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Georgeson Monthly Roundup - May 2019
global
activism
europe
north america
asia
australia
africa
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Latest Georgeson publications


Georgeson article in HV Magazin

HV Magazin has published a Georgeson article entitled Vergütungssysteme in Europa: Der deutsche Markt had Nachholbedarf (“Remuneration systems in Europe: The German market has some catching up to do”): “German companies are preparing for the introduction of annual remuneration votes. But how will investors and proxy advisors assess the remuneration systems and reports? According to the investor community, the German market is clearly a laggard – both in terms of executive remuneration and in terms shareholder perception.” If you would like to receive a copy of the article please email: daniele.vitale@georgeson.com.

Shareholder Activism
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Global
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Europe
Pan-European developments
  • The Financial Times reports that Proxy advisers wince in glare of regulatory spotlight: https://www.ft.com/content/5bd6b813-bcc0-332d-a13a-9c1ea0c0aed2. “EU rules come into force today and will draw attention to quality of advice.”

  • The European Commission has published guidelines to improve how firms report climate-related information and welcomes three new important reports on climate finance by leading experts: http://europa.eu/rapid/press-release_IP-19-3034_en.htm?locale=en. “The European Commission has today published new guidelines on corporate climate-related information reporting, as part of its Sustainable Finance Action Plan. These guidelines will provide companies with practical recommendations on how to better report the impact that their activities are having on the climate as well as the impact of climate change on their business. The Commission has also today welcomed the publication of three new important reports by the Technical Expert Group on sustainable finance, including key recommendations on the types of economic activities that can make a real contribution to climate change mitigation or adaptation (taxonomy).”
UK
France
Germany
  • Handelsblatt reports that Zalando-Chefs verdienen fast doppelt so viel wie Dax-Topverdiener McDermott (“Zalando bosses earn almost twice as much as Dax top earner McDermott”): https://www.handelsblatt.com/unternehmen/management/dsw-studie-zalando-chefs-verdienen-fast-doppelt-so-viel-wie-dax-topverdiener-mcdermott/24443762.html (in German). “So far, the rights of intervention of the shareholders are limited. The vote on compensation is not binding, it is not even required. That’s going to change. The Bundestag has a draft bill (ARUG II), which should strengthen the rights of shareholders. The law should be passed before the summer break. The government implements a directive of the European Union. Remuneration will thus be the subject of the Annual General Meeting every year. The hitherto voluntary say-on-pay on executive compensation will become mandatory. This means that the Board of Management and the Supervisory Board must annually prepare a ‘clear and understandable report’ on the remuneration of the Management Board and Supervisory Board. And the annual general meeting decides on it every year.”
Netherlands
  • De Brauw has published a memo entitled Guidance on revised EU Shareholder Rights Directive implementation: https://www.debrauw.com/newsletter/guidance-on-revised-eu-shareholder-rights-directive-implementation/. “The upper house of the Dutch parliament is still reviewing the bill implementing the revised European Shareholder Rights Directive (SRD). In the meanwhile, we provide guidance on the main changes for Dutch companies listed in the EU. Remuneration: (i) A remuneration policy needs to be in place for the management board and the supervisory board; (ii) The remuneration policies must be adopted by the general meeting at least every four years; (iii) The general meeting will have an annual advisory vote on the remuneration report.”
Switzerland
  • Bloomberg reports that Swiss Lawmakers Back Plan for Gender Quotas for Listed Companies: https://www.bloomberg.com/news/articles/2019-06-19/swiss-lawmakers-back-plan-for-gender-quotas-for-listed-companies. “Swiss lawmakers in parliament’s upper house voted in favor of a measure to increase the number of women in management of large, listed companies. The draft law includes a 30% guideline for women on corporate boards and 20% representation on executive committees. Companies that don’t meet those benchmarks need to provide an explanation for the shortfall in their annual compensation report and present a plan for improvement.”

