Important highlights from upcoming meetings, provided by Glass Lewis’ global research team
CBRE Group, Inc. New York Stock Exchange – May 17
Like many companies, CBRE has a provision in employee contracts requiring that disputes, including harassment, be resolved through arbitration rather than going to court. It’s a practice that has become increasingly common across corporate America over recent decades – and one that has drawn increasing scrutiny over the last few years. In November 2018, Google joined tech peers like Microsoft, Facebook and eBay by moving to undo its mandatory arbitration clause days after 20,000 employees staged a worldwide walkout over the company’s handling of sexual misconduct allegations. The moves also reflect regulatory pressure, including U.S. Congressional legislation to curb or clarify the mandatory arbitration process. CBRE has a checkered history when it comes to sexual harassment, and has already faced a legal challenge to its mandatory arbitration provision. Although the National Labor Relations board dismissed a CBRE employee argument that a mandatory arbitration clause was generally unlawful, the NLRB has yet to decide whether CBRE has violated the National Labor Relations Act by misleading workers into believing they’re not permitted to file certain workplace claims.
In this context, investors will consider a shareholder proposal requesting that the company prepare a report on the impact of mandatory arbitration policies on employees, including an evaluation of the risks that may result from the current mandatory arbitration policy on claims of sexual harassment. It’s the first proposal of its kind, but with increasing pressure on practices that reduce employee rights, and cases like Wynn highlighting the potential institutional cost of harassment, it may not be the last.
Partners Group Holding AG SIX Swiss Exchange – May 15
Doing something different is an easy way to get noticed – and can require some explanation. The compensation arrangements at Partners Group Holding are certainly a bit different, and have raised plenty of shareholder attention. Two years ago both the advisory Compensation Report and binding ‘aggregate board pay’ proposals were opposed by over a quarter of shareholders, reflecting concerns regarding the payment of extraordinary, variable fees and the practice of allowing non-executive directors to participate in equity incentive plans designed for employees and executives. The concerns were exacerbated by limited disclosure, particularly given the level of discretion afforded the board in determining pay outcomes. Last year saw reduced opposition to the binding proposal, but nearly a third of votes were again cast against the advisory Compensation Report. The result prompted the compensation committee chair to explicitly address shareholders’ opposition in the introductory letter to this year’s report, stating that the issue was investigated by the during the year and that shareholders’ feedback report was centered around transparency. In response, the company has substantially improved the disclosure of incentive plans contained in the compensation report, which now describes with greater clarity the vesting terms, performance conditions and limits utilised by the board to determine payout levels. In addition to having more information to consider, shareholders will also have more specific avenues to express their opinions. This time around, rather than a single binding vote covering all of executive pay, the proposal will be split into an upfront vote on short-term cash, and a retrospective vote on long-term variable grants, giving shareholders an opportunity to asses the board’s evaluation of executive performance.
XPO Logistics, Inc. New York Stock Exchange – May 15
There will be two elephants circling the room when XPO Logistics holds its AGM. Late last year, a New York Times investigation into miscarriages by women who worked at a company warehouse prompted allegations of pregnancy discrimination – in turn prompting a shareholder proposal on the agenda, urging the board to strengthen its approach to workplace sexual harassment by formalizing its oversight responsibility, aligning senior executive compensation incentives, reviewing (and if necessary overseeing revision of) company policies, and submitting a report to shareholders. For its part, the company has a “no discrimination, harassment or retaliation” policy and a “pregnancy care” policy designed to adjust work conditions for pregnant employees. The board is also likely to face questions regarding the loss of $600 million in annual business from its largest customer (widely presumed to be Amazon), and reports that the decision reflected XPO’s poaching of a former Amazon logistics executive; Kenneth Wagers only lasted a few months at XPO after receiving a $10 million joining award (most of which was forfeited). He wasn’t the only executive to receive a generous grant; the compensation committee awarded an aggregate of over $16.0 million in PSUs to three NEOs during the year, with approximately $12.7 million going to the CEO.
Realty Income Corporation New York Stock Exchange – May 14
There’ll be plenty of introductions at Realty Income Corporation’s AGM this year. The dividend company saw significant executive turnover over the past year. Sumit Roy was promoted from president and COO to take over as CEO, following the appointments of Neil M. Abraham as chief strategy officer, and Mark E. Hagan as chief investment officer, and early this year Michael R. Pfeiffer was appointed as chief administrative officer in addition to his current positions as executive vice president, general counsel, and secretary. There were also some non-executive changes, with one independent director departing and two joining the board. It will be interesting to see if the refreshment has any impact on the level of support Michael McKee’s reelection receives – the nominating committee chair has seen ~20% opposition in recent years.
First Republic Bank New York Stock Exchange – May 14
Ahead of its AGM, First Republic Bank has announced some succession planning. Pursuant to a revised employment agreement, founder James H. Herbert, II will serve as chair and CEO until December 31, 2021, and then transition to the Bank’s executive chair until December 31, 2028 (subject to election to the board by shareholders. However, also pursuant to that revised employment agreement, the company’s founder is now entitled to an enhanced (and arguably excessive) severance package, featuring a 3x salary multiple (up from the market norm of 2x) along with an entitlement to 0.5% of budgeted pre-tax profit. Investors appear satisfied with the stability of the management team, but it remains to be seen if they’re OK with how the board is paying the tab.
Applied DNA Sciences, Inc. NASDAQ – May 16
Applied DNA Sciences has had a rough few years, with it share price dropping down under $1 by the end of 2018. That decline has prompted a range of option repricings as the company attempts to keep executives and employees incentivized to turn things around. That’s always a controversial step, given that it risks undermining the at risk nature of awards by removing the downside — all the more controversial in this case given that the repricing is not sanctioned under the rules of the company’s option plan, and was not submitted to shareholders for approval. The board may also face questions regarding its leadership structure, with the CEO also serving as chair, and no lead independent director appointed.