Meetings can be (i) wholly virtual/digital, if shareholders may only participate and vote through electronic systems, or (ii) partially virtual/digital, if shareholders may participate and vote in person or remotely (in both cases, without prejudice to the use of the distance-voting proxy form as a means to exercise voting rights). In the event that a meeting is held (partially or wholly) virtually/digitally, the notice of meeting shall include, besides the information required under article 124 of Law 6.404/76 and Instruction 481/09, information detailing the rules and procedures on how shareholders may participate and vote remotely.
Where a company provides an electronic system made available for remote participation, it shall guarantee shareholders’ registration and respective votes, as well as foresee the possibility for shareholders to (i) just participate in the meeting (having submitted or not the distance voting proxy form), or (ii) participate and vote in the meeting.
Further, the company shall ensure: the (i) possibility of access to documents presented during the meeting that had not been previously made available, (ii) meetings’ full record and, (iii) the possibility of communication between shareholders.
Meetings called prior to the Instruction’s publication could still have been held virtually/digitally, as long as the company disclosed said information, through a material fact. If the meeting is to be held until April 30, 2020, the material fact must be published at least one day before the meeting date. In all other cases (i.e. meetings scheduled for after April 30, 2020), the material fact shall be published at least five days before the meeting date(s).
As a result of the state of emergency declared in Colombia on March 17, 2020, the Colombian government issued throughout March 2020 several decrees in response to the Covid-19 pandemic. This paragraph summarizes the most relevant ones, in terms of AGMs.
Decree 398 of March 12, 2020 -> The decree allows companies that have called the AGM to update the notice of meeting to indicate that the meeting will be held remotely. This could be done up to one day before the date of the AGM.
External Circular Letter 100-00003 of March 17, 2020 -> The Superintendencia Financiera de Colombia modified the timetable for the presentation of the financial statements. The deadline was extended until May 12th.
Decree 434 of March 19, 2020 -> The decree allows the companies to hold their AGMs one month after the end of the state of emergency. If there was no call, the meeting will be held on the 31st day after the end of the state of emergency. The aforementioned decree partially modifies article 422 of the Colombian Code of Commerce.
External Circular Letter 100-00004 of March 24, 2020 -> Regulates Decree 434 of March 2020.
The Ministry of Corporate Affairs released guidance on the passing of resolutions in response to the threat posed by Covid-19. Notably, the guidance includes updated procedures for how companies are to provide for the noticing of general meetings, which may include by postal ballot, along with rules pertaining to voting. The Ministry also notified that companies with a financial year ended December 31, 2019, may be able to postpone the holding of their AGM up to September 30, 2020, when those AGMs normally are to be held by June 30. Lastly, the Securities and Exchange Board of India is relaxing the requirement for the top 100 companies by market capitalization to hold their AGM within five months from the end of their financial year. Instead, those companies, which mostly have financial years ended on March 31, will be able to hold their AGM by September 30, instead of August 31. At this point, no guidance has been released on the holding of AGMs for all other companies with financial year ends of March 31, 2020, which encompasses the majority of Indian companies.