Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:
Toshiba Machine Co., Ltd.
Tokyo Stock Exchange March 27
A subsidiary of Office Support K.K. has initiated a tender offer that would increase its stake in Toshiba Machine Co., Ltd. from 12.8% to between 27.3%-43.8% of issued share capital. The approach has not been welcomed: Toshiba Machine’s board characterized it as an inappropriate acquisition of effective control that would disrupt implementation of the company’s management reform plan, and has raised questions about Office Support’s demands for an extensive program of share buybacks. The tender offer price, which represented a 10.8% premium to the undisturbed trading price back on January 17, is now 29.4% above Toshiba Machine’s share price (as of March 12). However, before they decide whether to take part in the tender, shareholders will have to consider the unusual defense strategy undertaken by Toshiba Machine.
The board has proposed a set of response policies structured such that any ‘large-scale share purchase action’ will trigger a related ‘Shareholders’ Will Confirmation Meeting.’ At a Will Confirmation Meeting, shareholders would consider proposals to implement a series of countermeasures, including the allotment of the share options subject to discriminatory exercise conditions and acquisition clause without contribution.
It’s a complex proposition. Takeover defenses are common, but Toshiba’s response policies, which ostensibly provide shareholders and the board with additional information about the ‘large-scale purchaser’, would take the unusual step of codifying a certain role for unaffiliated investors by virtue of so-called “Shareholders’ Will Confirmation Meetings”. Of course, they would also serve to functionally delay the most direct and fundamental exercise of the will of shareholders in such a scenario—namely, the election by individual investors to accept or reject the terms of a given offer in their sole discretion. Shareholders have a lot to consider.
Telefon Aktiebolaget LM Ericcson
NASDAQ Stockholm March 31
The Swedish telecom giant finalised its bribery investigation after agreeing to pay US$1.2 billion to US authorities. Ericsson will be required to pay US$520 million to the US Department of Justice and an additional US$540 million fine to the Securities and Exchange Commission. The US prosecutors were investigating the company for creating off-the-book slush funds to pay government officials in China, Djibouti, Vietnam, Indonesia and Kuwait over a period of seventeen years from 2000. Further, Ericsson has agreed to engage an independent compliance monitor for a period of three years and strengthen its ethics and compliance program.
Börje Ekholm has been serving as CEO since 2006, and as such, for most of the period for which the company has been investigated. However, the board of directors does not appear to believe that he should be held accountable for not ensuring that adequate due diligence measures were in place. Shareholders may be questioning the CEO’s responsibilities with regard to developing a compliance culture and better oversight over international subsidiaries.
Further, Ericsson’s board and remuneration committee have decided to exclude fines related to DoJ and SEC investigations from the Group operating income performance metric under its 2019/2022 long-term incentive plan. The LTIP measures the profitability metric in the first year of the plan while the TSR related metrics are measured over a period of three years. The exclusion of the fines, which were expensed at SEK 10.7 billion in the income statement, led to full vesting under the operating income metrics as it exceeded the SEK 20 billion target. At the upcoming AGM, shareholders will decide whether this decision was in their interest.
Australian Securities Exchange April 3
In the wake of the devastating bushfires, Australian companies, particularly those in the energy sector, are under increasing scrutiny from investors on climate-related issues. Accordingly, a number of Australian companies are expected to see shareholder proposals concerning how companies are mitigating and managing climate-related issues in the coming months. Most recently, at its 2020 AGM, Santos will put to a vote three proposals from the Australasian Centre for Corporate Responsibility.
As submission of non-binding advisory shareholder resolutions is not an automatic shareholder right under Australian law, the first resolution is a constitutional amendment that would, if approved, allow for the subsequent two proposals to be formally voted on. The second resolution seeks for Santos to set long-term emissions targets that would be aligned with the goals of the Paris Agreement, demonstrate how its capex is aligned with these goals, and detail how its remuneration policy will incentivize progress against its emissions targets. The final resolution requests that Santos report on its lobbying activities relating to climate-resources, and/or energy policy, addressing how its lobbying activities are consistent with the goals of the Paris Agreement. In instances where Santos has found that its lobbying is inconsistent with the Paris goals, ACCR is further requesting that the firm disclose a strategy to prevent further inconsistencies.
