Highlights from the world of Proxy Papers you can’t afford to miss: Sempra Energy, UBS Group AG, American International Group, Inc., Statoil ASA, Bilfinger SE and Tempur Sealy International Inc.
New York Stock Exchange – May 12, 2016
In October 2015, a leak sprang in an Aliso Canyon natural gas storage facility operated by SoCalGas, a Sempra Energy subsidiary. By the time the leak was corrected some four months later the Company had released an estimated 97,100 metric tons of methane. Some estimates state that, at a certain point, the leak was emitting 587 metric tons of methane per hour – a rate equivalent to double that of the methane emissions from every power plant, oil and gas facility, airport, smoke stack and tailpipe in all of greater Los Angeles combined. Not only does this leak have significant environmental implications, but Sempra values the value of the natural gas emitted during the leak to be worth approximately US$33 million. In addition to this significant loss, Sempra and SoCalGas face a number of lawsuits, criminal misdemeanor charges and regulatory actions, the totality of which is unknown, but could prove to be significant for the companies. Given that some reports had indicated that SoCalGas was aware of the potential for well failure and that it had not properly mitigated associated risks, shareholders may question whether Sempra’s board-level environmental, health, safety and technology committee provided adequate oversight, clearly outlined in its committee charter, of the Company and its subsidiaries.
UBS Group AG
SIX Swiss Exchange – May 10, 2016
After another year of widespread regulatory action and legal disputes across multiple jurisdictions, with mounting associated costs, shareholders may question again whether management and the board deserve to be discharged from liability for their actions in the past year. The votes on compensation may also prove contentious in light of significant payouts. While awards are subject to extensive deferral provisions, the relatively unchallenging nature of multi-year performance criteria may lead shareholders to question whether the plans are structured to ensure that multi-million franc payouts are truly aligned with long-term performance.
American International Group, Inc.
New York Stock Exchange – May 11, 2016
Now in its fourth year of independent operations from the U.S. Treasury and its second following the departure of the late Robert Benmosche, who led the Company out of the financial crisis, AIG has started to feel new pressure from outside stakeholders. After months of pressure from activist investor Carl Icahn, the Company agreed to spin off its mortgage business and add new directors to the board in February. Directors have also had to keep close tabs on a lawsuit brought by Hank Greenberg (who led the Company prior to its spectacular implosion during the financial crisis) against the U.S. government. Mr. Greenberg has sued the government for US$40 billion, stating that its takeover was unfair financially for shareholders. While the Company refused to join the suit after a public uproar, the U.S. government has claimed that the Company would be on the hook for any damages awarded. The case is currently under appeal by both parties, after the United States Court of Federal Claims, ruled in Mr. Greenberg’s favor but stopped short of awarding damages in June 2015.
Oslo Børs – May 11, 2016
As the profitability of the oil and gas industry continued to be challenged by the realities of the post boom environment, Statoil ASA, Norway’s biggest oil and gas producer, has proven resilient. The past financial year also presented the Company with a different kind of challenge – the integration of Norway’s new remuneration guidelines for state owned companies into its existing remuneration structure. Statoil’s response has been to introduce a payout modifier based on a matrix of two relative metrics – an unusually dynamic feature for the staid Norwegian market. Moreover, a new system of earning thresholds will limit, or wipe out, executive bonuses if the bottom line isn’t up to snuff. On the environmental front, Statoil shareholders will again have the opportunity to vote on whether the Company should exit controversial extractive industries.
Deutsche Boerse – May 11, 2016
During a period of significant restructuring and operational losses, the surprise resignation of Bilfinger SE’s CEO Per Utnegaard for “personal reasons” in April is unlikely to have inspired confidence in the Company’s route to recovery. Mr. Utnegaard’s departure, following his appointment just ten months earlier, is the latest in a string of changes to senior management in the past five years and could be perceived as a sign of internal discord in the upper echelons of the Company’s administration. Shareholders may also be seeking further information from Bilfinger’s management on the progress of an internal investigation into the Company’s conduct in recent years. The Company has proposed to postpone the ratification of several of its long-serving management board members while the probe is still ongoing, but initial investigations seem to indicate that bribes may have been paid to secure contracts in at least one jurisdiction.
Tempur Sealy International Inc.
New York Stock Exchange – May 5, 2016
Executive transitions often trigger unintended costs, but shareholders of this bedding behemoth may be wondering whether the Company has appropriately managed the recent leadership turnover that occurred over the past year given the onslaught of sign-on, retention, and various other supplemental awards doled out to incoming and departing executives for the year in review. In particular, shareholders may be particularly wary of exceptionally large “aspirational grants” made to executives, and assess whether the one-time awards are entirely appropriate or necessary.