Highlights from the world of Proxy Papers you can’t afford to miss!
ABB Ltd
SIX Swiss Exchange – April 13
ABB has never been one to sail through its annual meeting. This is a company with a shareholder base that is anything but shy in utilising the powers of the general meeting. Such a history does not bode well for the board following the revelation in February of criminal activities in its South Korean subsidiary which included embezzlement and misappropriation of funds. Due to a number of material weaknesses now identified in the company’s internal controls, the treasurer of the subsidiary was reportedly able to enter into a number of unauthorised financial contracts. In the investigation which followed, it was found that the Company had failed to provide adequate management oversight of local treasury activities. The eventual loss amounted to a decrease in net income of US$73 million. However, the long-term effects on ABB’s governance remain to be seen as the company is attempting to fend off pre-existing pressures from some shareholders to reorganise. Cevian Capital, Europe’s largest activist investing fund, has spent much of 2016 affirming the need for a streamlining of operations and reduction of complexity. At the 2017 meeting, shareholders will be asked to vote on the election of Cevian Capital’s managing partner, Lars Förberg, as a non-executive director.
Adobe Systems Incorporated
NASDAQ – April 12
In recent years, more and more S&P 500 companies have shied away from the combined chairman and CEO leadership structure as shareholders push for a greater separation of powers at the upper echelons of corporate America. Adobe Systems has bucked the trend in 2017 and appointed its longtime CEO, Shantanu Narayen, to serve as chairman of the board. The move represents something of a changing of the guard at Adobe, with two co-founders (and formerly co-chairmen), Charles Geschke and John Warnock, taking more of a backseat role in board affairs. Adobe hasn’t lost sight of the fact that some shareholders may view the move with skepticism: it has appointed James Daley to a clearly defined lead director role and also adopted proxy access in the past year.
Puma SE
Deutsche Börse – April 12
“The future is female!” – so proclaims Puma in its corporate strategy and brand marketing activities. In the past year, Puma has hired international superstar Rihanna as its brand ambassador and creative director as it looks to strengthen its strategic focus on the female target group. At Puma’s annual meeting this year, however, shareholders are likely to be scratching their heads when looking at the proposed composition of the company’s administrative board. In line with German legislation, Puma had set itself the goal of ensuring that at least 30% of its board is composed of female directors by mid-2017. At this year’s meeting, the whole board is up for election to serve until 2022; only one of the proposed members is female and Puma has remained tight-lipped on why it will miss its composition target. The board may have to explain this apparent inconsistency and the effect it may have on the brand.
PT Garuda Indonesia (Persero) Tbk
Indonesia Stock Exchange – April 12
Garuda Indonesia, the flagship airline of Indonesia, has found itself in turbulence while trying to fly away from the actions of its former president director and CEO, Emirsyah Satar. Mr. Satar is being investigated by Indonesia’s Corruption Eradication Commission (the “KPK”) in relation to a global bribery case that originated with Rolls-Royce Holdings plc. Mr. Satar and an associate are accused of taking bribes in exchange for purchasing Rolls Royce engines for 50 aircraft. While Garuda is cooperating with the KPK and has stated its innocence to the KPK, other Garuda employees are becoming of interest in the investigation. The outcome remains up in the air, however this could ground Garuda’s attempt to take off as a corporate governance leader.
CIMIC Group Limited
Australian Securities Exchange – April 13
CIMIC Group Limited (formerly Leighton Holdings Limited), a 73% subsidiary of Hochtief AG, has long been in the media spotlight for alleged bribery and corruption scandals and more recently for insider trading. While the corruption cases are still being investigated with two of CIMIC’s former executives facing criminal charges, the insider trading allegation have been judged to be true. The Federal Cout of Australia ordered Hochtief to pay a fine of A$400,000, in addition to a voluntary contribution of A$103,400 to each of Australian Shareholder Association (for the advancement of shareholder education in Australia and company monitoring) and to First Nations Foundation (for its initiatives with its adult financial literacy program). Aside from the court hearings, CIMIC’s board and management have also been busy snatching up Australian construction companies via hostile takeovers, starting with Sedgman and UGL in 2016. But the efforts to acquire Macmahon were met with a sharp halt after a series of amusing postcards sent to shareholders by the board of Macmahon advising them to take no action and later reject the offer. Macmahon also secured a contract with an Indonesian partner in exchange for issuing shares in Macmahon resulting in a 44.4% stake, effectively blocking CIMIC’s attempts.
Hunting plc
London Stock Exchange – April 12
Just days after PM Theresa May officially triggered Article 51, Brexit appears to be having an impact on governance – corporate governance, that is. FTSE 250 oil equipment and services provider Hunting has been forced to withdraw a resolution seeking approval for the exercise of remuneration committee discretion under its Performance Share Plan so as to avoid a revolt on the matter. The resolution had sought approval to move from a Sterling currency basis to a Dollar basis when calculating Total Shareholder Return for the purpose of determining award payouts. As a result of the committee’s retreat, TSR performance will continue to be measured on a Sterling basis and no shares will vest under the plan for the performance period 2014-2016. The message from investors to remuneration committees across the FTSE is that Brexit-induced currency fluctuations will not be accepted as valid rationale for the exercise of such discretion.
KB Home
New York Stock Exchange– April 13
“It looks good… on paper” is rarely a phrase that warms the spirits. However it’s one that may well apply to the compensation program at KB Home, the Los Angeles-based homebuilder. On its face the program looks robust, featuring a range of well touted safeguards, thanks in part to the compensation committee’s tinkering following a failed vote in 2012. The devil is in the details, however, and having “boxes checked” does not always line up with adequate shareholder protections. Although the year was largely business as usual for KB Home and its pay program, a closer look can turn up some potential concerns about upside opportunity and payout calculation. Pay levels have grown (along with revenue, in fairness), and many of the legacy structures that raised shareholders concern remain in place.
OTHER NOTABLE MEETINGS:
- Banco Popular Espanol, S.A. (Bolsas y Mercados Españoles – April 9)
- The Goodyear Tire & Rubber Company (NASDAQ – April 10)
- Bank of New York Mellon Corporation (New York Stock Exchange – April 11)
- Snam S.p.A. (Borsa Italiana – April 11)
- Julius Baer Group Ltd (SIX Swiss Exchange – April 12)
- Koninklijke KPN N.V. (Euronext Amsterdam – April 12)
- Rio Tinto plc (London Stock Exchange – April 12)
- ENI S.p.A. (Borsa Italiana – April 13)
- Ferrari NV (Borsa Italiana – April 14)
- Fiat Chrysler Automobiles N.V. (Borsa Italiana – April 14)