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Georgeson Monthly Roundup - April 2019
north america
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Latest Georgeson publications

Georgeson has published a memo about Vanguard’s 2019 Voting Policy Updates: https://www.georgeson.com/us/vanguard-2019-voting-policy-updates. “Georgeson has identified 230 NEOs who sit on more than two public company boards who are likely to be affected by this policy. Similarly, there are 142 non-executive directors who sit on more than four public company boards.”

Shareholder Activism
  • Reuters reports that France builds stake in Valeo in bid to neutralise activist fund: https://www.reuters.com/article/france-valeo/update-1-france-builds-stake-in-valeo-in-bid-to-neutralise-activist-fund-idUSL5N22B1AR. “France has raised its stake in car parts group Valeo to just above 7 percent through state bank Bpifrance, as it looks to protect leading companies from activist shareholders. […] The government’s stake in Valeo is now higher than the one held by activist fund Harris Associates. […] Dufourcq previously said his fund had 2 billion euros to fend off potential activist attacks on French firms. Bpifrance is due to get a seat on Valeo’s board in the coming weeks, he said.”
  • CNBC reports that Shell activist investor withdraws resolution targeting climate policy, citing oil major’s progress: https://www.cnbc.com/2019/04/08/shell-activist-investor-withdraws-resolution-targeting-climate-policy.html. “An activist investor group that has filed resolutions for three years pressuring Royal Dutch Shell to act on climate change said it would withdraw its proposal this year. The resolution, opposed by Shell’s board, called on the company to set and publish targets aligned with the 2015 Paris Climate Agreement.”
  • Reuters reports that France preparing to fight activist funds: finance minister: https://www.reuters.com/article/us-france-economy/france-preparing-to-fight-activist-funds-finance-minister-idUSKCN1RH1IA. “The French government is preparing measures to prevent activist funds destabilizing French companies, the country’s finance minister told Reuters in an interview. Activist funds are increasingly active in Europe, buying up stakes in companies they feel are underperforming and pushing for changes in strategy to extract more value for shareholders. […] ‘I am thinking about new national instruments that would make it possible to better resist activist funds,’ Finance Minister Bruno Le Maire told Reuters in Bucharest, where he was attending an EU finance ministers meeting. The plan would make it possible for the state to invest in companies it deemed to be of national interest, he said, declining to give further details other than saying the proposals would be ready in the coming months.”
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  • CNBC reports that Vanguard to surrender some of its corporate voting power to external fund managers: https://www.cnbc.com/2019/04/25/vanguard-to-give-up-some-of-its-voting-power-to-external-fund-managers.html. “Vanguard Group, the globe’s second-largest asset manager, announced Thursday plans to allocate a fraction of its vast voting powers on corporate boards to outside fund supervisors that control more than $470 billion of its holdings. Firms that manage Vanguard’s active equity funds will soon receive approval to vote on some of the important decisions in the lives of companies, including management changes, board elections and mergers and acquisitions. Vanguard said that despite relinquishing voting rights over about 9% of its assets, it will continue to leverage its own in-house investment team when voting on its vast index funds and ETFs. Vanguard oversees $5.3 trillion in assets around the world.”
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Pan-European developments
  • Thomson Reuters Lipper’s Detlef Glow argues that The EU action plan on financing sustainable growth has been hollowed by the European Parliament: https://www.investmenteurope.net/opinion/4001585/monday-morning-memo-eu-action-plan-financing-sustainable-growth-hollowed-european-parliament. “Even as the members of the European Parliament (MEPs) voted for a unified classification system – the so-called taxonomy of sustainable economic activities – this new taxonomy won’t be used as a reporting standard for all funds. Instead of forcing all kind of funds to disclose how their portfolios are positioned with regard to the taxonomy, the MEPs decided only funds which claim they are investing with an environmental, social and governance (ESG) or socially responsible investing (SRI) approach will have to report how the fund is positioned by using the taxonomy.”
