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Monthly Roundup - February 2019
north america
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Latest Georgeson publications
governance magazin

Governance journal
Governance journal has published a Georgeson article entitled Key considerations for the forthcoming AGM season across Europehttps://www.governance.co.uk/resources/item/1219-european-2019-agm-season

“Following an intense 2018 AGM season, which in many markets was characterised by an increased focus on director elections and continued pressure on executive remuneration, early indications are that the 2019 season will bring notable upheavals in the German and Dutch markets (with major transitions underway on share capital dilution and the expected introduction of annual remuneration votes), while the rest of Europe portends continued pressure on the two traditional areas of focus: boards and remuneration.” 

See here for the full article: 

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Shareholder Activism
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Pan-European developments
  • Hermes Investment Management finds that European investors risk ignoring incoming stewardship responsibilities: https://www.hermes-investment.com/ukw/press-centre/stewardship/new-research-highlights-european-investors-risk-ignoring-incoming-stewardship-responsibilities/. “Investors across Europe are at risk of ignoring their role as responsible stewards, this is the conclusion of a new piece of research from Hermes Investment Management, the £33.5 billion manager. The Shareholder Rights Directive survey, A step towards sustainable capitalism, conducted with 175 European institutional investors to gauge levels of awareness and readiness for the Shareholder Rights Directive II (the Directive), reveals that only a staggering 3% believe their organisation already meets all the requirements of the Directive.” See here for the full document: https://www.hermes-investment.com/ukw/wp-content/uploads/2019/02/0005345_shareholder_rights_directive_v6.pdf.

  • The Six Chairs Group of the governing bodies of the Corporate Governance Codes has committed to enhancing sustainability best practices within corporate governance codes: http://corporategovernanceboard.se/UserFiles/Archive/685/Six_Chairs_Common_Statement.pdf. “Therefore, the Six Chairs call the Legislator for an appropriate evaluation of the role played by Corporate Governance Committees in setting best practices that involve ESG issues and in monitoring their application, and take this role into account before starting any new legislative action. At the same time, in their role as Corporate Governance Codes custodians, the Six Chairs commit to develop a shared approach to enhance sustainability best standards.”

  • The BPP Group (Best Practice Principles for Shareholder Voting Research & Analysis) has published a Review Process Update: https://www.mccg.nl/download/?id=5915. “The Independent Review Chair is pleased to confirm the BPPG’s progress on introducing a new formal governance and oversight structure as part of the updated Principles and Guidance. This reflects the ambition of the BPPG to act in accordance with the highest standards and be transparent about their activities and policies, including formal policies and processes for management of conflicts of interest.”
  • The Investment Association has announced that Investors to target pension perks and poor diversity in 2019 AGM season: https://www.theinvestmentassociation.org/media-centre/press-releases/2019/investors-to-target-pension-perks-and-poor-diversity-in-2019-agm-season.html. “Ahead of the starting gun being fired on the 2019 AGM season, the Investment Association (IA) has announced it will highlight companies who are lagging behind on diversity, or pay pension contributions to executive directors at rates above the majority of the workforce. The IA’s Institutional Voting Information Service (IVIS) which provides corporate governance research to shareholders to aid their voting decisions during AGM season, will ‘red-top’ companies who pay newly-appointed directors pension contributions which are not in line with the majority of their employees. A red-top represents the highest level of warning IVIS issues and is reserved for companies where shareholders should have the most significant and serious concerns.  IVIS will also ‘red top’ companies that have no or only one women on their board. IVIS will also issue an ‘amber-top’ (the second highest warning) to companies not on course to meet the requirements of the Hampton-Alexander review, for 33% of women on their board by 2020. IVIS will highlight any board with women representing 25% or less.”

  • The Financial Times reports that Almost 40 per cent of UK chairmen face pressure to unseat them: https://www.ft.com/content/0894afba-32b8-11e9-bb0c-42459962a812. “Pub chain founder Tim Martin says new nine-year limit for chairs is ‘deeply flawed’.”

  • The Yorkshire Post reports that CYBG promises to ‘engage with shareholders’ after investor backlash over bonuses: https://www.yorkshirepost.co.uk/business/cybg-promises-to-engage-with-shareholders-after-investor-backlash-over-bonuses-1-9566318. “Yorkshire Bank owner CYBG has promised to engage with shareholders after witnessing a backlash over bonuses at its annual general meeting. More than a third of shareholders have voted against its executive pay plans. The group – which recently bought Virgin Money for £1.7 billion – said 34.2 per cent of investor votes were made against its pay proposals at its annual general meeting in Melbourne, Australia. A further 7.4 million shareholder votes were withheld. CYBG said while the plans were approved, with 65.8 per cent of shareholders voting in favour, it ‘recognises the large number of votes opposing the resolution’ and has pledged further talks with investors.”

