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Georgeson Monthly Roundup - May 2019
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Latest Georgeson publications

Georgeson memo on FTSE 350 Contested Remuneration Report Votes: March & April 2019

The FTSE 350 Contested Remuneration Report Memo provides an overview of proxy advisor recommendations on FTSE 100 and FTSE 250 companies that received more than 20% opposition on their remuneration report resolutions during March and April 2019 as well as the details of each of these proposals.

If you would like to receive a copy of the memo, please email: daniele.vitale@georgeson.com

Shareholder Activism

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  • Oxford Business Law Blog has posted an item entitled We Three Kings: Democratizing Voting at the Index Fund Giants: https://www.law.ox.ac.uk/business-law-blog/blog/2019/05/we-three-kings-democratizing-voting-index-fund-giants. “Due to the rapid growth of passive indexing, three large fund families – Vanguard, BlackRock, and State Street – are now the de-facto arbiters of U.S. corporate law controversies. In 9 out of 10 publicly-traded companies, one of the ‘Big Three’ is the largest shareholder. Passive funds will soon own the majority of all U.S. equity assets, and the way they vote their proxies will effectively be the ‘last word’ in corporate governance. […] Together, these phenomena have resulted in something of a paradox: individual index fund investors have essentially no power to shape corporate governance, while index funds themselves arguably have too much power over corporate governance. In order to address these two problems, I propose here that index funds take steps to incorporate the input of their investors when making corporate governance decisions. Because it would be irrational for individual index fund investors to engage with the tens of thousands of ballot items at issue in the thousands of companies in which they invest, I propose a variety of alternatives.”

  • The Financial Times reports that ESG rating agencies fulfil the need for knowhow: https://www.ft.com/content/2cd37df8-a973-3f94-b498-09ee1a6ba53b. “They can be controversial and they may not agree . . . but M&A is booming.”  

  • ISS have published a report entitled ESG Review 2019: The State of Play of Corporate Responsibility: https://www.issgovernance.com/library/esg-review-2019/. “The ESG Review 2019 is an annual analysis of the state of adherence by companies across the globe to ESG criteria. It provides insights into significant ESG developments and presents research findings that inform different responsible investment strategies. This includes ISS ESG products and services like Norm-Based Research, Corporate Rating and Climate research. The findings demonstrate positive trends in corporate sustainability performance, and a continued rise in the number of reported controversies across all ESG topics.”

  • The Financial Times reports that Bad governance makes banks perilous investments: https://www.ft.com/content/248b6b4c-733f-11e9-bbfb-5c68069fbd15. “BBVA and Wells Fargo have responded to regulators’ pressure to change how they are governed.”

  • The Spectator argues that Boycotting energy companies won’t solve climate change: https://www.spectator.co.uk/2019/05/boycotting-energy-companies-wont-solve-climate-change/. “Does refusing to invest in ‘sin stocks’ actually do any good?”

  • The Financial Times looks back at Larry Fink, Barclays and the deal of the decade: https://www.ft.com/content/48e703d8-6d87-11e9-80c7-60ee53e6681d. “How BlackRock’s $15.2bn purchase of BGI transformed the global asset management industry.”

  • The Climate Disclosure Standards Board and the Sustainability Accounting Standards Board have released their TCFD Implementation Guide: https://www.cdsb.net/task-force/901/cdsb-and-sasb-release-tcfd-implementation-guide. “In June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) published recommendations for climate-related financial risk disclosures in mainstream corporate filings. More than 600 organisations have publicly expressed support for the recommendations but many have cited a need for practical guidance on how to implement them. Today, the Climate Disclosure Standards Board (CDSB) and the Sustainability Accounting Standards Board (SASB) jointly released an effective solution for TCFD implementation by organisations around the world, in all industries and sectors.” 

  • Bloomberg reports about The One Job in Banking That Needs More Men: https://www.bloomberg.com/news/articles/2019-05-21/the-one-place-in-banking-that-needs-more-men. “Almost all digital assistants out there have feminine personas and critics aren’t impressed.”

