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Georgeson Monthly Roundup - March 2019
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Latest Georgeson publications
Ethical Boardroom

Ethical Boardroom
Ethical Boardroom has published a Georgeson article entitled Spain’s ‘micro-proprietary’ directors: https://ethicalboardroom.com/spains-micro-proprietary-directors/.

“Several months ago, Georgeson decided to address a challenging and complex issue: to consider the role of the proprietary director – who, in some cases, could be considered an independent director, despite the fact that under Spanish law they cannot be defined as such. [...] Georgeson recognise that the role of the proprietary director could be more flexible to help Spanish companies, but only through the development of regulatory mechanisms and adjustments that would, in turn, allow greater flexibility when compared with other companies around the world. We joined forces with law firms Uría Menéndez and Davis Polk & Wardwell to investigate this area, the first empirical analysis of this issue in Spain, in order to understand the singularity of the Spanish experience and propose such a change to the issue of micro-dominicales using the experience and knowledge of the investment community.”

See here for the full article: https://ethicalboardroom.com/spains-micro-proprietary-directors/.

Shareholder Activism
  • The Financial Times reports that Vivendi ends push to oust Telecom Italia board members: https://www.ft.com/content/9ad481f6-5212-11e9-b401-8d9ef1626294. “French group has asked to have previous proposals revoked, raising hopes of a détente.”

  • Reuters reports that Hyundai shareholders inflict big defeat on U.S. fund Elliott in proxy vote: https://uk.reuters.com/article/us-hyundai-motor-elliott/hyundai-shareholders-inflict-big-defeat-on-u-s-fund-elliott-in-proxy-vote-idUKKCN1R22NQ. “Hyundai Motor Group companies’ shareholders rejected on Friday Elliott Management’s demands for a massive special dividend and board seats, dealing a blow to the U.S. hedge fund’s campaign to shake up South Korea’s second-biggest family-run conglomerate. Although Hyundai fended off the threat from Elliott at the closely watched vote, it still faces a daunting challenge of winning shareholder support for a planned restructuring that should aid the handover of the group’s reins to heir apparent Euisun Chung.”

  • The Financial News reports that Three directors to leave Barclays board at May AGM: https://www.fnlondon.com/articles/three-directors-to-leave-barclays-board-at-may-agm-20190306. “Departures come as bank's board prepares to do battle over its strategy with the activist Edward Bramson.”

  • Reuters reports that Shareholders of Japan’s LIXIL make rare demand for management ouster: https://www.reuters.com/article/lixil-group-shareholders/shareholders-of-japans-lixil-make-rare-demand-for-management-ouster-idUSL3N2172OU. “Four investment firms on Wednesday called for the ouster of top management at Japanese housing products maker LIXIL Group, citing concerns about corporate governance and marking a particularly vocal stand by minority shareholders. Marathon Asset Management, Indus Capital Partners and two other firms called for an extraordinary shareholders’ meeting to have the company’s chief executive and chief operating officer dismissed from LIXIL’s board. The move comes as minority shareholders have become more vocal about the management of Japanese companies following Prime Minister Shinzo Abe’s efforts to strengthen corporate governance. Yet firms are often able to ignore the interests of minority investors due to the longstanding practice of cross-shareholding, where they hold stakes in each other to cement business ties.”

  • The Financial Times reports about Why old-school asset managers are copying the activists: https://www.ft.com/content/3f4fe0ae-417e-11e9-9bee-efab61506f44. “Wellington’s intervention in Bristol-Myers M&A battle could prove a turning point.”

  • The New York Post reports that Hedge funds manipulating $74B pharma deal: Starboard CEO: https://nypost.com/2019/03/11/investor-thinks-hedge-funds-are-influencing-74b-pharma-deal/. “An activist investor is probing whether hedge funds are using a controversial stock-trading tactic to tip the vote in favor of pharma giant Bristol-Myers Squibb’s $74 billion deal to buy rival Celgene, The Post has learned. Starboard Value – whose boss Jeff Smith has blasted the merger as too expensive for Bristol-Myers shareholders – has launched a books-and-records request, partly to determine whether an upcoming shareholder vote on the cash-and-stock merger could be swayed by so-called ‘empty voting,’ sources told The Post. Specifically, sources close to Starboard say the fund is investigating whether hedge funds including billionaire Dan Loeb’s Third Point and D.E. Shaw purchased Bristol-Myers shares strictly for the sake of voting in favor of the deal.”

