Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
The Toronto-Dominion Bank
Toronto Stock Exchange – March 29
At the 2017 annual meeting of The Toronto-Dominion Bank (“TD Bank”), a shareholder proposal asking the company to adopt U.S.-style proxy access rights was approved with 52.2% support. Under the proposal, shareholders owning 3% of TD Bank’s shares continuously for three 3 years would be allowed to nominate up to 25% of the board, similar to the standard proxy access rights south of the border.
TD Bank (along with the Royal Bank of Canada, which saw a similar proposal receive approximately 43% support) were quick to point out that the proposed standards were incompatible with the existing proxy access rights provided under the Canadian Bank Act (“Bank Act”), which stipulates that the minimum ownership threshold required to utilize proxy access at any firm is 5% of the total shares outstanding. But, in light of strong shareholder support for the proposals, both banks have subsequently joined in petitioning the Canadian Minister of Finance to amend the Bank Act to allow harmonization of Canadian and U.S. proxy access provisions. Further, both banks have adopted proxy access policies, not bylaws amendments, which provide that shareholders owning 5% of the shares outstanding for three years continuously may adopt up to 20% of their boards.
However, these actions were not sufficient for the proponent of the original proxy access proposal, Lowell Weir, who has submitted several proposals at TD’s upcoming meeting. Most notably, he is requesting that the company: (i) immediately cancel its proxy access policy; (ii) immediately implement a proxy access bylaw; (iii) that the chair of the board immediately resign; (iv) that there be a complete change of directors in the governance committee over the next year; and (v) that any director or officer refusing to act in accordance with the 2018 shareholder proposal immediately submit their resignation. It will be interesting to see whether shareholders determine that the company has satisfactorily responded to the shareholder proposal, or whether they believe that TD has not gone far enough.
Nippon Paint Holdings Co., Ltd
Tokyo Stock Exchange – March 28
In January, shareholders of Nippon Paint Holdings Co., Ltd. (4612) (“Nippon Paint”) were shocked as Nipsea International Limited (“Nipsea”), which holds a 39.57% interest in Nippon Paint, submitted a shareholder proposal with demands to elect six nominees to the board, representing a majority of the board seats.
While Japanese companies are no stranger to shareholder proposals, proponents are often perceived by companies and the public as short-term oriented investors. However, Nipsea painted a different picture.
Goh Hup Jin, a director of Nippon Paint and one of the nominees named in the proposal, is a director of Nipsea and the managing director of Wuthelam Group (“”Wuthelam”), a business partner of Nippon Paint and the parent company of Nipsea. Notably, Mr. Goh has had a long-standing relationship with Nippon Paint. His father, Goh Cheng Liang, made his multi-billion dollar fortune in the paint business, forming the Nippon Paint South-East Asia Group with Nippon Paint, as well as other joint ventures across Asia. Mr. Goh stated that the purpose of the proposals was to achieve a suitable corporate governance structure in the company at the board level for the “Maximization of the Shareholder value”.
Granted, this was not the first time Nipsea and Wuthelam attempted some form of control of Nippon Paint. Wuthelam initiated a takeover in 2013, but later retracted its bid after engaging with Nippon Paint and reevaluating their capital relationship. Wuthelam shed their majority stake in several joint ventures in Asia in return for an increased stake in Nippon Paint, from 14.5% to 30.3%.
Regarding the current standoff, shareholders remained in the dark until March 1, 2018, when Nippon Paint brushed aside uncertainty, announcing that it had decided to include the six Nipsea nominees as management nominees. Subsequently, Nipsea retracted its shareholder proposal, and Mr. Goh is to be appointed as chair of the Company at the 2018 annual meeting.
Given Nipsea’s 39.57% ownership in Nippon Paint, it is unlikely that the six nominees will not receive a majority vote. However, how disinterested shareholders react to Nipsea’s actions (and nominees) remains a point of interest.
ABB Ltd.
SIX Swiss Exchange – March 29
After having almost rejected last year’s compensation report, ABB’s shareholders will have to decide where to stand this year. The company introduced relative TSR and strengthened its share ownership guidelines, trying to mitigate investors’ concerns. However, some issues that were brought up at the 2017 AGM were not clearly addressed. Shareholders questioned the size of executive payouts, which didn’t decrease (and in some cases increased) despite the fraud case affecting the company’s South Korean subsidiary and the associated recognition of a material weakness. While ABB’s board declared that short- and long-term incentive awards were adjusted downwards to reflect these events, the compensation report fails to describe said reductions in any more detail. Given the delicate nature of the issue, shareholders may consider the board adjusted payouts internally, deciding to withhold any further sensitive information from the public. Moreover, the discontent expressed at last year’s AGM was also connected to other factors, including pay-for-performance concerns raised by a proxy advisor and a general disappointment with the (not so restraining) effects of the Minder regulation. As last year’s large opposition drew attention to the company’s remuneration practices, shareholders will now have to either consolidate their stance or grant some trust back to the board.
Siemens Gamesa Renewable Energy
Bolsas y Mercados Espanoles – March 23
Following the merger between Gamesa and Siemens Wind into Siemens Gamesa Renewable Energy, Siemens AG and Iberdrola, S.A. entered into a shareholder agreement which includes some commitments related to corporate governance and composition of the newly combined company’s board. Now there is some friction between the parties, and Iberdrola, which holds just 8% of the company compared to Siemens’ 51%, has submitted two shareholder proposals to the meeting agenda. The proposals would instruct the board to develop further safeguards with regard to related party transactions with the majority shareholder, and to provide assurances for keeping the company’s business operations in Spain.
OTHER NOTABLE MEETINGS:
- Broadcom Limited (New York Stock Exchange – March 23)
- Centamin plc (London Stock Exchange – March 26)
- Skandinaviska Enskilda Banken (NASDAQ Stockholm – March 26)
- Randstad Holding N.V. (Euronext Amsterdam – March 27)
- McCormick & Co. (New York Stock Exchange – March 28)
- Telefonaktiebolaget LM Ericsson (NASDAQ Stockholm– March 28)