  • The Financial Times reports about Mazars: the low-profile auditors who won over Goldman and Trump: https://www.ft.com/content/c46fc8f0-7d22-11e9-81d2-f785092ab560. “French firm says its structure makes it well-placed to benefit from industry reforms.”
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Pan-European developments
  • Regulations implementing into UK law parts of the European Shareholder Rights Directive II have been published: http://www.legislation.gov.uk/uksi/2019/970/contents/made. The explanatory memorandum (http://www.legislation.gov.uk/uksi/2019/970/pdfs/uksiem_20190970_en.pdf) and transposition notes (http://www.legislation.gov.uk/uksi/2019/970/pdfs/uksitn_20190970_en.pdf) provide some background: “Most of the requirements on directors’ remuneration reporting contained in the Directive are already implemented in UK law, including the requirement on companies to produce a directors’ remuneration report and a directors’ remuneration policy, each subject to a shareholder vote (advisory for the report and binding for the policy).”

  • Reuters reports that Funds protest UK drive to disclose more on boardroom chats: https://uk.reuters.com/article/us-funds-esg-meetings/funds-protest-uk-drive-to-disclose-more-on-boardroom-chats-idUKKCN1SY18C. “Some of Britain’s biggest asset managers are protesting proposals that they disclose more details about their discussions with company boards on issues such as climate change and child labour. The Financial Reporting Council (FRC), which sets best practice for funds’ oversight of the firms they invest in via the UK Stewardship Code, wants managers to be more open about how they tackle environmental, social and governance (ESG) issues. But some of the biggest money managers argue too much disclosure could damage efforts to change corporate behaviour.”

  • The Financial Times reports that FTSE 100 chiefs in spotlight over pensions gap: https://www.ft.com/content/6a75aae0-7af7-11e9-81d2-f785092ab560. “CEOs receive contributions worth 25% of salary on average while employees get 6%.”  

  • The Guardian reports that Investor group warns almost 100 firms over lack of gender diversity: https://www.theguardian.com/business/2019/may/13/investor-group-warns-almost-100-firms-over-lack-of-gender-diversity. “Lloyds Banking Group, Foxtons and Paddy Power are among almost 100 firms that have been singled out this year by an influential investor group for failing to boost the number of women on their boards.  According to documents seen by the Guardian, the Investment Association (IA), which represents City firms with £7.7tn in assets under management, has shamed 94 listed companies for dragging their heels on gender diversity. It has stamped their annual reports with the highest warning label. The list, which was confirmed by the Investment Association, shows the group has so far identified 57 of the UK’s 350 largest listed companies, 11 of which are on the FTSE 100, before their respective annual general meetings as falling foul of targets that aim to push the proportion of women in top leadership roles above 25%. The list is expected to grow as the AGM season rumbles on.”

  • Investment & Pensions Europe reports that FCA urged to investigate fund manager voting policy ‘market failure’: https://www.ipe.com/news/asset-managers/fca-urged-to-investigate-fund-manager-voting-policy-market-failure/10031449.article. “The UK’s financial services regulator should investigate the absence of a genuine market in asset manager shareholder voting policies, according to an influential group of pension scheme trustees. According to the Association of Member-Nominated Trustees (AMNT), a review of fund manager voting policies had demonstrated ‘opacity and lack of comparability’, which it said could prevent asset owners from selecting fund managers or holding them to account on voting issues.”

  • Accountacy Daily reports that Shareholders call for greater transparency on dividends: https://www.accountancydaily.co/shareholders-call-greater-transparency-dividends. “The Investment Association is calling for companies provide more information about their approach to paying dividends by publishing a ‘distribution policy’ setting out how they pay dividends to shareholders to curb the use of unapproved interim dividend payments.” See here for the full document: https://www.theia.org/sites/default/files/2019-05/20190528-shareholdervotesondividenddistributionsinuklistedcompanies.pdf.

  • ICSA has published a consultation into the effectiveness of board evaluation for listed companies: https://www.icsa.org.uk/about-us/press-office/news-releases/consultation-into-board-evaluation-listed-companies. “ICSA: The Governance Institute has today opened a consultation into the effectiveness of independent board evaluation in the UK listed sector. The review, which is being carried out at the request of the Department of Business, Energy and Industrial Strategy, will assess the quality of evaluations and identify ways in which board evaluation might be improved.”