  • Nikkei Asian Review reports that Activist investors set their sights on Asia: https://asia.nikkei.com/Business/Business-trends/Activist-investors-set-their-sights-on-Asia. “Number of targeted companies up 20% with Japan at the forefront.”

  • The Financial Times reports that Prudential’s M&G fund puts forward directors to Methanex board: https://www.ft.com/content/2797c1b0-4f0d-11e9-9c76-bf4a0ce37d49. “In a bout of activism, the asset manager says it had ‘no other choice’.”
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Pan-European developments
  • The Frankfurter Allgemeine Zeitung reports that Aufsichtsräte fordern ein Machtwort von Barley: Justizministerin soll die geplante Kodex-Reform stoppen (“Supervisory Board members demand Barley’s intervention: Justice Minister should stop the planned reform of the Governance Code”): https://edition.faz.net/faz-edition/wirtschaft/2019-02-21/a6211d3e2af1c72e7aba58290bb46290/?GEPC=s9. “The Professional Association of Supervisory Boards appeals sharply to Federal Minister of Justice Katarina Barley to put the planned reform of the Corporate Governance Code on hold. The Minister should not ignore the ‘concentrated criticism from large parts of the economy,’ writes the Chairman of the Association of Supervisory Boards in Germany (VARD), Peter Dehnen, in a letter to Barley, seen by this newspaper. […] More than 100 statements have been received, including comments from Dax companies such as Eon, Siemens, BASF, Lufthansa, Telekom and Deutsche Bank, as well as many consulting companies. Criticized are, among other things, the detailed requirements for manager remuneration, the high bureaucracy and the planned shortening of the appointment period for members of the Supervisory Board to three years. So far, the order of up to five years was customary in Germany.” Meanwhile, State Street Global Advisors has recently highlighted that Within Europe, board accountability is weakest among German companies, where directors stand for election only once every five years: https://www.ssga.com/investment-topics/environmental-social-governance/2018/05/board-accountability-in-europe-2018.pdf.  

  • Reuters reports that Commerzbank management pay cuts contrast with Deutsche Bank: https://www.reuters.com/article/us-commerzbank-m-a-deutsche-bank/commerzbank-management-pay-cuts-contrast-with-deutsche-bank-idUSKCN1R80UG. “Commerzbank’s chief executive was paid 32 percent less in 2018, contrasting with sharp rises for the top management at its potential merger partner Deutsche Bank. The disparity, revealed in Commerzbank’s annual report on Wednesday, underscores a divide in the compensation culture of the German banking rivals, which are in talks over a merger.”