  • The Financial Times reports about Breaking up the Big Four: EY, Deloitte, KPMG and PwC protest at UK reform: https://www.ft.com/content/e0cdfc4c-57b6-11e9-a3db-1fe89bedc16e. “Industry voices hostility to ‘operational’ split plan, as chair of commons committee prefers full break-up.” Additionally, the Competition and Markets Authority (CMA) has published its final report with recommendations to address serious competition problems in the UK audit industry: https://www.gov.uk/government/news/cma-recommends-shake-up-of-uk-audit-market. “The CMA is recommending the separation of audit from consulting services, mandatory ‘joint audit’ to enable firms outside the Big 4 to develop the capacity needed to review the UK’s biggest companies, and the introduction of statutory regulatory powers to increase accountability of companies’ audit committees.”
  • The Times reports that Investors rebel at Meggitt chairman’s outside roles: https://www.thetimes.co.uk/article/investors-rebel-at-meggitt-chairmans-outside-roles-z8nxjmk8g. “Significant numbers of investors have rebelled for a third year against the employment of Sir Nigel Rudd as chairman of Meggitt, the aerospace group. Many shareholders at Meggitt believe that Sir Nigel, 72, cannot have time to head the company because of his outside appointments. He is paid £355,000 a year to do the part-time job. At Meggitt’s annual meeting yesterday, investors speaking for 27 per cent of shares voted against his re-election. Last year 31 per cent were voted against him, up from 12 per cent in 2017.”
  • Les Echos reports about the Loi Pacte: les principales mesures et leur mise en oeuvre (“Pacte Law: the main measures and their implementation”): https://www.lesechos.fr/economie-france/conjoncture/loi-pacte-les-principales-mesures-et-leur-mise-en-oeuvre-1008505. “The final vote of the law came on Thursday at the National Assembly. The culmination for this text on which Bercy and parliamentarians have been working for more than a year and a half. […] The law strengthens the position of employee directors on boards of directors. Beyond 8 members, the board must include 2 salaried directors. This rule will come into force in 2020 only to prevent companies that have already held their general meeting in 2019 from having to call them again this year. The new composition of the board will have to be put in place within six months of the general meeting.”
  • Bloomberg reports that Investor Revolt at Bayer to Escalate After CEO Keeps His Job: https://www.bloomberg.com/news/articles/2019-04-27/investor-revolt-at-bayer-to-escalate-after-ceo-keeps-his-job. “The shareholder rebellion at Bayer AG is poised to worsen after its supervisory board ignored an unprecedented no-confidence vote against the leadership of Chief Executive Officer Werner Baumann. Several top investors of the German chemicals and drugs giant are frustrated with directors’ decision to back Baumann and his strategy that led to the $63 billion takeover of Monsanto, according to people familiar with the matter. The investors consider the move a sign that Bayer is unwilling to address shareholder concerns, the people said, asking not to be identified because the deliberations are private. […] At a fractious, 13-hour gathering in Bonn on Friday, more than 55 percent of shareholders voted against absolving Baumann and other managers of responsibility for their actions in the takeover of agriculture company Monsanto last year. Bayer has lost 35 billion euros ($39 billion) in market value, due in large part to subsequent lawsuits that allege the main ingredient of Roundup – the weedkiller Bayer acquired through Monsanto – causes cancer.”
  • The Chairman of the German Corporate Governance Code Commission, Rolf Nonnenmacher, has given a speech addressing the timeline for Code amendments: https://www.dcgk.de/de/kommission/die-kommission-im-dialog/deteilansicht/Rede-von-Prof-Dr-Nonnenmacher-auf-der-Konferenz-Corporate-Governance-und-Gesellschaftsrecht.html (in German only). “If the ARUG II law comes into force later than 10 June 2019, then the dates for the submission of the new Code to the BMJV and its subsequent publication will also be postponed. In the event that the discussions about ARUG II take even longer, the Commission is considering publishing a final draft of the new Code, for example, in May 2019. Such a final draft should inform companies, investors and the interested public about what changes the Commission intends to make to the draft of October 2018. However, we do not intend to open a second consultation procedure, but are open to any kind of input and discussion until the last day before submission to the Ministry.”
