Highlights from the world of Proxy Papers you can’t afford to miss!
Bombardier Inc.
Toronto Stock Exchange – May 11
The venerable Quebec institution Bombardier Inc. may have started as a maker of snowmobiles, but their recent product line is comprised in large part of planes, trains, and public migraines. Conspicuous rows over rail contract failings with municipal governments at home and abroad have tinted the spotlight on the firm. Toronto’s mayor penned harsh words for the company in December 2016 regarding potential failings and a lawsuit over a rail contract, and only nine months prior a London watchdog agency released a bruising report about the 2013 loss of another company contract with that city. Bombardier has also been a notable recipient of state funding, benefiting from sizable provincial and federal governments in recent years. The trouble for shareholders was amplified in early 2017 as public outcry hit a crescendo based on the information circular’s indication that executive compensation jumped, with a recent round of federal loans announced less than two months before. The board was not deaf to the protests, however — beyond a defense of its practices, the committee modified 2016 award terms and agreed to retroactively reduce pay for executive chairman Pierre Beaudoin in an attempt to calm a diverse group of irate stakeholders. With this dramatic backdrop, shareholders will have some say (limited by the influence of the founding family) on whether the board acted appropriately and more broadly on how government bailouts and executive pay should correlate in Canada.
Occidental Petroleum Corporation
New York Stock Exchange – May 12
Although no climate change-related shareholder proposals received majority shareholder support during the 2016 season, one such proposal at Occidental Petroleum did come very close, receiving 49% support, excluding abstentions and broker non-votes. In addition to the significant support for increased climate change reporting, proposals requesting that Occidental lower its special meeting threshold and increase disclosure concerning methane emissions management received high favorable votes at its 2016 annual meeting—47% and 33%, respectively. At Occidental’s upcoming meeting, shareholders will again vote on all three of these proposals as well as a shareholder proposal requesting increased disclosure of Occidental’s lobbying payments. However, given that Occidental hasn’t taken significant action on any of these highly-supported items, shareholders may be inclined to again support these proposals.
Eurazeo
Euronext Paris – May 11
A rose is a rose by any other name… but what about a poison pill? Eurazeo is asking for shareholder approval to issue warrants representing up to 47% of share capital in the event of a potential takeover offer. But the board insists that it doesn’t intend to use this authority as a takeover defense – instead, they argue that it would allow the company to negotiate a better price for all shareholders in the case of an unsolicited takeover bid. Last year, 17.8% of shareholders voted against a similar resolution, prompting the board to engage with investors and significantly reduce the proportion of share capital issuable under the 2017 authority. However only the voting will tell if the board’s engagement, responsiveness, and rationale are sufficient to address concerns regarding potential entrenchment.
Western Union Company
New York Stock Exchange – May 11
Western Union recently handed over $586 million pursuant to settlement agreements with regulators in January 2017 that would make even the embattled Wells Fargo blush. To resolve investigations by the Federal Trade Commission and U.S. Department of Justice, among others, WU agreed to pay the eye-watering penalty to the federal government which will be used to compensate victims of fraudulent activities perpetrated by a subset of its transfer agents. A resulting charge of $570 million will be recorded in the company’s financials for the fourth quarter of fiscal 2016.
The joint press releases by the DOJ and FTC shine a harsh spotlight on the breadth and depth of the fraudulent activity facilitated by Western Union, which occurred primarily between 2004 and 2012. As part of the settlement agreements, WU also admitted to a slate of violations including “aiding and abetting wire fraud”. Illicit activities included a variety of scams where victims were conned out of money and sent fraudulent payments to criminals via WU wire transfers. In addition to the cash forfeiture, Western Union is required to undertake corrective reforms which will be monitored by a compliance auditor for three years. Many of these reforms had already been implemented in the wake of regulatory scrutiny in in recent years. Further, WU has massively increased compliance spending over the past five years. Despite the turnabout efforts and bulky settlement package, however, the company may not be able to put these issues behind it just yet as a number of class action complaints have arisen in the aftermath of the settlement, in addition to legal inquires by regulators in international jurisdictions.
