Highlights from the world of Proxy Papers you can’t afford to miss!
Deutsche Bank AG
Deutsche Börse – May 18
Moving on can be tough. Can you go forward in peace without facing up to what’s happened and getting some kind of resolution? On the other hand, can you truly embrace the future when you’re still re-litigating the past? The Proxy Season Insider is not an advice column, but it does know this: as its AGM approaches, Deutsche Bank has plenty to move on from.
Starting at the bottom (line), nearly €6 billion in impairments dragged the bank to a €1.356 billion loss for 2016. That hole has been plugged by an €8 billion capital raising in March 2017, however the generous offer terms (including a discount to market price and retroactive entitlement to 2015 dividends) did not sit well with some existing shareholders. The impairment provisions related primarily to a January 2017 settlement with the U.S. Department of Justice over mortgage backed securities, however the company (and certain of its directors) remains party to a variety of ongoing proceedings and investigations, with total provisions at the end of 2016 roughly 30% higher than the prior year. Further raising concerns about the bank’s ability to turn the page, its recent settlement with the UK’s Financial Conduct Authority was increased when the regulator imposed an additional penalty based on the company’s conduct during investigations. How, exactly, the company is estimating these provisions is another topic of interest; after rejecting a shareholder’s call for clarity, an out of court settlement subjected Deutsche to a special audit into its provisions and risk management system. In addition, the mysterious departure of Georg Thoma, previously the chair of the board’s integrity committee and reportedly the driving force behind internal investigations, will likely draw some questions for the supervisory board, and chair Paul Achleitner in particular. On this year’s AGM agenda, shareholders have proposed three additional special audits in relation to misleading the FCA, manipulation of reference interest rates, and money laundering in Russia. One proposal that could garner increased support relates to the company’s compensation policy, which was overhauled with a new simplified incentive structure after the 2015 policy was rejected by shareholders. This type of responsiveness, along with strategic changes, completion of settlements and the capital raising, provide grounds for some measure of renewed confidence in the board and management; however whether it’s enough for shareholders to ratify their actions in respect of 2016 remains to be seen.
On this year’s AGM agenda, shareholders have proposed three additional special audits in relation to misleading the FCA, manipulation of reference interest rates, and money laundering in Russia. One proposal that could garner increased support relates to the company’s compensation policy, which was overhauled with a new simplified incentive structure after the 2015 policy was rejected by shareholders. This type of responsiveness, along with strategic changes, completion of settlements and the capital raising, provide grounds for some measure of renewed confidence in the board and management; however whether it’s enough for shareholders to ratify their actions in respect of 2016 remains to be seen.
Chubb Limited
New York Stock Exchange – May 18
The Switzerland based insurer formerly known as ACE Limited is the largest publicly listed insurance organization, with operations in 54 countries and 31,000 employees worldwide. With this global reach, the company must contend with numerous regulatory regimes, including Swiss laws requiring a binding vote on total compensation, in addition to the non-binding say-on-pay most U.S. investors expect. Investors on both sides of the Atlantic also bring their own varying expectations for executive pay and corporate governance—an additional challenge for a Swiss company whose peers consist primarily of the largest U.S. banks and insurers. At last year’s annual meeting, concerns regarding the pay program were evident, with over 40% of votes cast against the non-binding say-on-pay and over 26% cast against the binding Swiss resolution. With concerns centered around fine details of the program such as vesting terms, performance metrics and specific disclosures, the Company took action in the past year to make a number of adjustments to the program. At this year’s annual meeting, shareholders will consider whether these changes put the pay program on a favorable trajectory. Also a consideration will be the outside commitments of Chubb’s directors; the majority of the 16 member board serve on additional boards or as executives of other public companies.
BP plc
London Stock Exchange – May 17
Last year, BP became the poster-child for excessive pay after its advisory remuneration report was rejected by roughly 59% of shareholders. Compensation levels at the multinational have been contentious for some time; nonetheless, in a region where opposition from a significant minority of shareholders is enough to generate headlines, the company’s failure to get its advisory pay vote approved was a shock. As an advisory resolution, that vote didn’t ‘count’; however 2017 brings a binding policy vote in additional to the annual advisory affair.
With the stakes raised, the board appears to have been extremely responsive to shareholder concerns: under a revised policy submitted to shareholders at this year’s AGM, quantum award limits have been reduced, duplicative performance goals have been pared back to ensure that executives don’t receive multiple rewards for the same performance, and the overall pay structure has been simplified, most notably through the removal of share matching. These changes didn’t apply during FY2016; however, the board took additional steps to reduce quantum payouts for the year under review, with the application of downward discretion on both short- and long-term award outcomes contributing to a 40% year-on-year reduction to the CEO’s single total compensation figure.
Anthem, Inc.
