Highlights from the
world of Proxy Papers you can’t afford to miss: Volkswagen, Toshiba, Axiall, and DaVita Healthcare.
Volkswagen
Deutsche Börse – June 22
Volkswagen’s upcoming AGM is likely to be dominated by arguably the foulest corporate scandal of 2015 – the revelation that the Company had installed software in ~11 million of its supposedly ‘clean’ diesel vehicles that would activate only during lab conditions and serve to deceive emissions testers as to the true output of these vehicles under normal operation.
The Company has announced provisions of over $18 billion to deal with the fallout, a preliminary settlement in the United States, and a swathe of changes to senior management, but has remained tight-lipped as to the specifics of information gained from an internal investigation commissioned in the immediate aftermath of the scandal.
Aside from considering whether they are privy to sufficient information to ratify the actions of the management and supervisory board for the past year, shareholders will also be asked whether to support special audits to investigate the actions of directors from as early as 2005 and to examine the robustness of the Company’s risk management and compliance systems. Given the closely-held nature of its voting stock, free float shareholders are unlikely to be able to make much impact through the ballot box, but it remains to be seen as to whether they are able to use this scandal as a springboard to push for improvements to the Company’s traditionally poor governance practices.
Toshiba
Tokyo Stock Exchange – June 22
Toshiba’s shareholders might be experiencing déjà vu. After exposing a company-wide overstatement of ¥224.8 billion ($1.9 billion) in its profits between 2008 to 2014, the multinational conglomerate replaced most of its board members in September 2015, paid massive fines, and established a number of preventive measures and revitalization plans … only to announce additional accounting errors just two months later, this time involving its U.S. nuclear power subsidiary Westinghouse. The Company stated that it had failed to disclose the subsidiary’s past losses of ¥76.2 billion ($930 million) in 2012, apologized, and promised greater transparency going forward … only to announce new accounting errors as a result of its failure to promptly disclose the overstatement of ¥5.8 billion ($51.3 million) in seven cases, which were quietly applied to its interim financial statements published in November 2015.
At its upcoming general meeting, the Company is proposing to complete the total overhaul of its board of directors, including a new CEO, and to appoint a new auditor. Despite these changes, shareholders will likely be watching closely to see how the board intends to prevent further scandals going forward.
Axiall
New York Stock Exchange – June 17
Leading up its 2016 shareholder meeting, Axiall Corporation found itself in the unique position of entertaining multiple take-over offers from potential buyers while simultaneously trying to fend off an attempt by a then-hostile suitor, Westlake Chemical Corp., to replace the Company’s entire board. Westlake, having been publicly spurned by the Company’s predecessor several years ago, sought to acquire some or all of the business at what may arguably have been (and may still be) a cyclical weak point. Around the first quarter of 2016, Westlake publicly came forward with multiple takeover offers valued between $20.00 and $23.00 per Company share. Despite the significant headline market premium implied by those offers, the board was quick to reject Westlake’s initial bids for being opportunistic and too low of a price. Westlake responded with its contested solicitation in an attempt to gain control of the board and push through its initial offer. Glass Lewis recommended that shareholders support the entire slate of Company nominees. Since the initial publication of Glass Lewis’ recommendation on June 3, 2016, at least one potential alternative bidder, South Korea-based Lotte Chemical Corporation, emerged as having interest in acquiring the Company. Then, on June 10, 2016, the Company and Westlake announced an agreement which offers Company shareholders cash consideration of $33.00 per share, representing a 237% market premium to the unaffected closing price on January 28, 2016. Westlake simultaneously agreed to withdraw its proxy solicitation, and the companies will call another meeting for shareholders to vote on the announced agreement. The agreement likely brings to a close what would have been a highly contentious situation at the Company’s annual meeting; shares closed on June 13, 2016 at $32.53.
DaVita HealthCare Partners Inc.
New York Stock Exchange – June 20
DaVita HealthCare Partners Inc. has endured a number of lawsuits in recent years relating to the pricing and sales of its prescription medications, and settled whistleblower lawsuits for $389 million in October 2014 and $450 million in May 2015. In February 2016, the Company also received a new civil investigative demand from the U.S. Attorney’s Office stemming from false payment claims relating to prescription medications dating back a decade. At the 2016 annual meeting, DaVita shareholders will consider the board’s leadership throughout this period (the non-executive board members have served for an average of 11 years) and will note that management is seeking shareholder approval of a proxy access provision, following strong support for a shareholder resolution on this topic in 2015. With regard to executive pay decisions, shareholders will note the board’s implementation of a 2015 Supplemental STI Program and consider whether the program is appropriately designed to link pay with performance.