  • Finanz und Wirtschaft reports that Sika hängt Saint-Gobain ab (“Sika leaves Saint-Gobain behind”): https://www.fuw.ch/article/sika-haengt-saint-gobain-ab/. “Sika is now on a higher stock market value than the French group Saint-Gobain, also thanks to modernized corporate governance. One year ago, the shareholders of Sika decided to introduce the single share. In addition, corporate governance has been modernized by eliminating the penalty and opt-out clauses. This sealed the failure of the French SGO group to try to control Sika’s voting rights and a minority in the capital.”

  • The Financial Times reports that Switzerland weighs the merits of being the global good guy: https://www.ft.com/content/0fd8fdaa-8c3e-11e9-a1c1-51bf8f989972. “Unintended consequences of ethical clampdown threaten to undermine Alpine nation’s admirable aims.”
Norway
Spain
  • The ICGN has published a Letter on Loyalty Shares for Spanish Listed Companies: https://www.icgn.org/sites/default/files/Loyalty%20Shares%20for%20Spanish%20Listed%20Companies%2C%20Spain%2C%20June%202019.pdf. “Led by investors responsible for assets under management in excess of US$34 trillion, ICGN is a leading authority on global standards of corporate governance and investor stewardship. [...] ICGN has regularly commented about differential rights in regulatory consultations around the world and has also expressed its views in a Viewpoint report. Our message is consistent: ICGN and its members are fundamentally opposed to differential ownership rights, dual class share structures and the separation of economic ownership and voting control. We believe these structures are fundamentally flawed and carry significant governance risks for minority shareholders by diluting minority shareholder protections, management entrenchment and limited accountability. In extremis such structures create opportunities for expropriation, with controlling shareholder gaining private benefits of control at the expense of minority shareholders. […] A final point: given that many investors in Spanish companies are not based in Spain themselves, we believe it would be appropriate for a consultation of this nature to have an English language translation to make it easier for international investors to express their views.” Glass Lewis has also published a Submission on Spanish SRD II Consultation: Introduction of Loyalty Shares: https://www.glasslewis.com/glass-lewis-submission-on-spanish-srd-ii-consultation-introduction-of-loyalty-shares/. See here for the Anteproyecto de Ley por la que se modifica el texto refundido de la Ley de Sociedades de Capital: http://www.mineco.gob.es/portal/site/mineco/menuitem.32ac44f94b634f76faf2b910026041a0/?vgnextoid=add0a609b19ea610VgnVCM1000001d04140aRCRD (in Spanish).
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North America
United States
  • The Financial Times reports that Protest vote highlights concern over Mark Zuckerberg’s power: https://www.ft.com/content/49bd5ed8-865a-11e9-a028-86cea8523dc2. “Facebook external shareholders back proposal for independent chair.”

  • Bloomberg reports that SEC Plans to Update Proxy Adviser, Shareholder Proposal Rules: https://news.bloomberglaw.com/securities-law/proxy-advisers-shareholder-proposal-thresholds-make-sec-agenda. “The SEC is looking to update rules for proxy advisory firms and shareholder proposals in the coming months, according to a semi-annual agenda released May 22.  The Securities and Exchange Commission didn’t detail how exactly the regulations would change in its agenda, which has more than 40 items set for agency action in the next 12 months.”

  • The Financial Times reports that BlackRock, Vanguard and SSGA tighten hold on US boards: https://www.ft.com/content/046ec082-d713-3015-beaf-c7fa42f3484a. “BlackRock, Vanguard and State Street Global Advisors are on course to control four votes out of every 10 cast at large US companies.”

  • Bloomberg reports that Exxon Investors Move Closer to Upending Dual CEO-Chairman Role: https://www.bloomberg.com/news/articles/2019-05-29/exxon-investors-move-closer-to-upending-dual-ceo-chairman-role. “Exxon Mobil Corp. beat back mounting pressure to split the chairman and chief executive positions, and dismantle a structure that dates back decades and has seen the explorer through oil embargoes, war, currency crises and nationalizations. A total of 40.8% of shareholders voted Wednesday for the proposal, an increase from last year’s 38.7% but short of the simple majority required for it to pass at Exxon’s annual general meeting in Dallas.”