  • The Guardian reports that US SEC sues Volkswagen and ex-CEO over diesel scandal: https://www.theguardian.com/business/2019/mar/15/us-sec-sues-volkswagen-and-ex-ceo-over-diesel-scandal. “The US Securities and Exchange Commission is suing Volkswagen and its former chief executive, accusing them of defrauding investors by making ‘deceptive’ claims about the environmental impact of its cars. The regulator said that from 2007 until 2015, VW carried out a ‘massive fraud’ when selling securities and half a million cars it described as clean diesel, when executives knew about the extent of the cheating, the SEC alleged. The cars emitted 40 times more harmful nitrogen oxides than allowed under US rules.”
  • The Financial Times reports that ING chief claims Dutch bonus rules hurting in race to lure bankers: https://www.ft.com/content/9ca79c36-4c8e-11e9-bbc9-6917dce3dc62. “European capitals vying for financial services jobs expected to leave London.”
  • NautaDutilh reports about The protection of Dutch companies: government as stakeholder and industrial policy: https://www.e-nautadutilh.com/40/3606/landing-pages/the-protection-of-dutch-companies--the-government-as-stakeholder-and-industrial-policy.asp. “On 5 March 2019, a bill on undesirable control in the telecommunications sector was submitted to the lower house of Parliament. The bill is primarily due to a hostile takeover attempt in 2013 for KPN by the Mexican company Móvil, which led to public and political discussion. The question arose as to whether the government should be given tools to prevent a company responsible for such important infrastructure from falling into foreign hands. The scope of the discussion was extended due to takeover attempts by foreign companies of companies such as PostNL, Unilever and Akzo Nobel. Also because of the takeover of Fox-IT, a company important for cyber-security in the Netherlands, by the UK-based NCC Group in 2015. The government has taken not only legislative measures, such as the bill, to protect the telecoms sector. For example, last month the Dutch government increased its stake in Air France-KLM in order to safeguard ‘the major public interest’ represented by Schiphol Airport and KLM. This newsletter summarises the most important aspects of the bill as well as other relevant developments intended to protect Dutch companies and industries.”
  • Bloomberg reports that Swedbank Chairman Is Next in Firing Line After CEO Is Ousted: https://www.bloomberg.com/news/articles/2019-03-29/swedbank-board-in-crosshairs-as-ceo-ouster-fails-to-calm-markets. “If the market is any gauge, Swedbank AB’s dismissal of Chief Executive Officer Birgitte Bonnesen wasn’t enough. A turbulent week for Sweden’s biggest mortgage lender came to a head on Thursday with Bonnesen’s firing and a shareholder meeting in which the board was put on the defensive. That followed growing allegations of money laundering, a police raid of Swedbank’s headquarters and news that the U.S. was also investigating the bank.”
  • Investment & Pensions Europe reports that Norway to cut €6.7bn of ‘upstream’ oil and gas companies from SWF: https://www.ipe.com/countries/norway/norway-to-cut-67bn-of-upstream-oil-and-gas-companies-from-swf/10029969.article. “Norway’s Finance Ministry has decided against culling virtually all oil and gas stocks from the NOK8.9trn (€901bn) Government Pension Fund Global (GPFG).  Instead, the ministry announced today a proposal for the fund to divest NOK66bn worth of exploration and production – also known as ‘upstream’ – oil and gas companies. In its report on energy stocks in the sovereign wealth fund – which will now go on to be discussed by parliament, the ministry and the fund’s manager Norges Bank – the ministry said the move was aimed at reducing the aggregate oil price risk in the Norwegian economy.”
  • Reuters reports that Danske Bank investors express anger over money laundering scandal: https://www.reuters.com/article/us-danske-bk-agm/danske-bank-executives-waive-2018-bonuses-after-scandal-idUSKCN1QZ1RZ. “Danske Bank’s annual shareholder meeting extended into the fifth hour on Monday as retail investors expressed their discontent over the bank’s involvement in one of the world’s biggest money laundering scandals. Some of the 700 or so shareholders present called for management to be held personally responsible and others demanded the bank be split up as the fallout from the scandal continues. Denmark’s largest bank is under investigation in the United States, Denmark, Estonia, France and Britain over 200 billion euros ($226 billion) in payments that were found to have flowed through its Estonian branch from Russia, former Soviet states and elsewhere between 2007 and 2015.”
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North America
United States
  • The Financial Times reports that Lyft’s IPO shows some shareholders are more equal than others: https://www.ft.com/content/792bc3fa-3f27-11e9-b896-fe36ec32aece. “Multiple class structures have become increasingly popular in the tech sector.”

  • Fortune reports that CEO Pay May Soon Face a New, Hard-to-Manipulate Yardstick As ISS Embraces ‘EVA’: http://fortune.com/2019/03/28/iss-ceo-pay-eva/. “U.S. companies—whether they like it or not—could be on the verge of adopting a super-tough, super-fair new yardstick for C-suite pay.  On Wednesday, ISS, the U.S.’s leading adviser on corporate governance, announced that it’s starting to measure corporate pay-for-performance plans using a metric that prevents CEOs from gaming the system by gunning short-term profits, piling on debt, or bloating up via pricey acquisitions to swell their long-term comp. ISS’s stance is a potential game-changer: No tool is better suited to holding management accountable for what really drives outsized returns to investors, generating hordes of new cash from dollops of fresh capital.  The metric ISS champions is economic value added, or EVA.”

  • The Financial Times reports that Whistleblower accuses PwC of failings over private jet trip: https://www.ft.com/content/5def9f62-4e22-11e9-b401-8d9ef1626294. “Former auditor says ‘outrageous’ incident highlights independence issues.”  

  • Pensions & Investments reports that Investor coalition pushes power companies to decarbonize: https://www.pionline.com/article/20190228/ONLINE/190229829/investor-coalition-pushes-power-companies-to-decarbonize. “A coalition of large institutional investors with a combined $1.8 trillion in combined assets is demanding that the 20 largest U.S. publicly traded electricity generators work toward net-zero carbon emissions and commit to doing so within six months. The coalition is led by New York City Comptroller Scott Stringer, on behalf of the $63.8 billion New York City Employees’ Retirement System, the $71.5 billion Teachers Retirement System of the City of New York and the $6 billion New York City Board of Education Retirement System.”

