Highlights from the world of Proxy 
Papers you can’t afford to miss: Ansaldo STS S.P.A., Chipotle Mexican Grill, Inc., JPMorgan Chase & Co., Avalanche Biotechnologies Inc., Regus plc and China United Network Communications Limited.
Ansaldo STS S.P.A.
Borsa Italiana – May 13, 2016
If there are any minority shareholders left at the Italian railway signalling and transportation systems company, Ansaldo STS, they may want to get some popcorn ready, as it should be an entertaining ride at an AGM that’s full of mixed signals. Hitachi bought a 40% stake in the Company from Finmeccanica last year and extended an offer for the remaining shares; however, their plans may be derailed by Elliott Management. Paul Singer’s activist investment fund, which has reportedly increased its own stake to nearly 30%, refused to tender its shares and has asked Italian courts to look into the €9.50 per share paid by Hitachi, which it considers about one-third too low. Speaking of valuations, former CEO Stefano Siragusa is disembarking at the AGM, but shareholders may want to ask questions about his own gravy train after the board agreed to pay a €2.9 million lump-sum in exchange for Mr. Siragusa waiving his entitlement to outstanding variable pay that appears to be worth about half as much.
Chipotle Mexican Grill, Inc.
New York Stock Exchange – May 11, 2016
More than 500 people in at least five states reported illnesses as a result of eating Chipotle’s food during 2015. Separate outbreaks of norovirus, salmonella and E.coli in the Company’s stores contributed to a 30% decline in Chipotle’s share price, wiping out more than US$10 billion of market value in the process. On the back of these incidents, Chipotle’s shareholders will weigh to what extent current board members should be held responsible for these incidents and whether pay decisions were appropriate given the Company’s travails. Additionally, for the third year in a row, shareholders will vote on a shareholder proposal requesting that Chipotle enhance its sustainability reporting, an issue that may have special significance given the recent food safety incidents. The Company also elected to place two management proposals in direct opposition to shareholder proposals regarding proxy access and special meeting rights for shareholders.
JPMorgan Chase & Co.
New York Stock Exchange – May 17, 2016
After receiving a lukewarm 61% approval level for its say-on-pay proposal in 2015, JPMorgan’s compensation committee was tasked with soliciting shareholder views and making alterations. This year, shareholders will have an opportunity to weigh in on the eventual changes amidst a backdrop of continued multi-billion dollar settlements for allegations of misconduct regarding a litany of issues (including the “London Whale” trading fiasco, evidence of collusion to rig CDS and foreign exchange markets, and continued mortgage-backed security litigation), along with the Fed and FDIC’s decision to label the Company’s “living will” proposal as “not credible.”
Avalanche Biotechnologies Inc.
NASDAQ – May 10, 2016
Following announcement of disappointing clinical trial results for its lead drug candidate, AVA-101, a gene therapy treatment for macular degeneration, Avalanche Biotechnologies suspended development of that program, the Company’s CEO resigned and the Company’s shares lost nearly 75% of their value. What had been a promising US$1 billion market cap company prior to announcement of the clinical trial results was worth around US$260 million when the dust settled, roughly equivalent to the value of its cash and liquid securities holdings. Investors were understandably disappointed; after all, Avalanche had just raised an additional US$130 million of equity primarily to fund development of AVA-101. Against this backdrop, Avalanche began a search to acquire additional product candidates that could utilize the company’s existing infrastructure and placate investors. The deal that resulted was the proposed acquisition of Annapurna Therapeutics SAS (“Annapurna”), a privately-held startup focused on the development of a gene therapy product candidate, ANN-001, to address a deficiency that can lead to respiratory and liver disease. For Avalanche shareholders, the deal represents a deviation of focus from macular degeneration as well as an increase in risk. ANN-001 has not been validated through clinical trials and Avalanche shareholders have been provided limited insight into the validity of Annapurna’s other product candidates and technologies. In addition, the only independent financial assessment made available to Avalanche shareholders, that contained in the merger fairness opinion, made no attempt to assess the potential value of Annapurna’s product candidates. Perhaps unsurprising, news of the transaction was received poorly by shareholders, driving the price of Avalanche shares down an additional 13% following announcement.
Regus plc
London Stock Exchange – May 17, 2016
Regus plc has seen substantial growth in recent years, resulting in its positioning at the higher end of the FTSE 250 and exceptional returns to shareholders over each of the past five years. As a result, the remuneration committee sought to reposition the salary of the CEO, Mark Dixon, which they believe has fallen behind market rates for such a successful CEO. While the rationale appears reasonable given the growth at the Company, the 41% increase may be cause for shareholder concern with the CEO’s revised salary looking more at home amongst FTSE 100 companies and the compounding effect such an increase has on short and long term incentives. Moreover, Mr. Dixon, despite owning almost 32% of the Company also continues to receive performance-based pay in the form of equity.
China United Network Communications Limited
Shanghai Stock Exchange – May 11, 2016
Russian nesting dolls are usually easy to play with, but one company has adopted an unusual and complex indirect voting practice well worth shareholder’s attention. China United Network Communications Limited (“China Unicom”), the second largest state-owned telecommunication operator in mainland China, has been holding its annual meetings using a “Russian Doll” type format, nesting one meeting within another. For its 2016 AGM, shareholders of China Unicom are asked to approve business matters of its controlled subsidiary, China Unicom (Hong Kong) Limited (HKG: 0762,), which has its entire meeting agenda embedded within China Unicom’s meeting agenda. Complicating matters, shareholders will need to apply their policies across two different markets (China and Hong Kong) to China Unicom’s agenda at its upcoming shareholder meeting.