Highlights from the world 
of Proxy Papers you can’t afford to miss: Frontier Services Group, Shire plc, Cheniere Energy, Ainsworth Game Technology and Imagi International Holdings
Frontier Services Group Limited
HKSE – June 1, 2016
Fraud, money laundering, brokering of military services to foreign governments and violating a country’s neutrality; normally, these attributes bring to mind cloak-and-dagger intelligence agents operating in the shadows. In this case, they comprise allegations facing Erik Prince, executive chairman of Frontier Service Group Limited (“Frontier”). Two investigative articles suggest that Mr. Prince, who previously founded security & services provider Blackwater USA, is under investigation by the U.S. and Austrian governments. Although the Company has denied certain allegations contained within the articles, it has not addressed whether the board stripped Mr. Prince of his day-to-day authorities as executive chairman. Coincidentally, the Company’s CEO, Gregg Smith, and independent director William J. Fallon, himself a retired four-star admiral, unexpectedly resigned their positions following the publication of the articles. Beyond potential scandals, shareholders should be mindful of poor director attendance, independent directors receiving excessive cash bonuses, and questionable related party transactions; while these issues lack the intrigue of a spy thriller, they nonetheless raise questions about governance and leadership on the board.
Shire plc
LSE – May 27, 2016
After nearly a year of rumors and negotiations, Shire plc’s shareholders will weigh in on the Company’s pending merger with hemophilia-specialist Baxalta Incorporated at a special meeting on Saturday. The EGM comes less than a month after the Company’s AGM, which saw the advisory remuneration report approved by only a tiny majority. While there may be some lingering awkwardness, questions regarding the proposed tie-up will likely be front and center at the meeting. The deal capped a series of acquisitions that have contributed to the significant growth of the Company (and its debt load) under CEO Dr. Flemming Ornskov’s watch. However, increased competition within the hemophilia sphere and potential changes to U.S. tax regulations have raised concerns regarding the merger’s $31 billion shares-and-cash pricetag.
Cheniere Energy Inc.
NYSE MKT – June 2, 2016
Just two months after coming to an agreement with the Icahn Group that resulted in the appointment of two new directors to the board, Cheniere Energy unceremoniously terminated the employment of its longtime president and CEO Charif Souki. Mr. Souki, who oversaw a meteoric rise in the company’s share price in recent years, has received exceptionally generous compensation packages—including a nine-figure payout in 2013—that have repeatedly drawn the ire of shareholders. While it appears that no particularly notable severance benefits have been extended to Mr. Souki pursuant to his departure, it remains unclear whether and how compensation to the incoming CEO will be different from the arrangements that were in place for Mr. Souki and the plans that are still used to compensate other NEOs. At this year’s annual meeting, shareholders will consider whether simply not paying additional benefits is a sufficient response to multiple years of substantial opposition, and further consider whether the ongoing pivot in the company’s strategy will serve their interests going forward.
Ainsworth Game Technology Ltd
ASX – June 3, 2016
Twenty years after establishing Ainsworth Game Technology Limited, executive chairman Leonard Ainsworth has disclosed a privately negotiated sale transaction with Novomatic AG which would allow the founder to exit the substantial entirety of his 54.0% control stake in the Company at a material premium. This arrangement, which was not subject to pre-execution review by the board, has since been billed as a compelling strategic outcome for the Company. The Independent Directors believe the Company and shareholders stand to benefit from installing Novomatic as the new controlling entity and indicate the transaction would yield cost synergies, new commercial agreements and improved competitive positioning in key markets. Notable, however, is the fact that completion of Mr. Ainsworth’s agreement with Novomatic remains subject to approval by the Company’s disinterested investors, who must collectively weigh the combined firm’s potential upside against the marked absence of a full buy-out offer and the board’s post-announcement effort to explore alternatives.
Imagi International Holdings Limited
HKSE – June 2, 2016
Within the past few months, the board of Imagi International Holdings has effectively been replaced following the “disappearing” of its former chairman and major shareholder, SHAN Jiuliang, as well as directors ZHANG Peng (Mr. SHAN’s wife) and WEN Di in January 2016 and November 2015, respectively. The disappearing act of the aforementioned directors is likely due to their being in police custody as Mr. SHAN was implicated and arrested in a scandal involving his role in the Fanya Metal Exchange, which allegedly defrauded close to 240,000 investors out of US$6 billion. The board formally removed Ms. ZHANG and Mr. WEN in April, due to their failure to attend any board meetings since August 2015, and the Company has been proactive in dealing with the fallout from the disappeared directors. Notably, the board uncovered and voided unauthorized related party transactions that were initiated by Messrs. SHAN, WEN and Ms. ZHANG. Yet, until these matters are resolved, there is no telling how the fallout from the Fanya scandal may further impact the Company.