Important highlights from upcoming meetings, provided by Glass Lewis’ global research team

Fiat Chrysler Automobiles N.V. & Ferrari NV
New York Stock Exchange (FCAU) & Borsa Italiana (RACE) – April 12

It looks as if Fiat Chrysler and Ferrari are following the exact same roadmap when it comes to executive pay. Both automakers have proposed outsized equity grants for their CEOs – roughly €1.9 million for Ferrari’s Louis Camilleri, and US$3.2 million for Fiat Chrysler’s Michael Manley. Both grants are split between performance-based and time-vesting awards. And the supposedly “at-risk” elements of both grants are based on retrospective performance over the past few years – despite the fact that both CEOs were only appointed as executives in late 2018. It’s a curious move that appears to reward Camilleri and Manley for results they had little (if any) control over. Both companies have Italian roots but follow the Dutch governance code, with multiple listings and a wide operational footprint. As a result, choosing the appropriate basis to assess these multinationals can be tricky for shareholders. That said, regardless of which market standard you employ, the proposed grants appear to be decidedly out of line with best practice.

Spotify Technology S.A.
New York Stock Exchange – April 18

Spotify joined the growing list of tech giants that have gone public – and that have raised governance concerns in doing so. The music streamer took the unusual step of eschewing a traditional initial public offering, and instead listing its shares directly on the NYSE. However for investors familiar with Alphabet, Facebook, Snap, Broadcom and others, the company’s dual class share structure is all too familiar. Thanks to Spotify’s “beneficial certificates”, founders Daniel Ek and Martin Lorentzon enjoy 10 extra voting rights for every share they hold, giving them 77.9% voting power despite owning just 32.5% of the company itself. There also appears to be a void when it comes to independent oversight, with Ek serving as both CEO and chair, and no lead director appointed. For institutions and other investors, the upcoming meeting represents their first opportunity to express their concerns; however regardless of opposition, the distribution of voting rights effectively eliminates any chance the board gets put on shuffle.

Axel Springer SE
Deutsche Börse – April 17

With many companies in Germany electing their supervisory board members for identical five-year terms, a full-board election is the time where shareholders should pause for thought and consider whether they are content with the board’s composition and performance. On first glance, shareholders of Axel Springer may be positively surprised that the supervisory board is proposing some fresh blood and some additional core industry and financial expertise. However, given that both candidates have past ties with the company, shareholders will have to consider whether there is sufficient independent oversight at board level. A further bone of contention at this year’s meeting may be the publishing house’s approach to board-related disclosure. New board nominee Plett previously served as the lead audit partner for the independent review of the company’s consolidated financial statements. While some time has elapsed since this function ended, shareholders may well wonder why the company failed to even mention this connection in the meeting invitation. Additionally, there may be further questions regarding some rather cryptically-worded related party transactions that occurred in the past year.

The AES Corporation
New York Stock Exchange – April 18

Last year’s shareholder meeting of The AES Corporation drew headlines after the company took unusual measures to avoid a shareholder proposal that would have lowered the special meeting right from a threshold of 25% of outstanding shares to just 10%. The existing 25% threshold was adopted three years prior. Rather than reopen the question of where to set the threshold, the company put forward a proposal asking shareholders to ratify the existing provision, then got SEC approval for no-action relief, allowing it to leave the shareholder proposal off the ballot. Shareholders weren’t pleased: over 40% of shareholders voted against the ratification, and governance committee chair Holly Koeppel received over 33% opposition. Looking ahead to the 2019 meeting, the company has again received no-action relief from the SEC – however this time around, it doesn’t look quite as contentious. After receiving a shareholder proposal that would have required the AES chair to be an independent member of the board, the company adopted amendments to its corporate governance guidelines on December 7, 2018, to formally specify that, whenever possible, the chair will be an independent director.

HOCHDORF Holding AG
SIX Swiss Exchange – April 12

HOCHDORF had a plan. In 2016 it set out a four-year strategy to become a “globally active, profitable niche company with premium products by 2020”. But by the end of 2018 a series of profit warnings had contributed a massive drop in share price, from an all-time-high of CHF 314.50 at the start of the year to a a five-year low of CHF 94.10. Despite these setbacks, which it attributes to industry conditions and poor performance/integration of its investment in Pharmalys, the company remains committed to its strategy. However the company’s largest shareholder, ZMP Invest AG, appears to be crying over spilled milk. The Swiss dairy cooperative owns 14.5% of HOCHDORF and has nominated three candidates to the board, one of whom would serve as the chair. The company supports one of those nominees, Jorg Riboni, but has raised questions regarding the rest of the platform. Shortly after the nominations were announced, Thomas Eisenring resigned as HOCHDORF’s CEO with immediate effect, replaced on an ad interim basis by the managing director of the Dairy Ingredients division, Peter Pfeilschifter. Investors will have to consider whether the company’s recent performance warrants a change – and whether ZMP has nominated the right candidates to implement it.

Bangkok Airways PCL
Stock Exchange of Thailand – April 18

Following civil sanctions imposed by the Securities and Exchange Commission, Thailand (“SEC”), the executive chair and CEO of Bangkok Airways, Prasert Prasarttong-Osoth, was forced to step down. These sanctions were a result Mr. Prasarttong-Osoth, along with two others, manipulating the company’s share price and trading volume during the period from November 13, 2015, to January 12, 2016. While Mr. Prasarttong-Osoth originally stated that he was going to prove his innocence through the justice system, he eventually chose to accept the terms of the sanctions and, as such, has been banned from holding directorships and executive positions of listed companies for a period of two years. This has not only affected Bangkok Airways, but also Bangkok Dusit Medical Services, where he served as President and Group CEO. It’s not all turmoil though – the Prasarttong-Osoth family still holds three board seats, and controls 60% of the company’s share capital.

PT Lippo Cikarang Tbk.
Indonesia Stock Exchange – April 18

Lippo Group ran into trouble last year when the Indonesian Corruption Eradication Commission (“KPK”) found evidence of bribery in its flagship Meikarta project. The Meikarta project, developed by the Group’s property development arm PT Lippo Cikarang Tbk, is an IDR 278 trillion (approx. USD $19 billion) investment that, if completed, will consist of 200 skyscrapers, hosting offices, apartments, shopping malls, health care facilities, and educational institutions. It is envisioned as a modern alternative to Jakarta, roughly 35 kilometres away. On October 16, 2018, the KPK arrested nine suspects, including Lippo Group executive Billy Sindoro, on charges relating to bribery. Mr. Sindoro has been accused of offering the local regent RP 13 billion (~US$850,000) in order to obtain permits. While Meikarta remains ongoing, the investigation prompted Lippo to quickly cede majority ownership of the project. In its delayed 2018 Q2 financial statements, Lippo Karawaci disclosed its share ownership over PT Mahkota Sentosa Utama (“MSU”), the project developer, had dropped from 54.37% in March, to 49.72% in June. This was done through a series of transactions, including the sale of 14,000 shares to an individual investor named Mas Agoes Ismail Ning, who has been also identified as a former director of a subsidiary of PT First Media Tbk (IDX:KLBV), an IT company affiliated with the Lippo Group. As a result, it seems the project has been deconsolidated on the financial statements.