Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:
Singapore Reinsurance Corporation April 27 AGM
Sabana Shari’ah Compliant Industrial Real Estate Investment Trust April 27 AGM
Singapore Exchange
Singapore Reinsurance Corporation has a long list of governance concerns attached to its board — for now anyway. That’s not to say that the company’s governance practices are likely to improve in the near future. Instead, this could be its last publicly held shareholder meeting, following a conditional cash offer from a subsidiary of Fairfax Financial Holdings Limited for over 70% of share capital at S$0.35 per share, representing an approximate 20% premium to the share price prior to announcement. It’s not exactly a blind bid. Fairfax already controls nearly 30% of the company’s shares, and the board’s chair, Ramaswamy Athappan, also serves as chair of Fairfax Asia Limited. As a result, if the deal goes through, the company will be below the SGX’s free float requirements, and Fairfax has indicated its intention to take it private, rendering any governance concerns largely moot. Mr. Athappan is standing at the AGM and, given his role at Fairfax, his election could serve as a proxy for investor sentiment on the deal, which remains pending.
Speaking of well-informed dealmaking, Sabana’s Sahri-ah Compliant Industrial REIT is holding its first AGM after a proposed merger fell apart last summer in the wake of concerns regarding the Trust’s value, as well as potential conflicts of interest in the merger review process. Those potential conflicts stemmed from overlapping ownership of the managers of Sabana REIT and ESR-REIT, which Sabana would’ve been folded into, as well as the overlapping investment mandate of the two trusts. After raising the concerns and leading a vote-no campaign that ultimately scuppered the deal, Quarz Capital (a 9% shareholder) and Black Crane Capital (4.8%) have maintained pressure on the trust’s manager, demanding answers, actions, and accountability for the “failure of the disastrous and value destructive merger” and to increase dividend yields. That pressure appears to have prompted the resignations of several directors from the manager’s board. Even this action hasn’t gone smoothly, with Quarz and Black Crane calling for an immediate resignation and new appointments, rather than keeping them on the boar until the AGM. With the meeting to be held in a virtual format, it will be interesting to see what avenues for participation are provided — it appears that several shareholders have plenty of questions.
Bayer AG April 27 AGM
Deutsche Börse
Bayer’s balance sheet and share price continue to be dominated by the ESG and product litigation risks it acquired along with Monsanto, principally the Roundup™ product. In the past year the company posted a €10.5 billion loss, which reflected a US$10 billion+ Roundup™ settlement and €9.1 billion impairment charges for the Crop Science Division, which has been hit hard by COVID. The settlements prompted issuance of a €6 billion bond in July 2020, with a further bond of €4 billion issued for general corporate purposes including the refinancing of existing liabilities.
In response the company has announced plans to “accelerate transformation to address the challenging market environment and enable additional growth investments through the income of operational savings of more than €1.5 billion annually as of 2024”, with operational saving measures potentially leading to job reductions. Those won’t impact CEO Werner Baumann, whose contract was unanimously extended by the board until April, 2024.
Notably, despite the company’s ongoing ESG exposure profile, background and experience with environmental & social issues on the supervisory board appears to be limited to one member. That said, the company has assigned primary accountability for E&S issues to the executive board; in addition, three shareholder representatives have sustainability experience.
Centene Corporation April 27 AGM
Marathon Petroleum April 28 AGM
Kellogg Corporation April 30 AGM
New York Stock Exchange
For companies with restrictive voting rules, reform can be maddeningly difficult.
Marathon Petroleum’s agenda includes two management proposals that would repeal the classified board structure and eliminate supermajority requirements. Both were on the ballot last year (with declassification proposed by the board, and majority voting by shareholders), and both received support from 98.5% of votes cast. However despite the overwhelming support, the management proposal wasn’t technically approved due to insufficient investor turnout, and it’s unlikely that either will pass this time around unless that increases. Under the existing bylaws, even if all of the votes cast are in favor, amending those bylaws still requires support from 80% of outstanding shares — and last year turnout was just 70% of the issued share capital.
All of this may be familiar to shareholders at Centene, which last year had two shareholder proposals on the agenda, with both receiving majority support — including one asking the company to implement a simple majority vote standard, which got over 90% support. The board listened, and this year’s meeting includes a management proposal to remove supermajority requirements to remove directors and amend bylaws and articles. However, under the existing bylaws overwhelming support won’t matter unless it represents 75% of outstanding shares. There’s also another shareholder proposal aimed at improving the company’s governance practices, and potentially overall value — this time, the request is for the board to declassify and allow for annual elections. (Speaking of listening to shareholders — last year Centene’s say-on-pay vote received over 30% opposition, and in response the company has improved its disclosure and removed single-trigger equity benefits in the event of a change-in-control. That’s all well and good, but the CEO’s pay remains extremely high compared to peers, and that’s despite a subpar year of returns. Voters will have to consider whether the structural improvements are enough to outweigh ongoing quantum concerns.)
The situation at Kellogg Companies is similar to Centene and Marathon, but with a wrinkle: the Kellogg Foundation, which controls roughly 19% of the issued share capital and has three representatives on the board, appears to consistently vote against any sort of governance reform. Last year proposals on declassifying the board (submitted by management, after a shareholder proposal in 2019 received majority support) and adopting a majority vote standard (submitted by shareholders) received majority support, but the 67% supermajority threshold appears to be unreachable so long as the Foundation remains in opposition. This year’s agenda includes a binding proposal to eliminate those supermajority requirements — but again, it would need 67% approval to pass — and an advisory shareholder proposal asking the company to give shareholders the right to call a special meeting, with the ownership threshold set at 15%. Notably, management has made no recommendation on the special meeting right shareholder proposal; it recommended against last year’s supermajority elimination, but was also undetermined on the prior year’s declassification proposal.