  • The Financial Conduct Authority (FCA) has proposed new measures to encourage effective stewardship: https://www.fca.org.uk/news/news-stories/fca-proposes-new-measures-encourage-effective-stewardship. “The FCA is proposing new measures and gathering views on how to encourage effective stewardship in the interests of investors. Most UK consumers hold investments, for example through their pensions, which are looked after by asset managers. Asset managers have a duty to oversee these investments in their clients’ interests.”

  • The Times reports that the Chairman of Imperial Brands to quit amid board reform: https://www.thetimes.co.uk/article/chairman-of-imperial-brands-to-quit-amid-board-reform-c6szfrqfd. “Imperial Brands is expected to announce that Mark Williamson will step down as chairman of the tobacco group in the coming months on the back of the introduction of more stringent corporate governance rules. The Times understands that the cigarette maker has been engaged in succession planning over Mr Williamson’s tenure, which exceeds new guidance of nine years, and could soon confirm his resignation. At last week’s annual meeting in Bristol, shareholders speaking for almost 18 per cent of votes cast voted against his re-election, although much of the opposition is believed to have been due to fears of ‘overboarding’ – taking on too many other boardroom posts – by the chairman.”

  • The Investor Forum has published its Review of 2018 Activities: https://www.investorforum.org.uk/wp-content/uploads/2019/01/IF-press-release-Review.pdf. “The Investor Forum today publishes its Review of 2018 Activities and reports a continued success in collective engagement with UK companies, with members proposing 12 different company situations for assessment – leading to six completed engagements, with Centrica plc, Imperial Brands plc, Reckitt Benckiser plc, Shire plc, Victrex plc and Unilever plc. At the same time, the Forum welcomed a further nine members to its ranks during 2018, bringing the total to 43 asset managers and asset owners, a more than doubling of the membership from the original founding group. These Members collectively represent approximately 30% of the FTSE All-share.” See here for the full document: https://www.investorforum.org.uk/wp-content/uploads/2019/01/Annual_Review_2018.pdf.
  • The Sunday Telegraph reports that Investors ready to block €100m bonus package for Ryanair boss: https://www.telegraph.co.uk/business/2019/02/23/investors-ready-block-100m-bonus-package-ryanair-boss/. “Ryanair investors are preparing to launch a concerted bid to block boss Michael O’Leary’s controversial €100m (£90m) bonus package. The low-cost airline shocked shareholders two weeks ago by announcing Mr O’Leary would potentially be entitled to the shares-based payout, despite being savaged by stock markets since last summer. It was branded ‘ludicrous’ when announced, and The Sunday Telegraph can reveal some of the Square Mile’s most powerful institutions are plotting an approach to the Investor Forum, the corporate governance heavyweight that spearheaded a successful revolt against Unilever’s failed bid to move its headquarters out of the UK last year.”
  • The Financial Times reports that German minister calls for fund to counter foreign takeovers: https://www.ft.com/content/e78e8452-2944-11e9-a5ab-ff8ef2b976c7. “Initiative is part of backlash over Chinese attempts to buy high-tech manufacturers.”

  • Glass Lewis has published its response to the German Corporate Governance Code Consultation: http://www.glasslewis.com/glass-lewis-submission-of-public-comments-on-german-corporate-governance-code-consultation/. “However, there are some proposed changes which we believe will be viewed more critically by the market. For instance, a number of new recommendations regarding management board remuneration have been proposed; while further guidance on this topic in the Code is very welcome, some of the proposed amendments are likely to be viewed as unnecessarily prescriptive by German issuers, such as comply-or-explain recommendations that short-term incentive plans should be cash-settled and long-term incentive plans should be settled in blocked shares. In our view, this would appear to downplay other measures that could be included in incentive plans to align the long-term interests of shareholders and management and may be more suitable based on the structure of a company and the industry in which it operates. In the interests of establishing a clearer and more compact Code, the Commission also foresees the removal of some current provisions, such as a recommendation that companies announce candidates for the supervisory board chair position in the AGM invitation and a suggestion that companies hold an informational EGM in the case of a takeover offer. Considering the increased scrutiny of board elections in Germany and some cases in the German market where shareholders have complained of their lack of involvement in substantial corporate actions – such as the Bayer/Monsanto and Linde/Praxair mergers – we are concerned that some of the proposed removals of provisions may be viewed negatively by shareholders.”

