Highlights from the 
world of Proxy Papers you can’t afford to miss: Valeant, Kingfisher, MetLife, SoftBank, United Continental, and Abercrombie & Fitch
Valeant Pharmaceuticals International, Inc.
NYSE – June 14
During the past year, Valeant’s shares have plummeted amid questions surrounding its business and accounting practices. Having until recently been praised for his aggressive approach towards cost cutting and acquisitions, outgoing CEO J. Michael Pearson has departed the Company having seen its share price decline by nearly 90% as relentless scrutiny from the media, investors and politicians has severely damaged its reputation.
At this year’s annual meeting, shareholders will elect eleven directors, only two of whom (Messrs. Ingram and Power) were on the board last year. Joseph Papa, recently tapped from Perrigo Company plc to take the Company’s helm, and the other directors are now tasked with rebuilding the Company’s image whilst satisfying shareholder demands, including those from hedge funds Pershing Square and ValueAct, both of whom now have board representation and the former of whom was one of Mr. Pearson’s strongest advocates before reportedly pushing for his removal. Given the board’s revamped composition, substantial opposition to most nominees is unlikely. However, shareholders may have concerns with the continued service of Robert Ingram given his role as the Company’s lead independent director from 2011 through 2016, when he was named interim chairman.
Furthermore, shareholders will have to seriously consider whether the Company’s generous compensation practices and the near-exclusive focus that its incentive arrangements place on aggressive share price growth continue to be appropriate given the aforementioned concerns regarding its business and accounting practices. While Mr. Pearson’s eye-popping $140 million equity grant is now worthless given the fall in the Company’s share price, shareholders will undoubtedly note that the outgoing CEO will nonetheless receive a fairly hefty severance package upon his departure, and Mr. Papa’s incoming compensation arrangements appear to be functionally quite similar to the incentive structure that the company has historically relied upon.
Kingfisher plc
London Stock Exchange – June 15
The homogeneity of UK pay structures has been a hot topic amongst regulators, companies and investors alike; as it stands, hundreds of businesses pursuing myriad strategies rely on the same general prefab approach to attracting, retaining and motivating management. Rather than waiting for someone else to build a new model, home improvement retailer Kingfisher has taken the DIY approach to aligning compensation with its newly revised corporate strategy. Their proposed new policy encourages executives to have skin-in-the-game and take a long term perspective with high shareholding requirements that extend past cessation, and arguably reduces the emphasis on traditional incentives: cash bonus opportunity is significantly below previous, long-term awards are granted triennially rather than annually, and the gap is filled by annual grants of “alignment shares” that vest over an extended period and include underpins but no aspirational performance targets. The board appears to have put considerable thought into devising and explaining its new approach; however breaking the mould to try something different can be risky (just ask the remco at the Weir Group plc), making this a meeting of particular interest to pay nerds.
MetLife, Inc.
NYSE – June 14
While MetLife has been fighting its “too big to fail” status in court, the insurance giant has quietly passed some notable (and apparently unprompted) corporate governance measures. The Company amended its bylaws to provide shareholders with proxy access as well as the right to call a special meeting at a 25% threshold. In addition, the Company is seeking shareholder approval to adopt an exclusive forum provision at this year’s annual meeting.
Meanwhile, the Company’s legal battle regarding its designation as a “systematically important financial institution” or “SIFI” continues. The designation — authorized by Dodd-Frank and the Financial Stability Oversight Council (“FSOC”) — subjects the Company to special regulation by the Federal Reserve. In late March a federal judge sided with the Company and rescinded the designation, however the FSOC quickly appealed the decision. Whatever the final outcome, the Company is already set on selling its U.S. advisor force to MassMutual for $300 million, citing the “economic and regulatory environment” as a contributing factor.
So far, the Company is the only non-bank SIFI to sue over its “too big to fail” designation, although other non-bank SIFIs are watching closely. General Electric started divesting GE Capital in 2015 and AIG is facing pressure from Carl Icahn and John Paulson to split up its businesses. Prudential, the last of the four non-bank SIFIs, hasn’t disclosed any restructuring plans so far.
SoftBank Group Corp.
Tokyo Stock Exchange – June 22
SoftBank Group Corp. has been very busy recently engaging with investors in trying to persuade them to re-elect the board’s independent director, Shigenobu Nagamori, who attended only 54% of the Company’s board meetings during the last fiscal year. Mr. Nagamori is the founder and president of Nidec Corporation (“Nidec”), which he has built into a global corporation that is now listed on both the Tokyo Stock Exchange and New York Stock Exchange. Considering his background and experience, he seems like a ‘perfect’ candidate to serve as the Company’s independent director. However, while he is a well-respected manager, Mr. Nagamori is also a busy man given his responsibilities at Nidec, which contributed to his poor attendance record. One of the fundamental responsibilities of an independent director is to attend board meetings, especially for Japanese boards of directors which are mostly dominated by executives; the presence of independent directors is critical in such board structure. However, in its notice of meeting, the Company included a detailed explanation of Mr. Nagamori’s poor attendance record and the measures being taken to prevent the reoccurrence of such attendance issues. This detailed level of explanatory disclosure is exceptionally rare practice among Japanese companies; however, whether the Company’s explanation will be enough for shareholders to forgive Mr. Nagamori’s poor attendance record remains to be seen.
United Continental Holdings, Inc.
NYSE – June 8
After a period of turbulence, shareholders of United Continental Holdings, Inc. are hoping that this week’s AGM will mark a return to the friendly skies. Last year saw the abrupt resignations of CEO Jeffery A. Smisek and two other senior officials amid a federal corruption probe, low customer satisfaction ratings and sagging stock performance. (The officials allegedly offered special flight benefits to the then-chairman of the Port Authority of New York and New Jersey, which operates all New York-area airports.) In addition, hedge funds PAR Capital Management and Altimeter Capital Management spent months pushing for a shake-up of the board and senior leadership. Following Mr. Smisek’s departure, new CEO Oscar Munoz had barely taken the controls before going on leave to have a heart transplant; however since returning he’s averted a looming proxy contest by negotiating a deal that gives each of PAR and Altimeter one nominee on the board, and named Robert A. Milton, former chairman and CEO of Air Canada, as the board’s new chairman. In total, the revitalized board consists of seven new members. The company also voluntarily adopted a shareholder-friendly proxy access provision earlier this year.
Abercrombie & Fitch Co.
NYSE – June 16
Shareholders of the preppy clothier may be frustrated by supermajority voting requirements in the company’s charter, which require a daunting 75% of outstanding shares to amend the bylaws. A management proposal in 2015 seeking to implement proxy access failed to reach this threshold, despite approval from over 86% of the votes cast. Shareholders may be pleased, then, that management is again seeking approval of proxy access rights at this year’s meeting, although the supermajority requirement looms large. Shareholders will also consider the independence of certain board members, including the current executive chairman, whom the company has determined to be independent despite having received cash and equity compensation in excess of $4 million during fiscal year 2015 (more than double the amount received by the other nine directors, combined), as well as a senior advisor and former CEO of Ohio State University, to which the Company pledged donations of up to $10 million between 2007 and 2017.