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Georgeson Monthly Roundup - November 2020
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Latest Georgeson publications |
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Georgeson memo on ISS 2021 Policy Updates On 12 November, ISS announced the update of its benchmark policies for the AGM season 2021. As we do customarily, we have put together a memo highlighting the most important changes to the UK & European and US policies with the aim of providing an easy and accessible tool covering what to expect from ISS in the upcoming 2021 AGM season. Read more about the US and European updates.
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Georgeson publishes Part II of its US Annual Corporate Governance Review
Following the release of Part I of our Annual Corporate Governance Review in September 2020, we are pleased to present Part II of the report. Part II offers an expanded analysis of institutional investor voting decisions on key shareholder proposals, as well as say-on-pay proposals and director elections. It also contains a critical review of M&A, proxy contests and investor activism trends from the 2020 proxy season for all U.S. companies.
Read the full report here.
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Upcoming webinar: Wirecard - Dan McCrum from FT shares his story
Monday, 14 December 2020 2 pm GMT │ 3 pm CET │ 9 am ET
Join us on our webinar, when Dan will join Cas Sydorowitz, our Global Head of Activism and M&A, to recap his investigative journey over the last six years and discuss what takeaways the Wirecard story holds for issuers, investors and the market in general.
Register here.
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Georgeson’s Hannah Orowitz quoted in an Agenda Weekly article entitled “E+S Proposals Get ‘More Sticky’”
Data from this year’s proxy season suggests that shareholders are increasingly confident in environmental and social (E+S) proposals they put forward. More resolutions remained on the ballot this year compared to 2019 even though the percentage of resolutions that the SEC permitted companies to omit from proxy statements also increased, according to research from ISS. Georgeson’s Hannah Orowitz, Senior Managing Director, Corporate Governance is quoted in the article saying that the SEC guidance likely drove the decreased willingness of investors to negotiate proposals off the ballot as they got a handle on what types of proposals may get around SEC no-action rules.
Read the full article here.
Georgeson’s Cas Sydorowitz was quoted in a Barron’s article entitled “Expect More ESG Activism and SPACs in 2021
The new year will also see a continuation of recent trends that have bubbled up this year. ESG-focused activism and shareholder proposals will keep rising, Sydorowitz says.
Read the full article here.
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- Reuters reports that Billionaire UK investor aims to force hundreds of companies to act on climate: https://uk.reuters.com/article/us-climate-change-investors/billionaire-uk-investor-aims-to-force-hundreds-of-companies-to-act-on-climate-idUSKBN2802SN “British billionaire Chris Hohn is aiming to force hundreds of U.S. and European companies to slash their greenhouse gas emissions by enlisting global investors to demand an annual vote on their climate plans at shareholder meetings.”
- The Financial Times reports that Activist fund targets St James’s Place: https://www.ft.com/content/05c75dce-5085-4ac4-a085-eeea85bc1de1 “St James's Place, the UK's largest wealth manager, has been targeted by activist investment fund PrimeStone Capital.”
- Reuters reports that Activist investor Ferrari targets environment, social laggards with new fund: https://uk.reuters.com/article/uk-europe-hedgefunds-clearway-exclusive/exclusive-activist-investor-ferrari-targets-environment-social-laggards-with-new-fund-idUKKBN2870WV?il=0 “Activist investor Gianluca Ferrari, who has led campaigns against a string of mid-cap firms, is setting up a fund targeting companies lagging on environmental, social and governance (ESG) issues.”
- Institutional Investor asks Has Shareholder Activism Caught the Virus?: https://www.institutionalinvestor.com/article/b1pcx5bjpvwssj/has-shareholder-activism-caught-the-virus “Proxy battles are down, while investors say “no thanks” to activist board nominees.”
- Nikkei Asia reports that Activist investors promise to make life hell for Japan's CEOs: https://asia.nikkei.com/Opinion/Activist-investors-promise-to-make-life-hell-for-Japan-s-CEOs “What is becoming clear is that COVID has not changed the underlying economic drivers of Japanese activism. To the contrary, it has created irresistible economic pressures against which traditionally friendly shareholders are increasingly unwilling and unable to protect target management.”
- Bloomberg opines that Billionaire Activism Is Alive and Well in Paris: https://www.bloomberg.com/opinion/articles/2020-11-10/billionaire-activism-is-alive-and-well-in-paris-thanks-to-xavier-niel “Xavier Niel’s victory in a pandemic revolt at Westfield was made easier by the shopping mall owner’s blinkered defense.”
- Reuters reports that Elliott’s Swiss cookie raid merits activist slap: https://uk.reuters.com/article/us-aryzta-m-a-elliott-breakingviews/breakingviews-elliotts-swiss-cookie-raid-merits-activist-slap-idUKKBN2842FZ “Elliott Advisors is trying to raid the cookie jar. The U.S. hedge fund, led by billionaire Paul Singer, is planning a 793 million Swiss franc (733 million euros) bid for debt-laden baker Aryzta, maker of Otis Spunkmeyer biscuits. Yet with the pandemic easing, the Swiss group’s shareholders, which also include some activists, have good reason to hold out.”
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Pan-European developments
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- The Wall Street Journal reports that U.K. Requires Companies to Report on Climate Change by 2025: https://www.wsj.com/articles/u-k-requires-companies-to-report-on-climate-change-by-2025-11604964183 “It is the first country to make disclosures about the business impacts of climate change mandatory.” The full Government announcement can be found here: https://www.gov.uk/government/news/chancellor-sets-out-ambition-for-future-of-uk-financial-services “The UK will become the first country in the world to make Task Force on Climate-related Financial Disclosures (TCFD) aligned disclosures fully mandatory across the economy by 2025, going beyond the ‘comply or explain’ approach.”
