Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
Borsa Italiana – March 29
After 2018’s three-part campaign of contested meetings, Telecom Italia shareholders were likely hoping for some stability–but hopes of a quiet, peaceful AGM were crushed well in advance. Back in November 2018, the company’s CEO, Amos Genish, was replaced with Luigi Gubitosi; Genish had been appointed by Vivendi and confirmed by the newly elected board, the majority of whom were from the slate presented by Elliott. Vivendi has raised questions about Genish’s removal with the company’s statutory auditors, and submitted two shareholder proposals requesting the revocation of five directors and the subsequent appointment of five different directors. With the general meeting unfolding in less than a month, we’ll have to see who shareholders will place their trust with.
It’s been a tough fiscal year for Implenia. Back in July, the company completed a planned succession process, with André Wyss replacing Anton Affentranger as CEO. Wyss’s strategic review wasn’t completed until February 2019, but by then the share price had already halved from CHF 80 to below CHF 35 due to multiple profit warnings. While group revenue was up 13%, write-downs contributed to a CHF 5.1 million net loss for the year (compared to a CHF 35.8 million profit the prior year). These things happen. However, shareholders may have questions regarding the board’s response. The loss for the year had a corresponding impact on shareholder experience: besides the decline in market price, dividends were slashed from CHF 2 to CHF 0.50 per share. Yet it doesn’t appear that executives are feeling the pain. In fact, total variable cash remuneration grew from CHF 1.125 million to CHF 1.263 million, while the total share-based remuneration increased from CHF 1.725 million to CHF 1.87 million (excluding an additional replacement award granted in connection with Wyss’s appointment). This disconnect raises questions about board oversight, and makes this a meeting worth watching—especially given that 33% of shareholders voted against the company’s compensation proposals at the 2018 AGM.
Micro Focus International plc
London Stock Exchange – March 29
It’s been some time since Micro Focus International held an annual meeting—the least one was in September 2017. Shareholders looking for an update on the company’s integration of HPE Software, acquired from Hewlett Packard, may be in for a shock: difficulties led to a profit warning in March 2018 and, according to the current annual report, the process is approximately one year behind schedule. The HPE acquisition isn’t the company’s only transaction; last summer, it sold its SUSE business segment for US$2.535 billion in cash. There have also been notable management changes, with Stephen Murdoch replacing Chris Hsu as CEO in March 2018. That came at a cost, as Murdoch’s salary was set above that of his predecessor.
The remuneration committee may face other questions, in particular regarding its September 2018 decision to replace “ASG” share awards that had been granted just the previous year. ASG awards are issued in relation to material acquisitions, and vest (or don’t) based on absolute shareholder returns. The committee stated that the 2017 ASG awards were reviewed following the SUSE disposal, with the terms changed to better align with the HPE Software integration schedule; shareholders will note that it also followed a 50% decline in the company’s share price due to the profit warning. As such, replacing the awards with a new batch significantly reduced their grant date value — but also gave participants a much better chance of meeting the targets, and an additional year to do so.
SIX Swiss Exchange – April 1
The dust is finally settling at Clariant, and shareholders may not recognise they see. After the company’s planned merger with Huntsman Corporation was abandoned in October 2017, plans were announced for the Saudi Basic Industries Corporation to buy out several dissident shareholders and take a 24.99% stake. Regulatory approvals went through in September 2018, and SABIC entered a governance agreement that gave it one-third of an expanded 12-person Clariant board. Yet at a subsequent shareholder meeting in October, SABIC nominees Alissa, MacLean, Merszei, and Nahas received the support of only 66.98%, 78.92%, 81.93%, and 81.43% of votes cast, respectively. Despite a notable level of free float opposition, the board has not responded, and the nominations committee failed to meet between the October meeting and the fiscal year end.
On the remuneration front, the company is revising its incentive structure, which requires approval of a bundled series of article amendments. Most of the proposed amendments are intended to remove obsolete references and provide additional flexibility, and appear broadly positive; however shareholders may take issue with proposed change of control provisions, which would broaden the scope of the board’s discretion and allow for the payout of awards over and above pro-rata entitlements in the event of a change of control.
Nasdaq Stockholm – March 28
Swedbank’s AGM comes just over a month after Swedish public television broadcaster SVT aired a report on their investigation into the company’s business in the Baltic region. The report alleges that transactions of US$5.8 billion were made between suspicious accounts at the Swedbank and Danske Bank, with 50 customers in the Baltic region showing several risk factors that indicated possible money laundering activity. Following the broadcast of the report, the company announced on February 21, 2019 that it had appointed Ernst & Young to conduct an investigation into SVT’s allegations—but quickly replaced them with Forensic Risk Alliance due to E&Y’s involvement in the related Danske Bank money laundering scandal.
The company is also appointing PricewaterhouseCoopers as its independent auditor, replacing Deloitte, who had been in the role for 24 years. However shareholders may take issue with the length of the term: PwC has been submitted for a four-year appointment, meaning that if they’re appointed there won’t be another vote on auditor appointment until 2023.
Nasdaq Stockholm – March 29
Long-term shareholders are likely familiar with the severity of allegations regarding Lundin Petroleum’s complicity in war crimes and crimes against humanity. In June 2010, the Swedish International Public Prosecution Office commenced an investigation into alleged violations of international humanitarian law in Sudan during 1997–2003. Lundin had cooperated with the prosecutor’s office by providing information regarding its operations in Sudan during the relevant time period, but denied all allegations of wrongdoing.
The investigation came to a head in October 2018, when the prosecutor’s office requested that both board chair Ian Lundin and CEO Alex Schneiter be indicted and face a court trial over their alleged complicity in the war crimes. Investors have already reacted; the upcoming AGM agenda includes four shareholder proposals calling for major board changes, including two resolutions specifically targeting the chair and CEO, and two broader resolutions that would replace the entire board, and senior management.