Highlights from the world of Proxy Papers you can’t afford to miss!

Toshiba Corporation

Tokyo Stock Exchange – March 30

ProxSeasInsider 300x200Toshiba Corporation, the shares of which edged closer to delisting after being placed on “Securities Under Supervision” status by the Tokyo Stock Exchange, is holding an extraordinary shareholders meeting in order to sell its core flash memory business. While the broader implications are noteworthy, it merits recognizing the resolution up for consideration is merely an absorption-type company split. If approved, the rights and obligations related to most of the memory business operated by Storage and Electronics Devices Solutions Company will be transferred to a newly established wholly-owned subsidiary, Toshiba Memory Corporation. It has been widely acknowledged the contemplated proposal will facilitate a broader effort to cover up the capital deficiency caused by the ¥712.5 billion write-down in Toshiba’s U.S. nuclear power business. However, since Toshiba has not secured a definitive arrangement in relation to the sale of Toshiba Memory Corporation, it remains unclear whether further shareholder approval will be required for the future transaction. Nonetheless, given the firm’s tenuous position, there appear to be few realistic alternatives to management’s stated strategy.

Quantum Corporation

New York Stock Exchange – March 31

It’s been nearly two years since Quantum Corp has held an annual shareholder meeting – and about 10 months since one of the company’s largest shareholders, VIEX Capital Advisers, announced its intention to reconstitute the board due to concerns over stock price performance, negative enterprise value, and business strategy. The two parties have been negotiating to avoid a contested meeting, and earlier this month they entered a standstill agreement in which Quantum agreed to nominate two of VIEX’s nominees to the board. These directors would eventually be phased off, along with Quantum’s CEO, Jon Gacek, and replaced with three independent directors. Now, the rest of the company’s shareholders will get to vote on VIEX’s two nominees – along with the returning directors that negotiated the agreement.

Swedbank AB

Swedish Stock Exchange – March 30

The Nordic banking group’s 2016 AGM saw shareholders decline to grant the Company’s former CEO Michael Wolf and former chair Anders Sundström discharge from liability for FY2015 on the back of questionable property deals involving several top executives. While there is no evidence of such transactions occurring during 2016 and both Messrs. Wolf and Sundström have departed, shareholders will surely apply intense scrutiny to similar resolutions this year. Further, there remains uncertainty as to the circumstances of Mr. Wolf’s dismissal. The board announced that it had removed him due to non-disclosure rules; however the press and investors alike instantly questioned this rationale, along with Mr. Sundström’s role in the dismissal of Mr. Wolf, given that he had not informed the rest of the board of the property transactions prior to their decision. The timing raises the question of whether the decision could have waited until the full scope of the allegations were known to the board.

Toyo Tire & Rubber Co., Ltd.

Tokyo Stock Exchange – March 30

Investors may be forgiven for rolling their eyes at Toyo Tire’s recent announcement of inappropriate practices relating to its rubber products. After all, two separate deception issues from 2015 remain fresh in their memories – and the details of the latest problem are all too familiar. In 2015, substandard products were shipped, and multiple instances of falsified performance data were identified. This time around, the company found that certain rubber products were not undergoing sufficient safety testing, and that in some cases past data was being reused within inspection reports. Toyo Tire is now in the middle of replacing substandard products and going through possible reparations, but with falsification of data apparently a tradition, it’s unclear whether the company’s damaged image can be repaired.

SVG Capital plc

London Stock Exchange – March 30

Having received a 38% vote against its remuneration practices last year, one might expect that SVG would be at pains to avoid a repeat. However, the Company, which will soon be winding up having agreed the sale of its investment portfolio, has elected to breach its own pay policy in determining its CEO’s severance package. Upon leaving, Lynn Fordham will be entitled to six months’ salary in lieu of notice and nine months redundancy. Further, all of Ms. Fordham’s deferred STI shares and LTI awards from 2013 to 2016 have vested early and in full. While the Company’s shareholder approved remuneration policy states that on a change of control and/or in the case of a “good leaver”, vested shares will be scaled down to reflect a shorter measurement period (pro-rating), the board has used discretion to override this provision stating that “given the unusual circumstances presented by the Harbourvest takeover bid and the resulting sale of the Company’s investment portfolio (generating significant shareholder value) and the hard work and professionalism of the staff in responding to those circumstances, the Committee decided that it would be appropriate for these awards to vest early and in full”. We expect that shareholders will take a close look at this decision, as there is rarely a transparent way to measure performance and determine appropriate payouts in such circumstances.

Dentsu Inc.

Tokyo Stock Exchange – March 30

Dentsu, Japan’s advertising and public relations goliath, is on damage control and possibly facing a public relations crisis of its own. Two incidents have come to light that suggest serious problems with the company’s client interactions and employee working conditions. On September 23, 2016, Dentsu revealed that it had found irregularities in its digital advertising services, including false reporting of ad performance and overbilling clients. The company stated that the inappropriate practices were limited to its clients in Japan, but as the nation’s largest advertising company (believed to control 25% of the domestic market), any incident that besmirches their credibility may have far-reaching repercussions. Around the same time, on September 30 Japan’s labor ministry ruled that the 2015 suicide of a former employee qualified as “karoshi”, or “death from overwork”. After the ruling, local labor bureaus raided Dentsu’s headquarters and three of its offices to confirm whether this was a one-off incident or representative of chronic illegal overtime at the company. On December 28, officials decided that it would recommend the case to the prosecutor’s office for violations of the Labor Standards Act. Following these incidents coming to light, Tadashi Ishii tendered his resignation as Dentsu’s president effective January 2017 and announced his decision to step down from the board of directors at the upcoming AGM. While not directly related, both incidents indicate failed internal controls and risk management. In a cruel twist, Dentsu noted a lack of human resources to cover increasing demand in the digital advertising division as one of the contributing factors to the inappropriate practices. This is the very division where the departed employee worked.


McCormick & Company, Incorporated (New York Stock Exchange – March 29)

Svenska Handelsbanken AB (OMX Stockholm – March 29)

Telefonaktiebolaget LM Ericsson (OMX Stockholm – March 29)

Zurich Insurance Group Ltd. (SIX Swiss Exchange – March 29)

Canon Incorporated (Tokyo Stock Exchange – March 30)

Randstad Holding N.V. (Euronext Amsterdam – March 30)

Toronto-Dominion Bank (Toronto Stock Exchange – March 30)

Turkcell Iletsim Hizmetleri A.S. (Borsa Istanbul – March 30)