L3 Technologies, Inc.
New York Stock Exchange – May 9
Shareholders would be excused from rolling their eyes as they review L3 Technology’s most recent proxy statement – or more specifically, the management proposal to eliminate supermajority vote requirements, which itself requires unanimous approval to pass. Even if nobody votes against the proposal, a single abstention or broker non-vote will be enough to kill it. It may sound absurd, but the board’s position is that it’s in a catch 22: pursuant to the company’s Certificate of Incorporation, the article that sets out a requirement of unanimous consent can only be amended by unanimous consent.
This management proposal was submitted after a majority of shareholders supported a 2016 shareholder proposal calling for the board to eliminate its supermajority vote requirements. It’s worth noting that, as interpreted by the company, the 2016 proposal also required unanimous approval, meaning that the board could simply have ignored the nearly 67% of shareholders who supported it, but instead chose to offer another vote. It’s also worth noting that the 2016 shareholder proposal was interpreted by the company as requesting the ability for shareholders to act by written consent. However, the distinction between the two issues is narrow, as the company does not appear to have supermajority vote requirements for its bylaw amendments, but it does require unanimous shareholder approval for shareholder action by written consent. As such, whether shareholders consider this response to be sufficient remains to be seen.
Barclays plc
London Stock Exchange – May 10
After pursuing a higher calling under former CEO Antony Jenkins, Barclays are reclaiming their reputation as the ‘bad boys’ of British banking. Despite nearly tripling profits and progress in restructuring during Jes Staley’s first full year as CEO, the bank continues to generate negative headlines as its AGM approaches. To be fair, the probation sentence issued by the U.S. Department of Justice in January could be seen as the last vestige of a bygone era, closing the book on Barclays’ foreign exchange scandal (assuming, that is, that the multinational bank can find a place to live, maintain a job, and stay out of trouble for the next three years). On the other hand, the Financial Conduct Authority and Prudential Regulatory Authority’s investigation into Staley’s repeated attempts to identify a whistleblower remains ongoing. The board is walking a tight rope with the Staley situation, at once arguing that the boss made an honest mistake while also demonstrating the severity of that mistake by making “a very significant compensation adjustment” on his variable pay.
Elsewhere, the board appears to have preempted potential shareholder opposition to the election of NED (and proposed chairman of Barclays’ ringfenced UK retail bank) Sir Ian Chesire by providing last-minute assurances that he will reduce his outside commitments by September; however the company has yet to provide shareholders with an assurance of when their dividend, cut from 6.5p to 3p per share for 2016, will be going back up again.
Wyndham Worldwide Corporation
New York Stock Exchange – May 9
Save $6 million using this one simple trick! Investors reviewing Wyndham’s executive pay should be mindful of how a somewhat unusual aspect of the compensation program impacts the amounts reported on the hotelier’s summary compensation table: since the program provides no payout for at-target performance, and since certain equity awards are valued based on what the payout would be for at-target performance, these awards have been valued at $0 despite paying out at maximum for the past four years. As a result, an award with a grant date fair value of $6 million for the CEO were treated as presenting no cost.
The company is also facing a shareholder proposal seeking a report on political spending and expenditures; last year over 40% of shareholders supported a similar resolution.
OTHER NOTABLE MEETINGS:
- Aviva plc (London Stock Exchange – May 10)
- BAE Systems plc (London Stock Exchange – May 10)
- Canadian Pacific Railway Limited (Toronto Stock Exchange – May 10)
- E.ON SE (Deutsche Börse – May 10)
- Sanofi (Euronext Paris – May 10)
- Dow Chemical Company (New York Stock Exchange – May 11)
- Ford Motor Company (New York Stock Exchange – May 11)
- Lloyds Banking Group plc (London Stock Exchange – May 11)
- The Royal Bank of Scotland Group plc (London Stock Exchange – May 11)
- Telus Corporation (Toronto Stock Exchange– May 11)
- Transocean (New York Stock Exchange – May 11)
- Colgate-Palmolive (New York Stock Exchange – May 12)
- Power Corporation of Canada (Toronto Stock Exchange – May 12)