  • CFO Magazine reports about Do Clawbacks Cause as Many Problems as They Prevent?: https://www.cfo.com/compensation/2019/05/do-clawbacks-cause-as-many-problems-as-they-prevent/. “While penalties for erroneous financial reporting may spur achievement, they also may lead executives to cover up their mistakes, study suggests.”

  • Bloomberg reports Investor Discontent With Corporate Directors Hits Nine-Year High: https://news.bloomberglaw.com/corporate-law/investor-discontent-with-corporate-directors-hits-nine-year-high-14. “Investor discontent with directors at public companies in the U.S. has hit a nine-year high, according to data from a top investor advisory firm. Most directors get ringing endorsements from shareholders voting on their election, so anything less than 80 percent support gets flagged by Institutional Shareholder Services Inc. Its data show investor backing fell below this level for about 600 of the more than 12,500 director elections held through May of this year at companies in the Russell 3000.”
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Asia
Japan
China
  • The Financial Times reports that Chinese governance raises red flags: https://www.ft.com/content/10001b4c-82e8-11e9-b592-5fe435b57a3b. “Blurred boundaries can lead to moral hazard for those who value ESG.”

  • Bloomberg reports that China Steps Up Vigilance on Company Disclosures as Market Opens to World: https://www.bloomberg.com/news/articles/2019-06-05/china-steps-up-vigilance-on-company-disclosures-as-market-opens. “China’s stock exchanges have stepped up scrutiny of listed companies to address corporate governance concern, amid a push to further open up the nation’s capital markets. The Shanghai and Shenzhen stock exchanges sent out a total of at least 1,149 queries to listed companies in the first five months of this year, up 23% from the year-earlier period and 62% more than the 2017 tally, according to data compiled by Bloomberg. The questions mainly focused on irregularities in the firms’ financial results, inadequate information disclosure and relations with controlling shareholders.”
India
  • Reuters reports that India seeks bans for Deloitte, KPMG arm for alleged auditing lapses: https://www.reuters.com/article/us-india-il-fs-auditor/india-seeks-bans-for-deloitte-kpmg-arm-for-alleged-auditing-lapses-idUSKCN1TC1E4. “India is seeking to ban Deloitte Haskins Sells and KPMG affiliate BSR & Associates for five years, alleging lapses in their audits of a unit of Infrastructure Leasing & Financial Services (IL&FS), which the government took control of last year. India’s corporate affairs ministry told a company law tribunal that the companies ‘miserably failed’ to fulfill their duties as auditors for IL&FS Financial Services (IFIN), a filing seen by Reuters shows. Both auditing firms denied any wrongdoing on Tuesday.”

  • Mint reports that Sebi set to roll out 2% cap on royalty payments: https://www.livemint.com/politics/policy/sebi-set-to-roll-out-2-cap-on-royalty-payments-1561611435928.html. “The Securities and Exchange Board of India (Sebi) will on Thursday roll out a cap on royalty payments at 2% of net sales. Any other additional payment of royalties will require shareholder approval. Starting July, listed entities will need to follow this particular recommendation of the Kotak Committee. The regulator had in March deferred the proposal owing to a push back from the finance ministry and the industry. Royalty payments under any name such as brand fees or technical know-how fees or other service-related fees will come under this rule.”
Saudi Arabia
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Australia
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Africa
South Africa
  • Moneyweb argues that Standard Bank AGM a ‘watershed’, passing of shareholder resolution has set a precedent: https://www.moneyweb.co.za/news/markets/standard-bank-agm-a-watershed/. “The board of every bank in South Africa should have started this week with a new item on its to-do list: publishing its policy on lending to coal-fired power projects and coal mines. A shareholder resolution to exactly that effect was passed at Standard Bank’s AGM last week, and there is no question that similar requests will be made to every other bank in the country.”

  • The Financial Times reports that Old Mutual sacks chief executive over dividend payment: https://www.ft.com/content/9f67b560-9193-11e9-b7ea-60e35ef678d2. “Peter Moyo failed to account for payout from NMT, which he co-founded and group has stake in.”
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Contact
Daniele Vitale
Georgeson
Corporate Governance Manager > Corporate Advisory
daniele.vitale@georgeson.com
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
www.georgeson.com

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