  • Bird & Bird have published a memo about Dutch legislation to implement the amended European Shareholder Rights Directive: https://www.twobirds.com/en/news/articles/2019/netherlands/dutch-government-tabled-law-to-implement-amended-shareholders-directive. “The legislative proposal was discussed in Parliament on 27 March 2019 and accepted – with amendments – on 2 April 2019. Typically for Dutch Parliament, most of the discussion was focused on the remuneration paragraphs. The most important amendments which have been brought to a vote and have been accepted by Parliament include: 1) The remuneration policy must be adopted with at least 75% of the votes casts, unless the articles of associations provide otherwise; 2) The works council must have been able to advise on the remuneration policy before it can be put on the agenda of the general meeting of shareholders and the works council’s advice must be made available to the general meeting of shareholders. Furthermore, deviation from the works council’s advice must be explained; 3) If (i) the supervisory board of a listed company is entitled to determine the remuneration of the management board, and (ii) the supervisory board has a remuneration committee, the supervisory board member that has been appointed with the enhanced recommendation right of the company’s works council shall be a member of the remuneration committee; 4) The remuneration policy must include an explanation of the way in which the remuneration policy takes into account (1) the company’s identity, mission and values, (2) pay ratio within the company, and (3) social support (maatschappelijk draagvlak).” See the Eumedion reaction here: https://www.eumedion.nl/nl/nieuws/eumedion-verwelkomt-besluit-tweede-kamer-om-ava-grip-op-beloningsbeleid-te-versterken (in Dutch).
  • Reuters reports that Swedbank chairman quits over money laundering scandal: https://www.reuters.com/article/us-europe-moneylaundering-swedbank/swedbank-chairman-quits-over-money-laundering-scandal-idUSKCN1RH0P9. “Swedbank Chairman Lars Idermark has quit only a week after the lender’s chief executive was ousted over her handling of a money laundering scandal, saying the controversy threatened to distract from his role as head of forestry group Sodra. The bank, Sweden’s biggest mortgage lender, had fired its CEO Birgitte Bonnesen last week only an hour before a heated annual shareholder meeting marked by disgruntled investors rounding on her handling of the money laundering allegations.”
  • Reuters reports that EDP shareholders vote scuppers Chinese takeover bid, partnership to go on: https://uk.reuters.com/article/us-edp-m-a-china-elliott/edp-shareholders-vote-scuppers-chinese-takeover-bid-partnership-to-go-on-idUKKCN1S02CS. “Shareholders of EDP-Energias de Portugal voted on Wednesday to effectively block a 9 billion euro ($10 billion) takeover bid by China Three Gorges (CTG), but the Portuguese utility said their partnership would continue, with a focus on Latin America. The proposed scrapping of a 25 percent voting right limit was a key condition of CTG’s attempt to buy Portugal’s largest company, but it was opposed by activist investor Elliott and rejected by shareholders at a meeting on Wednesday.”
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North America
United States
  • Glass Lewis has launched their Report Feedback Statement service: https://www.glasslewis.com/glass-lewis-launches-report-feedback-statement-service/. “The RFS service provides a unique opportunity for the subjects of Glass Lewis’ proxy research to submit feedback about the analysis of their proposals, and have those comments delivered directly to Glass Lewis’ investor clients. Corporate issuers and shareholder proponents alike will be eligible to participate in this service and will provide their statements directly to Glass Lewis’ research and engagement team, which will in turn distribute them to Glass Lewis’ clients within its research and voting platforms. […] The service will be piloted in Spring 2019 for U.S. company Annual General Meetings.”
  • CNN reports that Best Buy’s new female CEO will join a growing – but still minuscule – club: https://edition.cnn.com/2019/04/16/success/women-ceos/index.html. “A small club of powerful women is about to get a little bigger. With news that Best Buy named Corie Barry its new CEO, the number of women CEOs at S&P 500 companies will grow to 26 by the time Barry takes office in June, according to the latest count from nonprofit research group Catalyst. Those 26 women CEOs will represent just 5.2% of all S&P 500 CEOs. Barry will also join Best Buy's board, which will expand to 13 directors.”
  • Bloomberg reports that CEO of Tiny California Bank Makes Twice as Much as Jamie Dimon: https://www.bloomberg.com/news/articles/2019-04-11/ceo-of-tiny-california-bank-makes-twice-as-much-as-jamie-dimon. “Chief executives of Wall Street’s largest banks were awarded record pay packages last year as profits soared. Nearly 2,500 miles away, the CEO of a little-known online lender, born at the height of the dot-com bubble, quietly out-earned them all. His name is Gregory Garrabrants. As head of Axos Financial Inc. – formerly Bank of Internet USA – he made $34.5 million in 2018, more than even the princely sums that Jamie Dimon of JPMorgan Chase & Co. and Goldman Sachs Group Inc.’s David Solomon raked in. It’s all the more remarkable considering just how small the San Diego-based bank is. With $9.8 billion in assets, Axos is little more than a rounding error compared with JPMorgan’s $2.62 trillion.”