  • The Financial Times reports that Norway’s oil fund sells half its €1bn stake in VW after clashes: https://www.ft.com/content/4d8529d8-3aa6-11e9-b72b-2c7f526ca5d0. “World’s biggest sovereign fund revealed the move in a list of holdings.”
  • Glass Lewis have published a blog entitled Spain is first country to mandate shareholder votes on ‘non-financial’ ESG reporting: http://www.glasslewis.com/spain-is-first-country-to-mandate-shareholder-votes-on-non-financial-esg-reporting/. “The law requires that large companies provide a report on non-financial information, which must be put to shareholder vote as a separate point in the annual general meeting. Shareholders in Spain will see this new item on the AGM agenda as soon as the upcoming proxy season – the law applies to financial years beginning on January 1, 2018, leaving companies little time to adjust their disclosure to the requirements of the new regulations. The report on non-financial information must include: Description of a company’s business model and main factors that may affect its future development; Description of the policies applied by the company with respect to due diligence procedures and mitigation of risks; The results of these policies, including key indicators of relevant non-financial results that allow for the monitoring and evaluation of progress and facilitate comparability between companies; The main short, medium and long-term risks related to the activities of the company, how it manages such risks, explaining the procedures used to detect and evaluate them; and, Key non-financial indicators that are relevant to the business, and that meet the criteria of comparability, materiality, relevance and reliability. The law also sets specific requirements for the information that is to be provided on i) environmental, ii) social and employee, iii) human rights, iv) anti-corruption and v) sustainable development issues.” See here for the underlying legislation: https://www.boe.es/eli/es/l/2018/12/28/11.  
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North America
United States
  • Cooley LLP has published a memo entitled NYC Comptroller goes straight to court to compel inclusion of shareholder proposal—is this the Comptroller’s new normal?: https://cooleypubco.com/2019/02/05/court-compel-inclusion-of-shareholder-proposal-is-this-the-comptrollers-new-normal/. “After the company sought no-action relief from the SEC staff – and notably well before the government shutdown and before the SEC had even responded to the company’s request – the proponent pension funds filed suit in the SDNY seeking to enjoin the company from soliciting proxies without including the shareholder proposal and declaratory relief that the exclusion of the proposal violated Section l4(a) and Rule l4a-8. Will the Comptroller use the same tactic of circumventing the traditional SEC process and commencing litigation for any proposal the pension funds submit in the future? Will going straight to court be the new normal?”

  • The Financial Times reports that US companies demand regulation of proxy advisers: https://www.ft.com/content/64727724-2965-11e9-a5ab-ff8ef2b976c7. “Hundreds sign Nasdaq-led letter to SEC calling for tougher policing of research groups.”

  • Bloomberg reports that European Investors Oppose CEO Pay More Than Vanguard, BlackRock: https://www.bloomberg.com/news/articles/2019-02-21/european-investors-oppose-ceo-pay-more-than-vanguard-blackrock. “Large asset managers oppose executive compensation plans at a higher rate than ever before, and European firms tend to reject CEO pay more often than their U.S. peers.  Allianz Global Investors last year voted against about 75 percent of compensation packages awarded to executive teams of S&P 500 firms, and Dutch pension fund PGGM opposed 98 percent of the time, according to a report issued Thursday by As You Sow, a shareholder advocacy group. Several major U.S. asset managers rejected only a fraction of those pay packages, the report said.” See the underlying report here: https://www.asyousow.org/reports/the-100-most-overpaid-ceos-2019.

  • Pensions & Investments reports that CII asks SEC for formal discussion on applying blockchain tech to proxy voting: https://www.pionline.com/article/20190205/ONLINE/190209898/cii-asks-sec-for-formal-discussion-on-applying-blockchain-tech-to-proxy-voting. “The Council of Institutional Investors is calling on the Securities and Exchange Commission to initiate a formal comment process on using blockchain technology in proxy voting. In a letter to the SEC dated Jan. 31, Ken Bertsch, executive director of CII, and Jeffrey P. Mahoney, general counsel, said the SEC should focus its efforts specifically on proxy system mechanics, rather than on policy issues related to shareholder proposals and proxy advisers. The SEC hosted a roundtable discussion in November seeking industry input on improving the proxy voting system. During the discussion, Mr. Bertsch endorsed looking into using blockchain technology in proxy voting as a way to streamline the process. The technology would ensure vote confirmation, enhance privacy and security, and reduce mailing costs, he said during the roundtable.”