  • The Institute of Economic Affairs has published a report entitled Top Dogs and Fat Cats: https://iea.org.uk/publications/top-dogs-and-fat-cats/. “In contrast to the recent past when even Labour politicians were ‘intensely relaxed’ about high pay, there is now widespread concern about the apparent excesses of some pay structures in corporate businesses. Top pay has risen much faster than average levels of pay in the last twenty years. This is in part the consequence of globalisation and developments in communications technology, but it may also be a result of rigged markets and ‘crony capitalism’. It is asserted that shareholders do not have enough influence on setting executive pay, which is determined by remuneration committees and consultants with a vested interest in boosting top pay. The public seems to distinguish between remuneration for CEOs – who are essentially employees of large businesses – and that of entrepreneurs, entertainers and sports stars, whose earnings and wealth can more easily be understood as related to their abilities and efforts.” The print edition is available here: https://www.amazon.co.uk/Top-Dogs-Fat-Cats-Debate/dp/0255367732/.  
  • The Government Commission German Corporate Governance Code has adopted a new version of the German Corporate Governance Code: https://www.dcgk.de/en/code/code-2019.html. “The new Code will then come into force with the subsequent publication by the Ministry in the German Federal Gazette, thus superseding the hitherto valid Code in its version dated 7 February 2017.” The Frankfurter Allgemeine Zeitung reports Das sind die neuen Benimmregeln für Unternehmen (“These are the new rules of behavior for companies”): https://www.faz.net/aktuell/wirtschaft/unternehmen/neue-regeln-der-kodex-kommission-fuer-gute-unternehmensfuehrung-16200306.html (in German). “The guidelines for the structure of executive salaries are nowhere near as detailed as many critics of the reform at times feared. Originally, it was planned that the long-term variable remuneration will in future only be granted in shares that can be sold after four years at the earliest. In addition, further detailed guidelines were provided for determining how many shares may be granted as long-term remuneration. After some harsh criticism that the planned requirements were much too detailed, the government commission is now rowing back and only recommends that the long-term remuneration should be higher than the short-term. In addition, the long-term variable remuneration is to be paid predominantly in shares of the company. Further criticism may come from the fact that in the remuneration reports the template disclosure tables, in which companies must disclose exactly how high the pay components granted and accrued in a financial year, will be omitted in the future. The new Code refrains from recommending that executive remuneration be presented in the form of these sample tables.”

  • The Financial Times reports that Investor adviser gives ‘final warning’ over promoting senior women: https://www.ft.com/content/18879eca-7be0-11e9-81d2-f785092ab560. “Hermes EOS tells German companies to triple the number of women among top executives.” See here for the new Hermes Corporate Governance Principles Germany: https://www.hermes-investment.com/ukw/wp-content/uploads/2019/05/hermes-eos-corporate-governance-principles-germany-may-2019-2.pdf.  

  • Bloomberg reports about the Attack of the Killer Shareholders Upends Cozy German Boardrooms: https://www.bloomberg.com/news/articles/2019-05-11/attack-of-the-killer-shareholders-upends-cozy-german-boardrooms. “The shift at Thyssenkrupp is the latest episode in a drama that’s shaking up executive suites across Germany. At Bayer AG’s annual meeting on April 26, investors hit management with a stinging rejection. And in February, a long-simmering feud between Uniper SE and its largest shareholder ended with the resignation of the power company’s two top executives. […] The backlash runs counter to the consensual culture that’s been the bedrock of the German economy. The country has a two-tier system, consisting of an executive board that runs the company and a supervisory board that hires senior managers, sets their pay, and signs off on major decisions. To ensure that employees’ interests are accounted for, half the supervisory board is stacked with worker representatives, a form of cohabitation designed to moderate the slash-and-burn instincts of capitalism’s most ardent adherents. Though it’s a long way from the resistance American executives can encounter, the new atmosphere is a rude awakening for companies long shielded by Deutschland AG, or Germany Inc. That web of cross-shareholdings and interlinked boards – often with major stakes held by banks and insurers – served as a bulwark against outside pressure. Since 2000, when Germany abolished a steep tax on corporate asset sales, those ties have unraveled. As the financial heavyweights sold their stakes in the nation’s companies, that opened the door to outsiders seeking higher returns, streamlined structures, and a seat at the table.  Investors are starting to express their displeasure via confidence votes at annual shareholder meetings. For decades, these votes – required under German regulations – would end predictably no matter how much vitriol might have been hurled at the dais throughout the day: shareholders typically approved the executive committee by margins that wouldn’t look out of place in the Soviet politburo. But at this year’s Bayer meeting in a vast conference center on the banks of the Rhine, a majority of shareholders declined to support management, an unprecedented rebuke.”
  • The Financial Times reports that Norway wealth fund’s former chief hits out at governance: https://www.ft.com/content/1dda3724-808c-11e9-b592-5fe435b57a3b. “Knut Kjaer breaks decade-long silence to raise concerns about risk-taking at big investor.”