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Hong Kong
  • Reuters reports that Hong Kong regulator says ESG funds must justify their green credentials: https://www.reuters.com/article/us-hongkong-regulator-esg/hong-kong-regulator-says-esg-funds-must-justify-their-green-credentials-idUSKCN1RN13M. “Hong Kong’s securities regulator has told funds who claim to consider environmental, social or governance (ESG) factors in their investment decisions to make it clear to their investors how it is they do so. The Securities and Futures Commission (SFC) said in a Thursday circular that a majority of the more than 20 funds it has authorized that claim an investment focus on ESG do not specifically disclose how they incorporate such factors into their investment selection process.”
  • The Council of Experts set up to review Japan’s governance and stewardship codes has published an opinion statement entitled Recommended Directions for Further Promotion of Corporate Governance Reform: https://www.fsa.go.jp/en/news/2019/follow-up/20190424.html. “In order to further deepen corporate governance reform from ‘form’ to ‘substance,’ the Stewardship Code was amended in May 2017 and the Corporate Governance Code was amended in June 2018. We are currently seeing steady reform progress, with a large number of institutional investors having started to disclose AGM voting results for investee companies on an individual agenda item basis, and with companies with two or more independent directors now constituting over 90% of listed companies. Since  November  2018, in order to enhance the effectiveness of corporate governance reform the Council has reviewed how institutional investors and companies have addressed the two Codes since their revisions.”
  • Barron’s reports about How the World’s Largest Pension Manager Is Trying to Make ESG Investing More Popular: https://www.barrons.com/articles/pension-manager-esg-impact-investing-51555020782. “The financial industry has jumped on the impact investing and environmental, social or governance – or ESG – bandwagon. But Hiromichi Mizuno, the man who oversees $1.6 trillion in the world’s largest public pension fund, says true believers on Wall Street are still hard to find, so he is taking his own steps to push ESG and impact investing off the sidelines. As chief investment officer of Japan’s Government Pension Investment Fund, Mizuno requires his asset managers to integrate ESG into their investment analysis – among many changes he has brought to the pension fund since taking the helm in late 2014. But while Mizuno told Barron’s there is growing consensus that using ESG criteria can lower risk, he routinely gets pushback. Despite the recent hype around ESG and impact investing, he says most on Wall Street and in asset management aren’t actually doing it.”
South Korea
  • Breaking Views argues that Korean Air CEO’s death sends grim chaebol message: https://www.breakingviews.com/considered-view/korean-air-ceos-death-sends-grim-chaebol-message/. “South Korea’s conglomerates were just given a grim reminder about how disliked their governance is. Just weeks after shareholders ousted Korean Air Lines boss Cho Yang-ho from the board, he has died. The family-controlled holding company’s market value promptly soared. That suggests a yearning for more chaebol changes.”
  • Business Korea reports that Many Listed Firms Fail to Appoint Auditor Due to Lack of Quorum at Shareholders’ Meetings: http://www.businesskorea.co.kr/news/articleView.html?idxno=30410. “More than 100 companies have failed to handle auditor appointment and other issues at their general shareholders meetings so far, mainly due to lack of a quorum. The figure is expected to surge on March 29, the super general shareholders meeting day when a total of 597 listed companies will hold their general shareholders meetings. In addition to auditor appointment, many companies have been unable to handle various matters including the amendment of the articles of incorporation due to their failure to meet the quorum at their shareholders meetings. As a result, there is a growing call for reform of the general shareholders meeting system through an amendment to the commercial law.”
  • The Financial Services Commission and the Ministry of Justice have proposed Measures to Improve Corporate Practices of Annual General Meetings: http://meng.fsc.go.kr/common/pdfjs/web/viewer.html?file=/upload/press1/20190424140435_c16506f8.pdf. “AGMs serve as a company’s highest decision-making body. However, the current  practices in many companies – e.g. concentration of AGMs on specific dates and  fast-paced proceedings – discourage shareholders’ participation, making AGMs a mere formality. Shareholders’ active participation in AGMs has become all the more important recently with the abolition of ‘shadow voting’ system and growing public attention to the role of institutional investors as shareholders. Against this backdrop, the proposed measures are intended to help companies boost participation of shareholders in AGMs and equip shareholders with more information to better exercise their voting rights.”
