Highlights from the world of Proxy Papers you can’t afford to miss!
International Consolidated Airlines Group
London Stock Exchange – June 15
Between May 27 and May 30, 2017, British Airways (“BA”), a wholly-owned subsidiary of IAG, experienced an IT failure which resulted in the grounding and delay of hundreds of flights, affecting an estimated 75,000 customers. The incident, which left staff unable to access check-in systems and locate baggage, saw approximately £500 million wiped off the company’s value in early trading on May 30 and is expected to cost BA up to £100 million in compensation. An early statement from Alex Cruz, BA’s CEO, suggested that a power surge was responsible for the incident; however, this theory has been rebuked by IT experts as well as the electricity supplier. Subsequently, the company blamed the outage on a contractor who turned off a power supply while performing maintenance work. Amid speculation surrounding IT resilience, BA has maintained that the outage was not driven by recent cost-cutting to the company’s IT budget – approximately 200 IT staff are in the process of being made redundant and certain IT arrangements are being outsourced. However, one commentator has noted that the global head of IT for IAG, Bill Francis, has no previous IT experience, and was previously in charge of introducing new contracts and working practices to cabin crew at BA during the bitter industrial dispute of 2010-11. Analysts, competitors and commentators alike have questioned the official reasons given for the incident and it is widely expected that a review of operations at BA, particularly IT infrastructure and fail-safes, will be conducted forthwith.
Renault
Euronext Paris – June 15
The remuneration of Carlos Ghosn, the chair and CEO of Renault, gained infamy last year after an advisory proposal seeking its approval was voted down — the first ever pay vote to be rejected by shareholders in France. As if this dubious honour were not enough, the company’s immediate response to the vote’s outcome attracted strong criticism for the swiftness with which the board reconfirmed Mr Ghosn’s pay, mere hours after the failed vote. To say that tensions will run high at the 2017 AGM now that remuneration votes have become binding — itself, in part, a response to the Ghosn pay debacle — is certainly an understatement.
The company’s largest shareholder at around 20% of capital, the French Republic, will doubtless oppose his pay, which they have openly denounced as excessive. It remains to be seen whether enough minority shareholders agree to cause the vote to fail for the second year in a row. For its part, Renault has not been idle. In 2017 it has provided shareholders with an abundance of detailed disclosure regarding all elements of the boss’s pay, and has made some structural improvements. However, little has changed by way of quantum — will clear disclosure and Renault’s strong financial performance be enough to appease a majority of shareholders?
Seaworld Entertainment, Inc.
NASDAQ – June 14
While most of the media coverage surrounding SeaWorld in recent years has centered around its struggle to respond to declining attendance following the release of the documentary Blackfish, a different controversy has floated beneath spectators’ line of sight in recent months. Blackstone, the private equity firm which took SeaWorld public in 2013, announced that it had agreed to sell its remaining 21% stake in March to Chinese firm Zhonghong Group at a 30% premium to the market price of the company’s shares. The board then announced that its independent board chairman and several executive officers would receive vesting of millions of dollars in equity awards– based on the rate of return achieved by Blackstone. While one Blackstone affiliate is departing the board immediately following the meeting, shareholders will likely have questions for board chair David D’Alessandro and the directors that approved the vesting of these awards.
Safran SA
Euronext Paris – June 15
A very public cross-channel confrontation is heading to a showdown under the Grande Arche of La Défense, with Safran’s shareholders set to vote on a proposed transaction to purchase Zodiac Aerospace. Those shareholders include TCI Fund Management, a London-based hedge fund that owns roughly 4% of Safran and has been extremely vocal in its opposition to the deal, on strategic, financial and governance grounds, since it was announced in February. Those governance concerns were largely addressed when Safran revised the terms of the deal, and TCI appears to have dropped its threat to oust chairman Ross McInnes, but the fund remains convinced that the move would represent strategic folly and poor value. The decision to revise the deal, which now includes a 26% reduction in price along with a simplified structure that gives Safran shareholders a meaningful vote and removes preferential treatment for the Zodiac families, reflects not just TCI’s campaigning but a poor string of results for Zodiac, which has announced multiple profit warnings since the transaction was announced. The board remains strongly committed and believes the move will serve to diversify Safran and confirm it as a national aerospace champion; whether a majority of shareholders agree is still up in the air.