  • IR Magazine reports that Investors put focus on board diversity for 2019 proxy season: https://www.irmagazine.com/esg/investors-put-focus-board-diversity-2019-proxy-season. “EY report highlights top three investor concerns as board diversity, ESG and human capital  More than half (53 percent) of investors say board diversity is top of mind going into the coming proxy season, according to the 2019 Proxy Season Preview report from the EY Center for Board Matters. The survey of more than 60 institutional investors, with assets under management of $32tn, shows investors are increasingly focused on board composition. This year’s figure of 53 percent saying the issue should be a top board focus is up from a third three years ago.” See the underlying report here: https://www.ey.com/us/en/issues/governance-and-reporting/ey-2019-proxy-season-preview.
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  • The Financial Chronicle reports that Governance standards improving in corporate India: http://www.mydigitalfc.com/plan-and-policy/governance-standards-improving-corporate-india. “Slowly, Indian companies are showing an improvement in their corporate governance standards, with the good companies bettering their governance score. Proxy advisory firm Institutional Investor Advisory Services (IiAS), in its corporate governance scorecard for 2018, says, ‘There are five companies in the “Leadership” category against three last year, and the maximum score has increased to 76 this year from 73 last year.’ According to the proxy advisor, ‘Most of the top 20 companies evaluated last year have displayed an improvement in their overall score or maintained their score despite adoption of a more stringent standard of scoring. Disclosure and transparency levels too have improved, with companies scoring as high as 87 per cent in the category,’ according to the IiAS study. The top five companies with governance score of more than 70 are Hindustan Unilever, HDFC, Infosys, Marico and Wipro. While the other five in the top ten companies list are Bharti Airtel, Crompton Greaves CE, HDFC Bank, Mahindra Finance and Tata Motors.” See the underlying documents here: https://docs.wixstatic.com/ugd/09d5d3_eef64afe13ab41cfa9b0df292b439470.pdf and here: https://docs.wixstatic.com/ugd/09d5d3_1c6902a8e6f24d4686eb99161050b3fd.pdf.

  • The Times of India reports that 2018 saw greater advocacy by institutional shareholders: http://timesofindia.indiatimes.com/articleshow/67990357.cms. “Shareholder meetings in 2018 saw high level of participation by institutional investors who made their voices heard by voting against resolutions proposed by managements, a report released Thursday noted.”
  • The Straits Times reports that Industry-led advocacy body formed to level up corporate governance standards: https://www.straitstimes.com/business/companies-markets/industry-led-advocacy-body-formed-to-level-up-corporate-governance. “Singapore has its first permanent, industry-led body, responsible for advocating good corporate governance (CG) practices in the city state. The Monetary Authority of Singapore (MAS) announced on Tuesday (Feb 12) the establishment of the Corporate Governance Advisory Committee (CGAC), whose role is to ‘level up corporate governance standards and practices and help to strengthen investors’ confidence in (Singapore’s) capital markets and uphold (the country’s) reputation as a trusted international financial centre’. Chaired by Bobby Chin, director of Singtel, the 18-member strong committee represents key stakeholder groups and includes notable names from numerous segments of the business community.”
  • Bloomberg argues that Australia’s Banking Overhaul Looks Like a Dud: https://www.bloomberg.com/opinion/articles/2019-02-04/australian-banking-commission-s-overhaul-looks-like-a-dud. “Enforcement rests with an underfunded regulator, while more fundamental changes were avoided. No wonder stock futures rose.”

  • The ASX Corporate Governance Council has released the fourth edition of the ASX Corporate Governance Principles and Recommendations: https://www.asx.com.au/documents/asx-compliance/cgc-communique-27-feb-2019.pdf. “The final version of the fourth edition maintains the same flexible, non-mandatory ‘if not, why not’ approach to disclosure as in earlier editions. It also has the same structure – eight core principles, supporting recommendations, and commentary with guidance on implementing the recommendations. The final version also includes all but one of the nine new recommendations proposed in the consultation draft, again with some drafting changes reflecting feedback received in the consultation. Importantly, the final version includes all of the key changes around culture and values proposed in the consultation draft, with some drafting changes reflecting feedback received in the consultation. Council considers it imperative that listed entities align their culture and values with community expectations to help arrest the loss of trust in business.” See the full document here: https://www.asx.com.au/documents/regulation/cgc-principles-and-recommendations-fourth-edn.pdf.
South America
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Daniele Vitale
Corporate Governance Manager > Corporate Advisory
T +44 (0)20 7019 7034 M +44 (0)7747 697 136 F +44 (0)870 702 0158
Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom

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Georgeson - Georgeson is a trading name of Computershare Investor Services PLC. Computershare Investor Services PLC is registered in England & Wales No. 3498808.
Registered office:
The Pavilions, Bridgwater Road
BS13 8AE Bristol
United Kingdom