  • The Times of India reports that Easier rules for differential voting rights shares likely: http://timesofindia.indiatimes.com/articleshow/69017356.cms. “Government agencies want markets regulator Securities and Exchange Board of India (Sebi) to make the proposed rules for issuing shares with differential voting rights (DVRs) more attractive, arguing that it will help founders of startups such as Ola and Paytm as well as other Indian companies to tighten the grip over their entities. At a meeting in the Prime Minister’s Office last week, one of the most radical suggestions was to remove the ceiling, which allows shares with DVRs to be up to 26% of the post-issue capital.” Additionally, Glass Lewis has published its Submission to SEBI Consultation on the Issuance of Equity Shares with Differential Voting Rights: https://www.glasslewis.com/glass-lewis-submission-to-sebi-consultation-on-the-issuance-of-equity-shares-with-differential-voting-rights/. “In our submission, Glass Lewis opposed the introduction of DVR structures in India. Foremost, Glass Lewis is strongly in favour of a ‘one-share-one-vote’ principle. Shareholders do and should take a limited role in the operation of a company. Management, at the direction of the board, is there to operate the business. Yet, when it comes to governance and shareholder rights, we believe shareholders should have the power to speak and the opportunity to be heard and effect change if necessary.” The SEBI consultation paper can be found here: https://www.sebi.gov.in/reports/reports/mar-2019/consultation-paper-on-issuance-of-shares-with-differential-voting-rights_42432.html.
  • The Hindu Business Line reports that Nestle India to seek shareholders’ nod every five years on royalty to parent firm: https://www.thehindubusinessline.com/companies/nestle-india-to-seek-shareholders-nod-every-five-years-on-royalty-to-parent-firm/article26854800.ece. “Nestle India has decided to seek shareholders approval every five years on the issue of payment of royalty to its parent company after receiving feedback from investors and proxy advisory firms. The FMCG major, currently pays royalty at the rate of 4.5 per cent of the net sales to Societe des Produits Nestle SA. In a statement, a Nestle India spokesperson said, ‘We received feedback from our shareholders and other stakeholders on the resolution pertaining to royalty payment and as a responsible corporate citizen with high standards of corporate governance modified the resolution.”
  • Institutional Investor Advisory Services’s Hetal Dalal argues in Moneycontrol that The competition to pay more to Indian CEOs: Investors are getting increasingly concerned with CEO remuneration levels in corporate India: https://www.moneycontrol.com/news/business/companies/opinion-the-competition-to-pay-more-to-indian-ceos-3768291.html. “Indian companies are not of the same size as the S&P 500 constituents, but they seem to be emulating global pay standards. While we don’t have a Nikesh Arora with an annual remuneration of over $100 million, we do have remuneration levels that stand out. A Wall Street Journal study showed that S&P 500 company CEOs get paid about $1 million a month. For India, that number for BSE 500 companies is around Rs 5.7 million a month (excluding the remuneration of CEOs of public sector enterprises). In FY18, the Marans (Kalanithi and Kavery) of Sun TV took home an aggregate of over Rs. 1.75 billion altogether. And, they were the highest paid executives of the BSE 500 companies.”
  • The Australian Financial Review has published an opinion piece by the leadership of Ownership Matters (http://www.ownershipmatters.com.au/our-team/), entitled Why APRA’s pay plan won’t work: Diluting total shareholder return as a measure of executive performance could achieve the opposite of what naive APRA imagines: https://www.afr.com/business/banking-and-finance/paying-for-culture-won-t-make-directors-more-accountable-20190401-p519lu. “Last week’s calls by Australian Prudential Regulation Authority chairman Wayne Byres for bank senior executive incentive pay to be based on an even balance of financial and non-financial considerations assumes that boards have been captive to investor demands for metrics based on Total Shareholder Return. This reheats the unconvincing ‘shareholders made me do it’ excuse, commonly rolled out by directors seeking to evade accountability for poor decisions.”
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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