Time Warner Inc.
New York Stock Exchange – June 15
Time Warner’s AGM comes a few months after shareholders voted on its controversial merger with AT&T. The deal became political fodder in the run-up to the 2016 U.S. election, with then-candidate Donald Trump opining that it would result in “too much concentration of power in the hands of too few.” Indeed, commentary on the merger has focused less on the strategic merits of the tie-up and more on the regulatory obstacles for its completion, including review by the United States Department of Justice and the prospectively greater risks associated with any evaluation by the Federal Communications Commission (“FCC”). However, now-president Trump’s formerly-fiery populist rhetoric appears to have cooled, and while the merger remains subject to Department of Justice review, it will not face FCC scrutiny and is expected to close by the end of the year.
In addition to the merger itself, which received 99% support, back in February shareholders were also polled on an advisory resolution covering golden parachutes, including $53 million in transaction bonuses for five executives. In contrast to the merger, this proposal only received 61% support. The sheer size of the awards should be put into context — they represented less than 1% of the merger’s equity premium, and the company has committed to granting no further awards over the next two years (meaning that the transaction awards effectively serve as front-loaded grants covering the three-year period, rather than an extra award on top of the normal structure). Opposition of 39% is also a high number — particularly given that the company does not appear to have responded to it in its AGM materials — but the company’s lack of response should also be put into context: in most cases, there is no opportunity to address shareholder concerns regarding golden parachutes, as subsequent compensation votes concern the resulting combined company, often with a separate board. In light of the unusual situation, it will be interesting to see if shareholders take issue with the board’s (non)-reaction to the opposition.
Tata Consultancy Services Ltd.
Bombay Stock Exchange – June 16
The 2017 AGM for Tata Consultancy Services Ltd. (“Tata Consultancy”, or the company), will be the first AGM since the ousting of Cyrus Mistry as Tata Sons Limited’s (“Tata Sons”) executive chairman and as the company’s non-executive chairman. In this instance, Tata Sons, the company’s controlling shareholder, ousted Mr. Mistry as its executive chairman in October 2014, then removed him as the Tata Consultancy’s chairman by way of a shareholder meeting in December 2016. Mr. Mistry subsequently resigned from six other Tata Group company boards. Despite the tumultuous debacle stemming resulting in the removal of Mr. Mistry from the Tata Group, the company must now demonstrate to shareholders how it will chart its own course going forward in order to restore its reputation as a corporate governance leader. This may be made more difficult, however, by the presence of Tata Sons, who appointed the company’s now former CEO, Natarajan Chandrasekaran, as Tata Sons executive chairman and as the company’s non-executive chairman. Only time and sound board actions will determine if the company, as a “crown jewel” of the Tata Group, will be able to restore the corporate governance reputations of it and other Tata Group companies after the Mistry debacle.
Spectrum Pharmaceuticals, Inc.
NASDAQ – June 13
After failing its say-on-pay vote in each of 2013-2015, Spectrum Pharmaceuticals received majority support for the 2016 vote, barely — only 59.5% of votes cast were in favor of the company’s executive pay program. In the 2017 proxy statement, the company states it has gathered feedback for its executive compensation program and has also listed several changes it has made in response to such feedback; however, all of those changes were also disclosed in the 2016 proxy statement as part of the company’s response to the 2015 say-on-pay vote. Beyond the lack of structural changes, shareholders may take note of some quantum consistency: the company has rewarded its CEO with an annual bonus equal to 100% of his base salary for each of the last five fiscal years despite the company’s negative total shareholder returns in each of those five years.
OTHER NOTABLE MEETINGS:
- MetLife, Inc. (New York Stock Exchange – June 13)
- Sonova Holding AG (SIX Swiss Exchange – June 13)
- Amadeus IT Holding SA (Bolsas y Mercados Españoles – June 14)
- Caterpillar (New York Stock Exchange – June 14)
- Toyota Motor Corporation (Tokyo Stock Exchange – June 14)
- Carrefour (Euronext Paris– June 15)
- Honda Motor Co., Ltd. (Tokyo Stock Exchange – June 15)
- Wm Morrison Supermarkets plc (London Stock Exchange – June 15)
- Brookfield Asset Management Inc. (Toronto Stock Exchange – June 16)
- Tesco plc (London Stock Exchange – June 16)