Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:
Danske Bank A/S
NASDAQ Copenhagen March 17
As its shareholder meeting approaches, the largest bank in Denmark is dealing with two of the largest banking scandals in recent history. Long-term investors are already familiar with the massive money laundering scheme involving US$1,208,886,397 in suspicious transactions. Over the past year, the company has continued to investigate, and the Estonian branch at the centre of the scandal entered liquidation. As if that wasn’t enough, in June 2019 it was revealed that approximately 87,000 investors had been charged excessive fees on Danske’s Flexinvest Fri product, resulting in a negative return. The Danish FSA later determined that Danske had broken consumer protection rules, and referred the matter to police. An investigation remains ongoing; so far Danske has dismissed the head of its wealth management division and pledged to reimburse approximately DKK 400 million to Flexinvest buyers.
Investor concern over the company’s response has contributed to an AGM agenda that is unusually heavy on shareholder proposals—seventeen of them, covering fallout from the scandals as well as other issues, including multiple proposals looking at the company’s involvement with fossil fuels. In a very rare move, one investor went even further, nominating a dissident candidate for election to the board to address corporate culture.
With all of this going on, shareholders would be forgiven for looking past a routine proposal to set fee levels for the board – but it’s worth another look, as directors have proposed to give themselves a 45% raise due “to increasing requirements and expectations”. If approved, the chair and vice-chair’s fees will have increased 71% in aggregate over the past four years.
Aston Martin Lagonda Global Holdings plc
London Stock Exchange March 16
It’s been a rough start to Aston Martin’s “Second Century Plan”. The company completed its initial public offering in October 2018, just 105 years after it was originally founded, with aims to stabilise the business, strengthen its core, and expand its product portfolio. The plan “ultimately proved to be too ambitious”, and over the past year the company has seen multiple profit warnings and a deterioration of its liquidity position.
It’s not the first time the automaker has flirted with liquidation. This latest round of struggles has prompted the board to pursue a £500 million capital raising, comprising 45,600,577 shares issued to the Yew Tree Consortium at 400p per share under a placing, and 153,217,942 shares to existing shareholders at 207p per share under a rights issue. In total, the capital raising represents over 87% of the company’s current issued share capital, and will reshape the share register, with current owners Prestige/SEIG and Adeem/PW seeing their interests dip from 29.6% and 27.6% to 24.7% and 17.9%, respectively, while Yew Tree is expected to control 21% of the company following completion. In addition, a member of the Yew Tree consortium, Lawrence Stroll, will join as executive chair, with the current chair, Penny Hughes, stepping down from the board. That’s not the only board change – outgoing CFO will retire no later than April 30, while three independent NEDs will leave at the AGM.
Borsa Italiana March 16
Shareholders will consider a bundled set of article amendments at Moncler’s upcoming special meeting, including positive changes to the rules surrounding board composition, technical housekeeping revisions—and, somewhat more controversially, the grant of double voting rights to shareholders who have held their rights for at least two years.
While that’s a common practice at smaller companies with concentrated ownership, it’s unusual for a company as large as Moncler. While the company isn’t subject to majority ownership, Ruffini Participationi Holding, led by executive chair and CEO Remo Ruffini, effectively maintains while holding just 22.6% of the share capital – down from 32% in 2016. Ruffini acquired the company in 2003, and it has performed exceptionally under his leadership. But investors have raised concerns over the timing of the move, which would reinforce Ruffini’s control after he sold a significant portion of his holdings. It appears that some of those sales were connected to changes in the ownership structure of Ruffini Participationi.
The board has argued that the additional voting rights are intended to ensure continuity and stability in management; moreover, they would not remain in place indefinitely. Under a sunset provision, the additional voting rights will be in force for six years following the two-year registration period, during which shareholders will be asked to express their vote on three elections of the board of directors, in 2022, 2025 and 2028. Even if they don’t agree with the decision to offer double voting rights, due to the bundled proposal structure shareholders will have to consider whether the move outweighs the benefits of the other amendments.
NASDAQ March 18
With regulators and exchanges around the globe taking action in response to the coronavirus, one company took matters into its own hands. Starbucks made news when it cancelled the in-person component of its annual shareholder meeting. The annual shareholder meeting will still proceed, but as a “virtual-only” meeting conducted remotely, with no in-person attendance.
SBUX owners who dial in will have to brew their own coffee, prepare their own sandwiches, and consider whether to support a Say on Pay that includes significant one-time awards (including a $25 million all-cash award to the CEO), a short performance period for “long”-term incentives, and relatively opaque disclosure (for example, of the LTI goal structure, and the rationale for certain one-time awards). Shareholders will also consider a shareholder proposal requesting that the coffee giant issue a report on its EEO risk, and whether non-executive director Mary Dillon’s service as CEO and director of Ulta Beauty (and with KKR & Co. as a non-executive director) leaves her with sufficient time to serve on this board. Last year, Dillon’s re-election was opposed by 15% of votes.
NASDAQ Copenhagen March 16
It was a good year for the FTSE Denmark Index, and brewer Carlsberg did better than most. Shareholders may want to consider just how much of that performance is attributable to the CEO, whose Kr 12 million base salary is significantly higher than that of peers—both local competitors in the OMX Nordic 40 index, and the company’s bespoke beverages-industry peer group. High fixed pay is particularly concerning as a large base salary has a compounding effect on the amount of short- and long-term incentives granted to an executive (since such awards are often granted as a fixed percentage of base salary). Indeed, the chief executive’s bonus for the most recent fiscal year is substantially larger than the median bonus of the Company’s OMX Nordic 40 peers—though it is more in line with the international beverage industry peer group. With just a forward-looking remuneration policy on the AGM agenda, shareholders won’t be directly voting on 2019 pay outcomes; moreover, while the CEO’s salary is already high, the proposal would only raise it by a modest 2.4%, on top of a 2.3% increase this past year.
Banco Bilbao Vizcaya Argentaria S.A.
Bolsas y Mercados Españoles March 13
BBVA has been frontpage news in Spain since January 2019 when the company’s transactions with disgraced police chief Jose Manuel Villarejo came to alight. It was alleged the company hired Villarejo’s firm, Grupo Cenyt, to spy on a potential buyer, Sacyr, as well as senior government officials, in efforts to stop Sacyr to acquire a stake in the company. In July 2019 the Spanish National High Court declared that BBVA an “investigated party” for bribery, unveiling and revelation of secrets and business corruption. The media frenzy only intensified when the secrecy order of the proceedings was lifted in February 2020.
The company’s longtime chair Francisco González Rodríguez is at the centre of the reports; Rodriguez had already stepped down from that position in December 2018, and subsequently left his honorary chair position in 2019. Also, certain current and former officers and employees, as well as former directors, have been named as official suspects in connection with the investigation, including former CEO Ángel Cano. While no current directors have been implicated in the investigations, shareholders will have to decide whether the board’s response to the investigation has been satisfactory.