  • The Daily Telegraph reports that Norway’s largest pension fund to ditch alcohol and gambling stakes: https://www.telegraph.co.uk/business/2019/05/28/norways-largest-pension-fund-ditch-alcohol-gambling-stakes/. “Norway’s largest pension fund will stop investing in gambling firms and alcoholic drinks makers in a continued push towards more ethical investments. KLP has already sold stocks and bonds in betting and booze firms worth about $320m (£253m). The fund, which covers public sector workers, will also exclude investments in pornography companies but does not hold any such investments.”
  • The Croatian Financial Services Supervisory Agency and Zagreb Stock Exchange have opened a public consultation on the new Corporate Governance Code: http://zse.hr/default.aspx?id=91971. “The main purpose of this consultation is to gather insights and contributions from the public in the context of the ongoing review of The Corporate Governance Code. The Code was last revised in 2010. Since then, significant improvements have been made in corporate governance practices, which are reflected in the recently amended codes of other European countries and European Union legislation. Amendments to national legislation have also introduced binding requirements on matters previously regulated only in the Code.”
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North America
United States
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  • The 30% Club has announced the launch of its newest chapter, the 30% Club Japan: https://30percentclub.org/press-releases/view/30-club-japan-to-launch-on-may-1-2019. “Founded in the United Kingdom in 2010 with the aim of increasing female representation on company boards, and subsequently at senior management level, the 30% Club is officially launching its newest chapter, the 30% Club Japan. Members of the 30% Club consist of senior leaders who view gender diversity as a critical business issue and commit to playing an active role in promoting diversity initiatives. The 30% Club has made a significant contribution to increasing female representation on company boards in 13 countries/regions. In UK, the percentage of female FTSE-100 directors increased from 12.6% in 2010 to 31% in 2019. The 30% Club Japan is launching with the support of 30 members and is forming an ‘Investor Group’ which is one of the cornerstone initiatives of the 30% Club campaign. […] The 30% Club Japan aims to achieve 10% representation of women on the boards of TOPIX100 companies by 2020, and 30% representation by 2030.”

  • The Financial Times reports about Nissan’s parable of shoddy governance: https://www.ft.com/content/d6aca7b8-39d9-11e9-9988-28303f70fcff. “Scandal-hit carmaker’s woes offer wider lessons for Japan Inc.”  
South Korea
  • Mint has published an opinion piece about The quiet transformation of corporate governance: https://www.livemint.com/opinion/columns/the-quiet-transformation-of-corporate-governance-1557392837251.html. “As trends go, matters that are categorized under the general umbrella of ‘corporate governance’ are all set to take up greater mind space among CEOs and boards. These include issues pertaining to the wholesomeness of board and committee composition, disclosure standards, succession planning, executive compensation, stakeholder engagement, board effectiveness and evaluation, risk management and strategy for environmental, social and corporate governance (ESG). On account of the criticality of the drivers described below, we expect governance to become part of the staple agenda for boards, going forward.”

  • Moneycontrol argues that Dual class shares will weaken corporate governance in India: https://www.moneycontrol.com/news/business/markets/reality-bites-dual-class-shares-will-weaken-corporate-governance-in-india-3976021.html. “The argument against differential voting rights is too strong to be dismissed. At a time when corporate practices are on the mend, the issuance of DVRs may just turn the clock back.”
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  • Bloomberg reports that Australia Pension Giant Doubles Down on Push for Woman Directors: https://www.bloomberg.com/news/articles/2019-05-07/australia-pension-giant-doubles-down-on-push-for-woman-directors. “Australia’s largest pension fund is doubling down on its campaign for more women on boards. With almost all of the top 200 listed companies now having at least one female director, AustralianSuper Pty is raising the bar and pushing for at least two women board members, said Andrew Gray, director of ESG and stewardship at the Melbourne-based fund. That puts more than a quarter of companies in the benchmark S&P/ASX 200 Index in the A$154 billion ($108 billion) fund’s sights. It has given them until their annual meetings in October-November to show progress, or it will start voting against directors up for re-election, Gray said in an interview.”
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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