If Santos cannot agree upon a remediation plan with an industry association of which it is a member, ACCR recommends that Santos suspend membership in the group. This issue is especially important, given significant strides in disclosure and policies made by a number of Australian and European companies, as well as Climate Action 100+’s focus on how companies are engaging with their industry associations. Regardless of whether any of the resolutions garner significant support, they will highlight key differences between Santos and its peers on these hot-button issues.
Carnival Corporation & Carnival plc
New York Stock Exchange/London Stock Exchange April 6
Carnival’s AGM comes as the company faces criticism for its response to the coronavirus —and as politicians debate whether to include the cruise industry as part of economic stimulus measures. In response to claims that the company’s Diamond Princess ship, which saw over 700 passengers infected following a 14-day ‘quarantine’, constituted “a floating epidemiological disaster”, CEO Arnold Donald has said the company had “every protocol in place” and that “cruise ships are not a source for coronavirus.” Like other major cruise lines, Carnival has suspended sailing operations to and from US ports until at least April 11.
While President Trump has described the industry as “prime candidate” for government funding to support it through the crisis, the idea has drawn some criticism. Mr. Donald said the company is not seeking a bailout, but “a loan guarantee would be helpful.” The company has already provided a preliminary update on the financial impact from canceled trips and decreased global bookings as a result of virus, which is expected to have a material impact on its financial results.
With listings on both the London and New York exchanges, the meeting agenda for the joint company features both UK and U.S. proposals. On the compensation front, in addition to the annual say on pay shareholders will consider an advisory vote on the remuneration report, and a binding vote on the remuneration policy. In addition, there are several capital authority proposals, which may be unfamiliar to U.S. investors; the proposed share issuance and repurchase authorities are in line with UK market practice.
In light of the dynamic nature of the ongoing crisis, we have compiled a market-by-market roundup of the impact on proxy voting. The most recent updates are below; for the full roundup, see our blog post.
While no official action has been taken, Brazilian companies are starting to push their meetings – but only by a week, to the end of the month of April. That is the latest the law allows them, since the meetings have to be held within four months of the end of the company’s fiscal year.
On March 20, 2020, the Canadian Securities Administrators (CSA) published guidance to assist companies in relation to conducting AGMs, stating that in its view issuers can amend the details of the meeting if they promptly file a news release and take all reasonable steps to inform shareholders and provided companies include clear directions on the logistical details of a virtual or hybrid AGM.
On the same day, Canadian banks and life insurance companies announced in a joint press release that they had obtained a court order to hold meetings, in whole or in part, using electronic means. The order was obtained because Canadian banks and insurance companies are not permitted to conduct an electronic annual meeting in lieu of an in-person meeting without relief from the court.
The initial trickle of virtual-only meeting announcements that started last week is turning into a flood of such announcements, with well over 50 public companies making the last minute switch since the beginning of last week.
The Chilean securities commission is implementing measures so that shareholders’ meetings can be held remotely and will even allow companies to present reasons of force majeure of why the meeting may not be held at all.
On March 23, the German Ministry of Justice has proposed a draft resolution to the federal cabinet pursuant to which:
- companies (under all relevant incorporation forms for GL) would be able to hold virtual general meetings, even without a stipulation in a company’s articles of association;
- the days until when a company has to call a meeting would be reduced from 30 days to 21 days;
- advanced dividend payments would be facilitated; and
- the period until when a Company has to hold its annual general meeting would be extended from 8 months after fiscal year end to “until fiscal year end”.
The draft will be presented and voted on by the Bundestag (“parliament”) on Wednesday, March 25.
The Financial Services Authority of Indonesia (“OJK”) on Wednesday, March 18, 2020 had extended the deadline for reporting and holding a General Meeting of Shareholders (GMS) for Capital Market Industry participants in a response to the emergency conditions due to the Corona virus in Indonesia.
The provision for extension can be summarized as follows:
- The implementation of the Annual General Meeting of Shareholders, which was supposed to be held no later than June 30,2020, was extended to August 31, 2020;
- Submission of the Annual Financial Statements have been changed from March 30,2020 to May 31, 2020; and
- Submission of the Annual Report was extended from no later than April 30, 2020 to June 30, 2020.
Additionally, Company are encouraged to hold GMS through electronic authorization mechanism using the e-GMS system provided by the Depository and Settlement Institution. The holding and use of the Electronic Proxy mechanism for the GMS through the E-GMS system will be as prepared by PT KSEI (“PT Kustodian Sentral Efek Indonesia”). With Electronic Proxy, it is expected that the shareholders do not need to be present (avoiding the crowd) and are sufficiently represented by the proxy.