Important highlights from upcoming meetings, provided by Glass Lewis’ global research team:
Berkshire Hathaway May 1 AGM
New York Stock Exchange
When it comes to governance, Berkshire Hathaway has long zigged where others zagged. Board independence doesn’t meet market best practice, shareholders don’t get an annual vote on the auditor, and of course there’s the combined chair/CEO role, still held by Warren Buffett. For most shareholders, Buffett’s singular presence and the returns his approach to investing has delivered smooth over any potential concerns about traditional leadership and oversight structures.
But with the scope of stewardship increasingly extending beyond traditional oversight, does that exceptionalism always apply? The company certainly seems to think so, largely neglecting to keep pace with investor expectations on its disclosure regarding issues like environmental sustainability, and diversity and inclusion. This year’s AGM agenda includes two shareholder proposals calling for additional reporting on those topics — and in each case, the board’s rebuttal focuses on the company’s uniquely decentralised operating structure. With a variety of subsidiaries and few integrated business functions, what’s the head office to do?
It’s an interesting argument, though one wonders how much weight it will carry with investors who’ve successfully implemented common standards for disclosure and best practice across portfolios that dwarf Berkshire’s, despite having far less control over the investee companies than Berkshire does over its subsidiaries. Moreover, it’s not clear that the company’s approach is actually working in practice, particularly in relation to climate change. By power generation, the Berkshire Hathaway Energy subsidiary is the largest U.S. investor-owned electric utility to fail to set any carbon reduction targets. Looking group-wide, the company meets none of the criteria for net-zero and greenhouse gas reduction target setting, according to Climate Action 100+, and received a climate change management quality grade of zero from the Transition Pathway Initiative.
Perhaps that’s not surprising, given the lack of clear disclosure regarding the board’s role in environmental and social risk oversight. In any case, at least there’ll be something to discuss at the AGM besides succession planning.
Danone April 29 AGM
Euronext Paris
It’s a been a turbulent year at the top of France’s socially-minded food and beverage multinational. In late 2020, plans to restructure as a “local-first” organisation, intended to give local business units more autonomy and promote growth and profitability through decreased spending, led the head of dairy and plant based to resign; and a governance crisis related to the reorganisation prompted Cécile Cabanis to give up her executive role as the CFO and become vice-chair of the board (as you do).
About the board — after initially rebuffing calls from shareholders Bluebell Capital and Artisan Partners to separate the roles of chair and CEO, last month it was announced that Emmanuel Faber would step down from those positions immediately. The entreprise à mission company has appointed Gilles Schnepp as non-executive chair, Véronique Penchienati-Bosetta (formerly CEO International) as interim CEO, and Shane Grant (formerly Chief Executive Officer North America) as interim deputy CEO. The search for a permanent CEO remains ongoing.
Vale April 30 AGM
Bovespa — Novo Mercado
As if board elections in Brazil weren’t complicated enough, Vale is facing a contest, with sixteen candidates for twelve seats. A group of shareholders has proposed four candidates and published an open letter outlining concerns about the independence of certain board-proposed directors, who were former executives or party to shareholder agreements, the need for additional refreshment, and for implementing cultural change throughout the organisation. The board has responded by outlining its track record of governance reforms over the past four years, from bylaw amendments and board restructuring to a new listing and increased shareholder participation.
Looming behind the contest is the company’s involvement in, and response to, the dam collapses at Mariana in 2015 and Brumadinho in 2019. Shareholders will have to consider whether the existing board has made sufficient progress on environmental & social issues, as well as broader governance oversight.
Moderna April 28 AGM
NASDAQ
Having only IPO’d in 2018, Moderna’s development has been accelerated by the COVID-19 pandemic. The share price is about 6x higher than it was in February 2020, but that’s not the only story. Over the past year the company’s growth has been matched with some commensurate governance improvements, including the disclosure of a board skills matrix, formal oversight of environmental & social issues (by the nominating and governance committee), and adoption of an overboarding policy. Along the way, the board took steps to preempt concerns over a potential conflict of interest when Dr. Elizabeth Nabel, who also served as President of Brigham Health, stepped down from the board after the renowned Brigham and Women Hospital was identified as a clinical site for vaccine trials. Having left that post to become Executive Vice President for Strategy at ModeX Therapeutics, Dr. Nabel was reappointed to Moderna in March and will stand for election at the upcoming AGM.
Kingspan Group April 30 AGM
Euronext Dublin
In December, the ongoing public inquiry into the deadly fire at Grenfell Tower in West London revealed that Kingspan, which manufactured a combustible insulation cladding used at Grenfell, hired PR firms and used sham tests in an attempt to convince politicians that non-combustible materials would have been just as dangerous. It was also revealed that a year before the fire, Kingspan employees had joked in text messages that the company had lied about the safety of the combustible insulation. The news prompted divestment by sustainable investors. Nor were they the only ones selling their shares — it was reported that members of the executive team sold shares worth millions before the allegations were revealed to the public.
The company maintains that culture and process failings were limited to its UK Insulation Boards business, and has commissioned a review of the unit’s governance and compliance. There have also been broader changes within the group, including expanding internal audit functions and the remit of the audit committee to include compliance, additional compliance personnel at executive and divisional level, and a new code of conduct.
Steinhoff International Holdings N.V. April 30 AGM
Deutsche Börse
The specific details of “Accounts & Reports” proposals can vary by market, but they’re usually quite routine. Except when they’re not. Take Steinhoff, which has spent the past few years dealing with accusations of whose auditor, Mazars, has issued a disclaimer of opinion regarding the “exceptional circumstances” surrounding the company’s 2017, 2018 and 2019 financial statements, and the continuing impact on the 2020 statements.
Without qualifying its opinion, Mazars drew attention to complex and subjective judgements regarding the company’s control over investments in Europe, uncertainties related to accounting treatment of subsidiary debts, uncertain tax positions in relation prior accounting irregularities. Shareholders may want to review before they sign off.
The board has seen a full cycle of refreshment since the scandal broke, with the resignation of former chair Heather Soon in May 2020 marking the departure of the last holdover director.
The Goldman Sachs Group, Inc. April 29 AGM
New York Stock Exchange
After being accused of misleading investors about bond sales, conspiring to violate anti-bribery laws, and funnelling billions to offshore bank accounts and shell companies, the past year saw Goldman pay billions in settlements to the U.S. and Malaysian governments in relation to the 1MDB sovereign wealth fund — and implement a number of actions to enhance its compliance and internal controls, with particular reference to sovereign-related financings, and ensure accountability. While senior management does not appear to have been aware of illicit activity at the time, the board nonetheless chose to utilise clawback, forfeitures, and compensation reductions totalling approximately $174 million, impacting executives.
The AGM agenda includes several shareholder proposals, including requests for a racial justice audit and reporting on how Goldman’s use of mandatory arbitration policies affect workplace culture. The racial justice audit proposal is largely similar to the one at Wells Fargo — but unlike at Wells Fargo, Goldman has not disclosed that it is undertaking an equivalent internal assessment regarding its treatment of and impact on nonwhite communities.