With thousands of companies holding AGMs during proxy season, it’s hard to know where to start. Glass Lewis’ Controversy Alert service can help, identifying the most crucial meetings globally and allowing investors to make better informed voting decisions with the latest information in hand.
In this post, we provide a roundup of the AGMs taking place this week that were previously highlighted by Controversy Alerts, and dive deep into the situation at Credit Suisse and UBS. To get alerted ahead of time, get in touch and sign up for Glass Lewis Controversy Alert service.
Controversy Alerts April 3 — April 7, 2023
4/3 Astra Agro Lestari Tbk; Controversy Alert issued on 3/21
4/3 Broadcom; issued on 3/15
4/4 Credit Suisse Group AG; issued on 3/22
4/5 UBS Group AG; issued on 3/22
4/5 Schlumberger Limited; issued on 3/16
Deep Dive: Credit Suisse Group & UBS Group AG
Credit Suissse had been undergoing a restructuring process after years of scandals and losses. At the 2022 AGM, shareholders rejected the board proposal on the ratification of the members of the board of directors and the executive committee for their actions in fiscal year 2020, as investors fretted about the string of scandals and associated gaps in risk management. Total net losses attributable to shareholders for FY2022 reached CHF 7.3 billion.
This year’s meeting was set to be focused on the radical restructuring that was underway, as well as incentivising the much-changed executive team to meet ambitious targets. However, against a backdrop of dwindling share price, substantial annual losses, destruction of shareholder value over the past decade, and retention concerns for senior managers and top executives, it wouldn’t be a true Credit Suisse AGM without some additional last-minute intrigue.
This time around, the publication of the company’s annual report was delayed after the SEC stepped in for further clarification on the company’s financial statements. On release, it emerged that Credit Suisse’s statutory auditor had identified material weaknesses in its internal controls. This issue, alongside globally falling bank stocks following the collapse of Silicon Valley Bank, sent the company’s share price to a new all-time low. A CHF 50 billion covered loan facility agreed with the Swiss National Bank appeared insufficient to restore investor confidence and stem outflows, and the SNB stepped in to broker a merger deal between Credit Suisse and its cross-town rival UBS to effectively prevent the bank from collapsing.
As the merger was agreed under emergency legislation, neither company’s shareholders will be offered a vote on the deal. While Credit Suisse shareholders may be baulking at the CHF 0.76 valuation of their shares through the merger, there will likely be some understanding that the value of their holdings could have fallen much further had the bank been allowed to fail. Their bondholders will, however, be feeling extremely aggrieved after the company’s AT1 notes were written down to zero.
UBS’s shareholders may also have questions for management on why they did not insist on a shareholder vote. Some shareholders may believe that UBS also had little alternative but to proceed with the deal, given the likely negative knock-on effects that the collapse of Credit Suisse would have had on the Swiss financial market, the global banking industry and, ultimately, on UBS itself. The fire sale price of CHF 3 billion against an CHF 45 billion book value also looks attractive from a long-term perspective. Yet UBS’s shareholders would be warranted to harbour concerns about the substantial increase in risk and complexity that UBS will have to navigate over the coming years.
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