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 ArcelorMittal. To get alerted ahead of time, get in touch and sign up for Glass Lewis’ Controversy Alert service.
Controversy Alerts May 2— May 6, 2023
5/2 ArcelorMittal SA; Controversy Alert issued 4/19
5/4 Allianz SE; issued 4/19
5/5 HSBC Holdings plc; issued 4/19
5/6 Berkshire Hathaway; issued 4/21
Deep Dive: ArcelorMittal SA
The importance of non-financial oversight can at times be hard to quantify. Reputation may be everything, but some reputational risks never come to fruition, and it can be difficult to draw a direct link between a company’s standing and its bottom line. Yet if they are left unattended, reputational risks can become operational risks.
Take ArcelorMittal. At last year’s AGM, nearly a third of independent shareholders dissented from supporting the steel miner’s remuneration report, and the ratification of its directors’ actions. The former is a wholly advisory proposal, and the latter is often treated as such in Luxembourg — nonetheless, a significant level of opposition is notable, and can serve as an indication of confidence (or a lack thereof). In this case the opposition likely reflected concerns with the company’s ongoing environmental and employee safety issues, and the extent to which the latter were reflected in executive pay outcomes.
Since then, the company has taken steps to address workplace safety, with improved results overall; and has moved to pre-empt concerns about the pay structure by waiving executives’ 2022 short-term incentive awards. These actions could win over independent shareholders – but may nonetheless be too little, too late to ensure a healthy working relationship with government of Kazakhstan, where the company’s Termirtau steelmining operations are based.
The company had fewer fatalities in 2022 compared to 2021 (22, down from 29), and a lower lost-time injury frequency rate (0.70 per million hours, down from 0.79). However, an explosion at the Karaganda coal mine has resulted in backlash from Kazakhstani government officials, and increased scrutiny of the company’s operations, including calls for expensive investments to modernize the facilities. On November 23, 2022, the government commission of Kazakhstan declared that the management of Arcelormittal Termirtau was to be held responsible for the explosion. A week later, the Prime Minister took part in talks with Vijay Goel, CEO of ArcelorMittal CIS, and in December the Kazakh Industry Minister Kaïrbek Ouskenbaïev questioned whether the company would be able to continue its operations in the country. Since then, it was reported that one of ArcelorMittal Temirtau’s contractors had lost his life in relation to work carried out in a sheet-rolling process in January 2023, with the employer found liable for failing to provide adequate supervision.
Beyond the situation in Kazakhstan, the company will likely face questions regarding the resumption of sales of basic products to Russian customers despite the ongoing invasion of Ukraine (the company described this decision as “the only option to continue viable operations and the employment of the 35,000 workers at our operations in Kazakhstan”, and noted that it has complied with all sanctions), and the implementation of investments to address environmental concerns at the company’s leased Taranto, Italy plant. There are also claims that the company had a UK-based web host delete the entire website of an online newspaper that published an article by Reporters without Borders investigating ArcerlorMittal’s acquisition of a mine in Liberia (apparently the company only requested the defamatory article be deleted, not the whole site). That’s one way to protect your reputation.
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