Highlights from the world of Proxy Papers you can’t afford to miss!
Schlumberger N.V. (Schlumberger Limited)
New York Stock Exchange – April 5
The oilfield services company received only lukewarm support (64%) for its 2016 say-on-pay resolution, with shareholder concerns likely stemming from the size of payouts following a year of steep share price decline and questions about the design of the company’s short- and long-term compensation programs. These concerns were more pointed in the wake of the company’s controversial U.S. sanctions violations, which resulted in a $155 million criminal fine, the largest ever imposed for a U.S. sanctions violation, and the forfeiture of $77.6 million in illegally obtained profits in early 2015. This year shareholders will weigh the board’s efforts to rectify these concerns, as it moves to put the sanctions controversy in its rear-view mirror. The company adopted proxy access in early January and has made several adjustments to performance metrics and disclosure following last year’s say-on-pay vote. At the 2017 annual meeting, shareholders will also evaluate the company’s request to authorize 30 million shares under a new Omnibus Stock Incentive Plan as well as an updated employee stock purchase plan.
Hunter Hall Global Value Limited
Australian Securities Exchange – April 6
The resignation of Australian fund manager, Peter Hall, late last year from the investment management firm he co-founded, Hunter Hall Investment Management Ltd. (ASX:HHL), has given rise to an alleged “corporate governance crisis” at its listed investment company, Hunter Hall Global Value Ltd. (ASX:HHV). That claim, among others, comes from HHV’s largest holder, Wilson Asset Management (WAM), which in the wake of Mr. Hall’s departure sought to replace the entire HHV board with its own director nominees. WAM’s purported plan for HHV includes an equal access buy back which would allow all of HHV’s shareholders the opportunity to exit their investments at the fund’s net tangible asset (NTA) value. However, an objective review of the current governance and ownership changes surrounding HHV and its manager, as well as an analysis of HHV’s narrowing trading discount to NTA per share, raises questions as to whether WAM’s director nominees and buy back plan would be beneficial to HHV’s shareholders.
Semen Indonesia (Persero) Tbk
Indonesia Stock Exchange – March 31
Thus far in the 2017 Proxy Season, Indonesian government-controlled Indonesian companies are disappointing shareholders with lack of disclosure surrounding nominees standing for election and proposed auditors. To be fair, the poor disclosure is not completely unexpected, especially amongst government companies that generally disclose nominees on the day of the meeting. These companies tend to have two share classes – Series A Shares, held by the government, and Serie B Shares, held by everyone else. Semen Indonesia is somewhat unusual: despite being controlled by the government, it currently has one class of ordinary shares. That may soon change. This AGM features a vaguely worded proposal to confirm the creation of a new Series A Shares to be held by the government, with no details whatsoever about the rights attached or if that series will become the controlling share class. While cement companies are vital for building infrastructure in Indonesia, burying minority shareholder rights under the cement of new Series A Shares may lead to the entrenchment of the Indonesian government as the controlling shareholder, with little to no recourse for all other shareholders.
Quintiles IMS Holdings Inc
New York Stock Exchange – April 6
Shareholders overwhelmingly supported the merger that created Quintiles IMS Holdings back in September 2016, but nearly half voted against a related advisory proposal on golden parachute payments. Concerns likely centered on the package offered to Thomas Pike (who transitioned from CEO to president and vice chairman as part of the merger), which included up to $9.5 million in merger awards and cash payments, and $7 million in new equity grants. As it turns out, it appears that these awards were forfeited when Mr. Pike retired in late 2016; however, he’ll still be taking home a hefty severance package, which includes a $1 million cash payment in addition to two years’ worth of salary and target bonus, thanks to a last minute amendment to his employment agreement just days before his departure. One aspect of the merger should draw governance enthusiasts’ attention – whereas the former Quintiles Transnational held Say-on-Pay votes annually, IMS was on a triennial schedule, which the combined company has proposed to adopt, potentially reducing shareholders’ ability to weigh in on compensation going forward.
SIX Swiss Exchange – April 6
Nestlé’s annual meeting this year is likely to be dominated by discussions on generational changes on its board of directors and executive committee. In June, the company surprised the market with the appointment of the head of German healthcare firm Fresenius, Ulf Mark Schneider, as its new CEO – perhaps signaling the seriousness of its future focus on its healthcare business. Former CEO Paul Bulcke is set to take over as the new chair of the board of directors, with incumbent director Henri de Castries being proposed as the new lead independent director. It is likely that Nestlé was challenged by some shareholders as to the appropriateness of its current LID appointment, Andreas Koopmann, in light of his extended tenure – Mr. Koopmann is entering into his 15th year on the board.
Banca Mediolanum S.p.A.
Borsa Italiana – April 5
Is enough ever enough? The Doris family owns 29.6% of Banca Mediolanum’s share capital, and Massimo Antonio Doris is the company’s CEO. Mr. Doris has historically received only fixed pay, and been excluded from incentive schemes – somewhat unusual for a top exec, but understandable given his family’s significant holdings. This year however, the company is including Mr. Doris in its short-term incentive scheme, which includes a payout split equally between cash and shares. Shareholders may have questions regarding the decision to deliver a portion of the CEO’s awards in equity in light of his existing holdings, which would appear to provide a fairly strong level of alignment with company performance. One shareholder who won’t get to weigh in is Fininvest, controlled by Silvio Berlusconi; its voting rights have been frozen in connection with Mr. Berlusconi’s conviction for fraud.
Toronto-Dominion Bank; Bank of Nova Scotia; Bank of Montreal; Royal Bank of Canada; Canadian Imperial Bank of Commerce
Toronto Stock Exchange – March 30 (TD); April 4 (BNS, BMO); April 6 (RY, CM)
The big banks in Canada have historically enjoyed near-unanimous support for their director nominees and say-on-pay resolutions, a trend that is likely to continue as stock prices in the banking sector approach all-time highs. But the 2017 proxy season may give some reason to pause, with a potential controversy brewing at Toronto-Dominion following claims of aggressive sales practices—allegations which TD has renounced while touting its customer-focused culture. Shareholders at Toronto-Dominion and Royal Bank of Canada will also consider shareholder proposals seeking 3%/3-year proxy access rights like those adopted by the companies’ U.S. peers. A notable difference, however, are the access rights already afforded under the Canada Business Corporations Act, which permit holders of 5% for at least six months to nominate directors.
OTHER NOTABLE MEETINGS:
Volvo AB (OMX Stockholm – April 4)
Actelion (SIX Swiss Exchange – April 5)
Carnival plc & Carnival Corporation (London Stock Exchange and New York Stock Exchange – April 5)
Smith & Nephew (London Stock Exchange – April 6)
Banco Santander S.A. (Bolsas y Mercados Espanol – April 6)