Highlights from the world of Proxy 
Papers you can’t afford to miss: Nissan & Mitsubishi Motors, Sharp, BlackBerry, China Electric, and Wison Engineering
Nissan Motor Co Ltd
Tokyo Stock Exchange – June 22, 2016
Mitsubishi Motors Corp.
Tokyo Stock Exchange – June 24, 2016
Buying a car requires due diligence, and buying a line of cars is no different. Nissan Motors might be wishing it had kicked the tires on the Dayz and Dayz Roox models, which it purchased from Mitsubishi Motors Corp. and rebranded under the its own brand; last year Nissan halted sales of these lines after discovering that Mitsubishi had been falsifying emissions data. The revelation was a betrayal by a business partner with whom Nissan had been strengthening ties since 2003 – and a betrayal for shareholders who stuck with Mitsubishi after it faced significant scrutiny in the early 2000s over accidents and deaths stemming from its failure to conduct proper recalls. Moreover, it wiped approximately $1.2 billion from Mitsubishi’s market value.
Instead of cutting its losses with Mitsubishi, Nissan has extended a lifeline by agreeing to enter into a strategic alliance. Under the terms of the agreement, the Company would acquire a 34.0% stake in Mitsubishi for $2.2 billion. The deal would make the Company the de facto controller of Mitsubishi and place the familiar three-diamond trademark under the Renault-Nissan umbrella. Further management change at Mitsubishi is expected at a special meeting that is expected to be convened at a later date where more Nissan executives will be nominated to its board. Carlos Ghosn, Nissan’s chief executive, has stated that while reforming Mitsubishi’s corporate culture and restoring its tarnished reputation is of the utmost importance, he believes the new partnership will enable both entities to generate long term value. Only time will tell whether the Nissan’s purchase will be hailed as a bargain or a lemon.
Sharp Corporation
Tokyo Stock Exchange – June 23, 2016
One of Japan’s preeminent consumer electronics manufacturing firms, Sharp Corporation, finds itself backed into a position of having to conduct a significantly dilutive share placement with Taiwan-based strategic investor Foxconn Group. In recent years, the Company has seen its losses mount in the face of growing market pressures and now it seeks shareholder authority of the issuance in order to shore up its capital position. Considering the historically insular nature of Japan’s tech industry, the proposed financing at the Company marks a major shift and could perhaps signal an increasing openness by struggling domestic electronic firms towards the idea of foreign ownership.
BlackBerry
Toronto Stock Exchange – June 22
As BlackBerry continues its restructuring saga, shareholders have been given something of a reprieve from the significant transitions and sizable transition payments. Notable external hires in recent years include CEO John Chen and president Sandeep Chennakeshu, each of whom received equity inducement awards totaling over $102 million for joining a Company in the midst of turnaround efforts.
Sign-on packages have skewed the Company’s aggregate executive pay figures relative to its peers, and it is no secret that the Company’s relative performance has lagged as well. The committee’s use of discretion to determine payouts in past years has sometimes made an otherwise well-structured compensation program appear somewhat performance-insensitive, and shareholders have voiced their concerns. The Company’s advisory vote has received less than stellar support in the four years since adoption, with a low of 67% but more enthusiastic support of around 90at the 2015 meeting.
While the remarkable dollar value figures have not appeared in the company’s compensation tables for the year in review and the company recently adopted performance-based long-term awards, the CEO’s employment agreement continues to include a $2 million guaranteed annual bonus and Chief Legal Officer Steve Zipperstein is entitled to a guaranteed $2.5 million annual equity award, although both executives have made some recent concessions in this regard. Although the CEO’s pay arrangements remains largely performance-insensitive, comprised of largely fixed pay or tied to the prior time-vesting sign-on award, the past year’s increased emphasis on performance-linked pay and a reduction in overall pay levels may go far in assuaging shareholders’ concerns.
China Electric Manufacturing Corporation
Taiwan Stock Exchange – June 23
Have you ever seen adults in a power struggle behaving like children fighting over toys? Shareholders of China Electric Manufacturing Corporation may be in for a corporate temper tantrum. Following its contested election in 2015, the Company’s 2016 annual meeting is still all about scandals, with fifteen directors and two supervisors lined up to ask the permanent removal from the board of Da De Construction Co., Ltd. (“Da De”), the representative director of Da De-YAN Gan-Lin (“Mr. Yan”) and their allies. Since losing control over the Company in 2012, its former chairman Mr. YAN has repeatedly accused the current management group of misconduct such as cooking the books and insider trading. It appears that the current management has had enough, but shareholders will have to decide whether Mr. YAN has a legitimate grievance or is just crying out for attention.
Wison Engineering Services Company
Hong Kong Stock Exchange – June 22
For the third year in a row, Wison Engineering Services Company has received a qualified opinion from its auditors along with a not-too-subtle reminder that there are concerns about the Company’s ability to continue as a going concern. Along with these matters, the Company and its former chairman, Mr. HUA Bangsong were convicted of bribery in the past year, with the Company receiving a RBM 30 million fine. Although the Company and Mr. HUA were acquitted of tender-offer fraud, the conviction marks the culmination of regulatory investigations into the Company dating back to September 2013. Questions remain as to whether the Company will take the opportunity to improve its governance arrangements – and its finances.