AENA SME SA April 27 AGM
Bolsas y Mercados Españoles
The proliferation of say-on-climate votes has been one of the stories of the 2021 proxy season so far. With standards for the nascent category yet to be established, the stakes of the proposal aren’t always clear.
Take AENA, for example. Shareholders are essentially voting on a 35-page glossy powerpoint presentation setting out the company’s Climate Action Plan 2021-2030. The company has provided an overview of its strategy in moving “Towards zero emissions” (Net Zero carbon emissions is not expected until 2040, but the plan lays the foundations), including some reductions targets — but largely elides the Scope 3 emissions that make up an overwhelming proportion of the company’s footprint.
Moreover, the company has not provided any indication of how it will view the result, how it would respond to significant support or opposition, and how this proposal and its outcome fits into ongoing engagement and reporting — leaving shareholders in an awkward position as they consider their votes.
Charter Communications April 27 AGM
NASDAQ
Wells Fargo & Company April 27 AGM
New York Stock Exchange
The shareholder proposals at Charter Communications’ upcoming AGM illustrate some of the topics that are dominating the ESG agenda this year. All three elements of ESG are included: There’s an environmental proposal that would give annual vote on the company’s GHG emissions plan; social proposals calling on the company to produce a diversity & inclusion report, publish its consolidated EEO-1 report, and provide disclosure regarding lobbying; and a governance proposal calling for an independent chair. That last one is a repeat, receiving 24% support at the 2020 AGM.
Wells Fargo also has a host of shareholder proposals on the agenda, covering governance and social issues — including a request for a racial justice audit to analyze the bank’s impact on nonwhite stakeholders and communities. Racial justice and civil rights audits have been increasingly common in recent years, with companies and their shareholders looking to assess and subsequently address issues of racism linked to their workforces and operations. Moreover, historic racial biases and discrimination in the banking industry have been widely reported. Nonetheless, given that Wells Fargo’s corporate responsibility committee is already is already in the process of conducting a human rights impact assessment, which will includes a specific focus on racial equity, in this case shareholders will have to consider whether the board has already addressed the aims of the proposal.
If you need background on the issues involved, Glass Lewis’ In-Depth series has you covered with reports on sustainability, human capital management, pay equity, corporate political disclosure, and independent chairs, along with a variety of other topics.
Nice LTD April 28 AGM
Tel-Aviv Stock Exchange
“Nice” is the word to describe recent share price growth for Israel’s high tech firm. Shareholders will have to consider whether that stellar performance warrants a commensurate hike in the CEO’s incentive awards, with votes on his 2021-2023 equity plan and the company’s broader compensation policy at this year’s annual meeting. Just looking at quantum, it’s a sharp rise in award value, from $12 million to $19.6 million, based on some interesting changes to the disclosed benchmarking peer group compared to prior years. What hasn’t been discussed is the specific set of hurdles that will be used to determine payouts. Notably, the grant is described as a non-recurring award — just like the similar award he received in 2018. Also worth noting, while many of the company’s chosen peers are from the U.S., the regulatory regime is distinctly Israeli and both proposals are “binding” under local law; rejection of either would require the board and compensation committee to take further action, and could be misinterpreted as a vote of no confidence in the CEO and executive team.
Ovintiv April 28 AGM
Toronto Stock Exchange
This meeting looks set to be far less dramatic than it could have been after Ovintiv narrowly avoided a proxy contest. Back in January the Kimmeridge Energy Management Company announced its intention to nominate three candidates to the board, alleging governance and environmental stewardship failures, as well as concerns about capita allocation. The company appears to have reached out an olive branch, and in early March announced an agreement with Kimmeridge and the appointment of Katherine Minyard to the board. The company was also responsive to a shareholder proposal at last year’s AGM regarding disclosure of climate targets aligned with the Paris Agreement, which received majority shareholder support. Late last year it announced a goal of 33% reduction in methane intensity, with the target to be tied to annual incentives for all employees starting this year.
The Williams Companies, Inc. April 27 AGM
New York Stock Exchange
In the early days of the pandemic, the potential for increased takeover activity prompted discussion of COVID-related poison pills. Only a few firms ultimately adopted them, one of which was Williams Companies. However, the move wasn’t popular with shareholders, perhaps out of principle, and perhaps because the specific features that Williams adopted included a low trigger threshold and a “wolfpack” provision that aggregated ownership of parties potentially acting in concert, making it easier to meet that threshold. The board chair and members of the governance committee received notable opposition at the AGM last April, and a subsequent lawsuit led to the poison pill being struck down ahead of the 2021 proxy season.
OKP Holdings April 26 AGM
Singapore Exchange
The Singapore Code of Corporate Governance calls for boards to be majority independent where the board chair is not independent. Despite this, OKP has a non-independent chair, and only three of its nine directors are considered independent by the company. Moreover, one of them has a professional services relationship to the company, and all three have served for more than nine years. Because of their extended tenure, shareholders will get a vote on whether they should be retained as independent directors. Shareholders will also have to consider whether to approve a share plan that my be somewhat dilutive.
However, governance and compensation concerns may be secondary at this year’s AGM, which comes just months after a subsidiary and two of its employees were convicted of safety failings relating to the 2017 collapse of the Pan-Island Expressway viaduct — an incident which itself occurred just days after the same subsidiary was found guilty of a 2015 safety breach. A financial penalty is still under consideration, and the company has made a S$1.4 million provision.