NASDAQ – June 6
As in recent years, the agenda at Netflix features a variety of shareholder proposals covering topics like proxy access, majority voting, written consent and the right to call a special meeting. One of the reasons these proposals keep popping up is that despite strong shareholder support, the board hasn’t taken any steps to respond and improve its governance structure and practices. It’s not a new phenomenon: back in 2011, 73% of votes were in favour of establishing a simple majority vote requirement that still has yet to be implemented. Last year, shareholders tried to take board responsiveness out of the equation, proposing to implement majority voting for director elections on a binding rather than precatory basis. However that proposal required two-thirds support, and only received 64.6%. It’s been resubmitted on a binding basis again this year; can shareholders get it over the hump and force board action?
The company also faces questions regarding executive compensation after eliminating its performance bonus plan. The bonus change, like the plan itself, appears more focused on the advantages of the tax code rather than incentivising executives, and removes one of the last elements of the executive pay program that provided shareholders a level of measurable performance accountability, leaving NEO compensation to be determined entirely by discretion. On the topic of structure, the board will also have to explain its strong stance against adopting an overarching clawback, which runs counter to general market practice ahead of final SEC guidelines and ignores the risk-mitigating benefits to shareholder value. The absence of such a provision is… the topic of a shareholder proposal.
Deutsche Börse – June 6
The dust has yet to settle on Fortum Oyj’s attempted takeover of German power company Uniper SE, but shareholders are already asking for clarity. The Finnish state-owned entity had conducted a tender offer at the start of 2018, convincing former parent company e.on SE to give up its 46.65% Uniper shareholding. However Uniper’s management and supervisory boards opposed the deal, and aside from e.on the offer only attracted a further 0.47% of the share capital — less than a controlling stake. As the parties involved set about establishing a working relationship, other stakeholders have been reviewing the deal, and its implications. Russian regulators in particular took their time before giving the OK. In part this was due to fears about Fortum’s potential influence on the Russian energy market, however the process may have been slowed down by some dissension in the ranks: in a press release announcing the approval (subject to restrictions), Fortum CEO Pekka Lundmark alleged that Uniper management “has actively worked against the transaction in Russia.” Given the intrigue, Elliott International has submitted a shareholder proposal requesting that a special auditor investigate potential breaches of duty or legal infringements of the management board in connection with the takeover offer and Russian regulatory clearance. Uniper’s CEO says that the vote proposal amounts to a confidence vote, and claims that all contacts with Russian officials “were in compliance with the letter of the law.” One wrinkle — as the transaction is unlikely to be completed prior to the AGM, e.on should still be entitled to vote the shares they tendered months ago. Given the company’s ownership structure and meeting participation rates in Germany, it appears that the fate of the special audit rests solely on the shareholder with one foot out the door.
NASDAQ – June 6
With a newly appointed independent board chair following Eric Schmidt’s transition from exec chair to technical advisor, change is in the air at Alphabet. However while the org chart looks better from a governance perspective, it’s unclear whether independent leadership will make much of a difference to how the board, and company, operate. After all Schmidt, along with Sergey Brin and Larry Page, still control over 56% of the company’s voting rights. That’s despite holding roughly 6% of the company’s actual equity, thanks to a multi-class voting share structure. Removing that structure is, as in past years, the subject of a shareholder proposal that is, as in past years, likely to garner majority support from unaffiliated shareholders before being ignored by the board. Other shareholder proposals on the agenda this year cover topics such as the gender pay gap, linking pay to sustainability — and one seeking a report on “the efficacy of enforcement of content policies”, or, in other words, the company’s involvement in the dissemination of fake news during the 2016 U.S. election. The company (more specifically, its subsidiary Google, Inc.) also faces various regulatory investigations. Last year the European Commission’s ever-ongoing probe antitrust probe yielded a 2.42 billion fine, currently pending appeal, with further decisions regarding Android and Adsense still to come.
Teva Pharmaceutical Industries Ltd.
New York Stock Exchange – June 5
It’s been two rocky years for Teva, for many years Israel’s only true global stock market giant. The company’s existential mantra of consume or be consumed, practiced through years of aggressive M&A, culminated in the failed acquisition of Mylan and the ill-fated acquisition of Allergan’s generic drugs business, and led to the revolving door culture that the board no doubt hopes is now a thing of the past. The reason for quiet optimism is that Teva finally got the world class CEO it so sorely craved, Kare Schultz, poached from Danish company Lundbeck with an unheard of sign-on fee (by Israeli standards). Now investors, who generally responded positively to news of Schultz’s arrival and his ruthless early measures designed to service the company’s gargantuan debt, have the chance to have their say on the lucrative pay package. If the new CEO delivers on his reputation as a turnaround expert, the package will look like small change in the big pharma industry of the future. But it also has the potential to be recorded as another nail in the coffin of the once proud “people’s stock” of Israel.
Nabors Industries Ltd.
New York Stock Exchange – June 5
Last year’s Nabors AGM was a bit of a mess. Only three of seven director nominees received a majority of votes cast in their favor, management failed its say on pay proposal, and a shareholder proxy access proposal was overwhelmingly approved by shareholders. These unfavorable results echoed previous meetings; shareholders have actually repeatedly passed shareholder proposals asking for proxy access with terms substantially identical to the proposal approved in 2017, and the Company has flunked all but one of its say on pays since the proposal first became mandated in 2011 (~44% support in 2017 was actually way up from ~36% in 2016). The shareholder opposition to directors reflected the board’s consistent refusal to budge to shareholder demands on these issues. Over the past year, the board gave in on proxy access, amending its existing provision to terms substantially similar to the 2017 shareholder proxy access proposal. However, few material changes were made to the compensation structure, and CEO Anthony Petrello took home over $14 million for the year. With proxy access sorted, there are no shareholder proposals on the agenda this time around; it will be interesting to see if that victory galvanizes action on compensation, or if the board’s responsiveness in one area wins them deference from investors.
Lululemon Athletica Inc.
NASDAQ – June 6
Lululemon’s AGM finds the yogawear emporium without a CEO, following the surprise (and immediate) resignation of Laurent Potdevin in February. In announcing his departure, the Company stated that Mr. Potdevin fell short of the Company’s standards of conduct, but did not get into specifics as to the reasons for his removal. Subsequent reporting revealed that the decision was not taken based on any one particular action, but was motivated in part by a years-long relationship with a former employee-turned-consultant. While the board searches for a new CEO, the company faces allegations of having maintained a toxic work environment which enabled the poor conduct of Mr. Potdevin. Despite the negative attention, the company won’t have to worry about any rallies gathering outside the AGM. That’s because the company is part of a small but growing contingent of companies which has elected to hold shareholder meetings by virtual means only.