New York Stock Exchange – May 18
As potential mergers go, Anthem’s attempt to combine with Cigna has gotten pretty, pretty messy. The deal was always going to be tricky due to competition concerns, and indeed the Department of Justice has filed to block it. However with the transaction stalled, things have gotten ugly, with Cigna filing suit to break off the merger amidst claims that Anthem had stolen confidential information and harassed its customers, and Anthem in turn blaming Cigna’s CEO for sabotaging the deal after his request to head up the combined entity was shot down. Cigna wants a $1.85 billion breakup fee and $13 billion in damages, but Anthem claims they don’t have the right to withdraw. This on-off merger won’t be settled by the AGM – after a federal appeals court again sided with the DoJ in April 2017, the company said that it intended to take the case to the Supreme Court – but Anthem’s board can expect some pointed questions from shareholders about how it has been conducted.
CTI BioPharma
NASDAQ – May 16
2016 was a difficult year for CTI BioPharma to say the least. In February 2016, the FDA placed a full clinical hold on its leading drug candidate (pacritinib) after linking it to patient deaths, which plunged the company’s share price by over 70 per cent to all-time lows. Nonetheless, the board determined to give then-current CEO Mr. James Bianco a special $250,000 bonus in June for his performance over the first half of the year. “Then-current”, as Mr. Bianco would ultimately end up resigning as the company’s CEO and president just four months later in October. In connection with his resignation, Mr. Bianco is eligible to receive cash severance payments totaling up to $1.5 million and full acceleration of all of his outstanding stock option grants. If that wasn’t enough, the board also provided the former CEO an additional grant of fully vested stock options to purchase up to 653,929 shares of the company’s common stock upon his departure.
The terms of Mr. Bianco’s goodbye are all the more awkward given CTI shareholders’ ongoing concerns over compensation. For the third consecutive year, CTI received less than 55% support for its advisory vote on executive compensation program in 2016. In the most recent proxy statement, the company highlights a number of positive changes in response to shareholders, though most of these changes were made prior to the 2016 annual meeting.
Spark Networks
New York Stock Exchange – May 11
The company that runs infamous online dating platforms Christianmingle.com and JSwipe has found itself embroiled in its own tumultuous relationship with its investors after a series of controversial moves in the past year. After tepid stock performance during the previous fiscal year, and a well-supported shareholder proposal requesting the sale of the firm received upwards of 44% votes in its favor, Spark decided to take initiative by entering an investment and management agreement with PEAK6. The generous terms of the agreement provided PEAK6 with a position as over 31% beneficial owners of the company in exchange for a purchase price of $7.75 million. Perhaps more lucrative, the agreement allows PEAK6 to render payments of $1.5 million per year for management services, and saw the appointment of PEAK6 nominee Mr. Daniel Rosenthal and PEAK6 president Bradley Goldberg as CEO and director of Spark, respectively.
Its seems as though exclusivity wasn’t enough for this relationship, as the board also adopted bylaw amendments that imposed restrictions on the transfer of the company’s securities. The controversial bylaw disallowed any investor from holding any shares that will put them over the 4.9% mark, and furthermore restricted any firm with over 5% from making certain transfers of its ownership without board approval. The amendment was controversial to say the least, as the restrictive bylaw was adopted not only without requesting shareholder approval, but without a single meeting of the company’s governance committee during this fiscal year. In light of significant governance changes that appear to protect PEAK6 with no apparent input from the board’s governance committee, shareholders may question who is wearing the pants in this relationship.
The drama doesn’t end there, as the firm announced on May 3rd that they recently entered into a merger agreement with Affinitas GmbH, the firm most notable for ‘genteel’ dating platform EliteSingles.com and its international surrogates. Subject to the board approval, the stock-for-stock merger will provide Spark shareholders with 25% of the new entity, and Affinitas shareholders with 75% of the new entity. Are we amid a budding romance between Spark and its new so-called “established, refined, and middle-aged” partner in online dating? We are certainly watching.
OTHER NOTABLE MEETINGS:
- ConocoPhillips (New York Stock Exchange – May 16)
- JPMorgan Chase & Co. (New York Stock Exchange – May 16)
- Vonovia SE (Deutsche Börse – May 16)
- Acciona SA (Bolsas y Mercados Españoles – May 17)
- Deutsche Börse AG (Deutsche Börse – May 17)
- Erste Group Banking AG (Wiener Börse – May 17)
- GGP Inc. (New York Stock Exchange – May 17)
- Molson Coors Brewing Company (New York Stock Exchange – May 17)
- Paddy Power Betfair plc (London Stock Exchange – May 17)
- Southwest Airlines (New York Stock Exchange – May 17)
- Prudential plc (London Stock Exchange – May 18)
- CBS Corporation (New York Stock Exchange – May 19)
- Michelin SCA (Euronext Paris – May 19)