Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
The AES Corporation
New York Stock Exchange – April 16
With permission from the SEC, The AES Corporation has excluded a shareholder proposal seeking to reduce the threshold required for shareholders to call a special meeting from 25% to 10%. Instead, AES has put forth a management proposal ratifying the existing 25% threshold for special meeting rights, citing that the original management proposal was “overwhelmingly approved by the Company’s Stockholders at that annual meeting” and that the recent adoption of the 25% threshold aligns with the current views of the predominant shareholder base. AES further states that, “a vote in favor of ratification of the existing Special Meeting Provisions is tantamount to a vote against a proposal lowering the ownership threshold to 10%.”
This rationale stems from the SEC Division of Corporation Finance’s interpretation of no-action requests under the Code of Federal Regulations Rule 14a-8(i)(9) and based on “whether a reasonable shareholder could logically vote for both proposals.” As of 2015, the SEC has determined that shareholder proposals may be excluded by the company if it directly conflicts with an existing management proposal. The Council of Institutional Investors raised objections that AES was “forcing shareholders into a dilemma” with the inclusion of its ratification proposal by removing altogether the opportunity to voice an opinion in favor of lowering the threshold. The CII has urged the SEC to reconsider its approach to shareholder proposal exclusion, and shareholders of AES may find themselves asking similar questions at this year’s annual meeting.
Teleperformance SE
Euronext Paris – April 20
France’s binding pay votes may get a test when Teleperformance SE holds its annual meeting. Shareholders have already voiced their concerns with the company’s remuneration structure and high quantum: over 30% rejected the amounts paid to the company’s top executives at the 2016 AGM, with opposition increasing above 40% at last year’s meeting. Those concerns may be exacerbated by the terms of former CEO Paulo Salles Vasques’ departure, which appear to exceed the AFEP-MEDEF corporate governance code best practice recommendation that termination payments of this type be limited to two years of fixed and variable salary. In addition, shareholders may question why Mr. Salles Vasques is even receiving a non-compete payment given that he remains actively involved in the company’s Brazilian subsidiary.
Telekom Malaysia Berhad V
Bursa Malaysia – April 20
With the introduction of the revised Malaysian Code of Corporate Governance (the “New Code”) released in May 2017, FTSE top 100 companies listed on the Bursa Malaysia Stock Exchange must meet more stringent corporate governance requirements to be aligned with best practice. One such governance guideline is the appointment of a risk management committee comprising a majority of independent directors. The changes take full effect this year, and as a FTSE top 100 company in the Bursa Malaysia with a fiscal year end of December 31, Telekom Malaysia Berhad is one of the first companies impacted. It responded by appointing a risk committee to its board for shareholder review before its upcoming annual general meeting of shareholders. We expect Telekom Malaysia Berhad to be one of many companies that are aligning with the New Code in the coming months. As the proxy season progresses, there will be increasing attention on the compliance to the New Code by FTSE top 100 companies within Malaysia. Other amendments to the corporate governance code that companies will likely begin complying with include an increase in the number of female directors appointed to a board to 30%, and guidelines that would limit the tenure of independent directors to nine years.
Gerdau S.A.
B3 – April 20
It seems the independent shareholders of Gerdau S.A., the subsidiary of Metalurgica Gerdau S.A., will not have much to say at the company’s upcoming meeting: following Metalurgica’s tender offer, the Gerdau Johannpeter family now owns approximately 96.7% of Gerdau’s voting share capital. However even as the family tightens its control, it is loosening its grip on the company’s day to day operational management. During the past year, all family members serving in executive roles stepped down, as a step in the evolution of the Company’s governance. That includes the CEO, who was replaced by Gustavo Werneck, a long-serving in-house executive who had previously served as the CEO of the Brazil Business Division. The company still has a long way to go on governance; but with the Gerdau family now consigned to the board (and the ownership registry), it will be interesting to see how the new CEO tackles the company’s challenges on the governance front from the general meeting onwards.
Georg Fischer
SIX Swiss Exchange – April 18
After several years of courting shareholder concern, Georg Fischer saw its advisory compensation report receive 55% opposition last year. The Swiss machinery company avoided the headache of having any of its binding pay proposals rejected, but the result was nonetheless notable — previous Swiss shareholder activism on executive compensation had focused on financial institutions. The advisory rejection — and roughly 15% opposition to the reelection of the directors serving on the compensation committee — appears to have gotten the board’s attention. This year, the pay structure included several changes, including fully performance-based long-term awards subject to multiple metrics, and shareholding guidelines for all executives. Whether that’s enough for shareholders to offer support remains to be seen.
CCR
B3 – April 16
Historically closely held, CCR faces its first AGM (and board election) without a controlling party. And with the election of directors being held individually, which is rather unusual in Brazil, smaller shareholders are getting their first opportunity to have a real say in the board’s composition (though with that said, the board nominees remain, for the most part, related to the former controlling parties). While approval of the agenda items has never been an issue for the company given assured support from the controlling party, it remains to be seen whether the former minority shareholders have anything different to say.
Keppel Corporation Limited
Singapore Exchange – April 20
Singapore prides itself on the strength of its corporate governance practices, especially when Temasek Holding (Private) Limited is a major shareholder. Yet, Singaporean companies are not immune from the pitfalls of doing business in developing markets, as Keppel Corporation learned. The company and its subsidiaries recorded an exceptional expenditure of S$619 million in relation to legal fees, fines and other costs from a bribery and corruption scandal involving some of its subsidiaries. One subsidiary even pleaded guilty to conspiracy to violate the U.S. Foreign Corrupt Practices Act, while another received leniency and a Deferred Prosecution Agreement in exchange for cooperating with the U.S. Department of Justice.
While Keppel Corporation has vowed to address the past transgressions of its subsidiaries, shareholders will likely have questions. As the scandal involving Keppel’s group companies lasted from 2001 to 2014, there appears to have been a breakdown in stringent oversight and risk management during that time. The hope is that a renewed focus on internal controls will help to offset the sting of having group companies involved in bribery and corruption proceedings.h
British American Tobacco Bangladesh Co. Ltd.
Dhaka Stock Exchange– April 17
So much for giving your customers a good deal. In September 2017, the Bangladeshi lower court found against BAT Bangladesh for alleged tax evasion in the amount of Taka 19.24 billion, after the company allegedly sold several higher-quality cigarette brands at lower-quality cigarettes’ prices in order to avoid paying tax. The company has appealed the decision and currently the case is pending in the Bangladeshi appellate court. Furthermore, the British High Commissioner to Bangladesh faced allegations that it lobbied on behalf of the company to reverse the lower court’s decision. This extraordinary intervention has enraged health organizations and transparency campaigners, both in the United Kingdom and in Bangladesh, who found it to be a breach of strict World Health Organisation rules.
OTHER NOTABLE MEETINGS:
- L’Oreal (Euronext Paris – April 17)
- Fifth Third Bancorp (NASDAQ – April 17)
- Sika AG (SIX Swiss Exchange – April 17)
- U.S. Bancorp (New York Stock Exchange – April 17)
- Whirlpool Corporation (New York Stock Exchange – April 17)
- The Sherwin-Williams Company (New York Stock Exchange – April 18)
- Swiss Re Ltd (SIX Swiss Exchange – April 20)