  • The Wall Street Journal reports that Many S&P 500 CEOs Got a Raise in 2018 That Lifted Their Pay to $1 Million a Month: https://www.wsj.com/articles/many-s-p-500-ceos-got-a-raise-in-2018-that-lifted-their-pay-to-1-million-a-month-11552820400. “The stock market ended 2018 with a swoon but many CEOs in the S&P 500 got a compensation boost.”

  • The Financial Times reports that US companies agree to lift veil on political donations: https://www.ft.com/content/7d789226-4990-11e9-bbc9-6917dce3dc62. “Mondelez, Chubb and MSCI among those promising more disclosure after activist pressure.”  
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Hong Kong
South Korea
  • Maeil Business Newspaper reports that NPS starts disclosing vote decisions in upcoming shareholders’ meetings: https://pulsenews.co.kr/view.php?year=2019&no=150870. “South Korea’s National Pension Service (NPS), the country’s largest institutional investor who has vowed more proactive role under stewardship code adoption, disclosed that it will oppose one or more agenda proposals by 11 listed Korean companies to be put to a vote in upcoming annual shareholders’ meetings. The world’s third largest pension fund with 635 trillion won ($560.5 billion) assets under management on Tuesday posted its position on shareholders’ meetings of 23 companies in which it has more than 10 percent stake or 1 percent or more in stock funds. The disclosure showed that the fund is opposed to one or more agendas of 11 companies. The veto mostly concerned appointments of inside and outside board directors and auditors. The 11 companies include LG Hausys, LG International, Hanmi Pharmaceutical, Hyundai Glovis, Hyundai Engineering & Construction, Hyundai Wia, Shinsegae, Nongshim and Poongsan.”

  • Reuters reports that State pension fund to oppose Korean Air CEO's re-election to board: https://www.reuters.com/article/korean-air-shareholders/update-2-state-pension-fund-to-oppose-korean-air-ceos-re-election-to-board-idUSL3N21D2NV. “South Korea’s National Pension Service (NPS) said on Tuesday it will vote against extending Cho Yang-ho’s term as a board director at scandal-hit Korean Air Lines Co Ltd.  Cho controls South Korea’s top airline, and is its CEO and chairman. NPS’s opposition to his staying on the board is the latest example of shareholder activism in Asia’s fourth-biggest economy, long dominated by corporate giants accused of benefiting family owners at the expense of minority investors.  Proxy adviser ISS has also recommended investors to vote against the reappointment of Cho, who is on trial over charges of embezzlement and breach of trust. Cho has denied the charges against him.”
  • The Financial Times reports that India’s Fortis Healthcare calls for founders’ arrest: https://www.ft.com/content/c5db2eea-38cc-11e9-b72b-2c7f526ca5d0. “Group says Singh brothers failed to repay $57m allegedly defrauded from company.”  

  • Cyril Amarchand Mangaldas reports about Dawn of a New Era in Indian Corporate Governance?: https://corporate.cyrilamarchandblogs.com/2019/03/april-2019-dawn-of-a-new-era-in-indian-corporate-governance/. “2018 was an eventful year for the corporate governance regulatory framework in India. The Securities and Exchange Board of India (SEBI) not only approved a host of recommendations made by the Kotak Committee on Corporate Governance, but also gave these recommendations the required regulatory impetus by notifying the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018. Come April 1, 2019, a slew of these amendments will come into effect and all listed entities will be required to ensure their readiness in terms of implementation and compliance. Broadly, the Amendments have four intended targets: the board of directors, the listed company, the investors and the promoters.”  
South America
  • Reuters reports that Vale shares fall after CEO is ‘temporarily’ ousted after dam disaster: https://www.reuters.com/article/us-vale-sa-disaster/vale-shares-fall-after-ceo-is-temporarily-ousted-after-dam-disaster-idUSKCN1QL1OG. “Shares in Brazil’s Vale SA, the world’s largest iron-ore miner, fell on Monday after its CEO Fabio Schvartsman and three other executives resigned over the weekend following a dam collapse in January that left over 300 dead. Brazilian prosecutors had requested that the executives be ‘temporarily removed,’ the company said in a statement. It is unclear how long the ‘temporary’ removals will last or if they could become permanent. […] Vale has faced increased public scrutiny after the disaster, including the arrest of several mid-level executives soon after the dam burst who were released days later. Prosecutors have also sought the arrest of ferrous minerals head Peter Poppinga, although they have been unsuccessful so far. Poppinga was one of the executives temporarily let go on Sunday.”
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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