- The FRC has issued a statement claiming that Reporting on the new Corporate Governance Code is a mixed picture: https://www.frc.org.uk/news/november-2020/reporting-on-the-new-corporate-governance-code-is “The revised UK Corporate Governance Code provides an opportunity for companies to report to their stakeholders in a way that allows them to communicate high-quality information about the way in which their governance functions to deliver a company’s purpose and strategy. Although some companies have embraced the opportunities the revised Code offers, the FRC has found in its Review of Corporate Governance Reporting that this was not consistent across the board.” The full review can be accessed here: https://www.frc.org.uk/getattachment/c22f7296-0839-420e-ae03-bdce3e157702/Governance-Report-2020-2611.pdf On this matter, the Financial Times also reports that UK companies fall short on climate reporting, warns watchdog: https://www.ft.com/content/233c52d6-0233-4447-8316-81f383285ac1 “Financial Reporting Council says environmental disclosure needs to improve.”
- The Financial Times reports that Bame appointments stall on boards of biggest UK companies: https://www.ft.com/content/310b969c-47c3-4ade-8ea9-050a34ac70bd “British groups lagging behind US counterparts on ethnic diversity.”
- The Financial Times reports on Scottish Widows to dump £440m of company holdings that fail ESG tests: https://www.ft.com/content/a09a59d7-0284-4d29-a71e-37e92e5cc69a “Exclusions policy is one of the most aggressive adopted by a leading UK pensions provider.”
- City AM reports that New foreign investment powers will create 'considerable uncertainty' for business: https://www.cityam.com/new-foreign-investment-powers-will-create-considerable-uncertainty-for-business/ “A new law giving the government the power to block foreign takeovers will create ‘considerable uncertainty’ for businesses, City firms have warned today.”
- The IA released its 2021 Principles of Remuneration which are accessible here: https://www.ivis.co.uk/media/13885/principles-of-remuneration-2021.pdf “The impact of the pandemic on UK Plc will continue to reverberate for many years. How companies balance the need to reward and incentivise management whilst reflecting the experiences and expectations of employees, suppliers, shareholders and wider society will be crucial. IA members consider the Principles of Remuneration remain relevant through the pandemic, but we have supplemented the Principles with separate guidance which sets out member expectations on specific issues arising from the pandemic. The wider stakeholder interest in remuneration shows no signs of abating and will come into sharper focus as a result of the inequalities highlighted by the pandemic. Executive remuneration is seen by some commentators as a barometer on the state of corporate governance in the UK as a whole.” Further information about the IA's approach to Covid-19 and executive remuneration is available here: https://www.ivis.co.uk/media/13887/remuneration-and-covid-19-for-2021.pdf
- Professional Pensions reports that Two-thirds of fund managers reduce investments in companies failing on diversity and inclusion: https://www.professionalpensions.com/news/4023599/thirds-fund-managers-reduce-investments-companies-failing-diversity-inclusion “63% of UK investors say they their firms are actively applying exclusionary screening based on diversity and inclusion metrics, while 64% have started to put portfolio investments that do not meet their diversity and inclusion thresholds on ‘watch lists'.”
- Environmental Finance reports on Carney: AGMs could give investors 'say on transition plans': https://www.environmental-finance.com/content/news/carney-agms-could-give-investors-say-on-transition-plans.html “Mark Carney has suggested investors could be given an automatic advisory vote on companies' net-zero transition plans, similar to 'say on pay' shareholder rights to vote on executive remuneration.”
- The Financial Times reports that Covid rule allowing UK companies to fast-track share issues scrapped: https://www.ft.com/content/630dcb71-d5cc-4c02-9381-4760eb21cf9c “Rights of retail investors to participate in large fundraisings will be reinstated next month.”
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- The Financial Times reports that Investors target French companies over lack of women in top jobs: https://www.ft.com/content/5a1a76f8-1629-4c46-ad2d-bd926a166bbb “Group of asset managers calls on 120 biggest businesses to make 30% of executive management teams female by 2025.”
- The AMF published its Annual Report On Corporate Governance: https://www.amf-france.org/en/news-publications/news-releases/amf-news-releases/2020s-general-meetings-and-executive-compensation-amf-publishes-its-annual-report-corporate “Since the French Financial Security Act of August 1st, 2003, the Autorité des Marchés Financiers has conducted an annual review of the disclosure of listed companies with regard to corporate governance and executive compensation. This is the opportunity to issue new recommendations for companies, as well as providing new areas for discussion to reinforce best practices. The 2020’s annual report is obviously marked by the context of the health crisis, which has led the authorities to take lockdown measures.”
- Reinsurance News reports that Court orders Derez and Covéa to pay €19.6mn in compensation to SCOR: https://www.reinsurancene.ws/court-orders-derez-and-covea-to-pay-e19-6mn-in-compensation-to-scor/ “Global re/insurer SCOR has announced that the Paris Commercial Court has ruled against Thierry Derez and Covéa for misconduct during the preparation and execution of Covéa’s unsolicited takeover bid for the French re/insurer.”
- The HCGE publishes its 7th Annual Report (in French): https://hcge.fr/le-hcge-rend-public-son-7eme-rapport-annuel/ “The High Committee for Corporate Governance (HCGE) is today publishing its seventh annual activity report for the period from September 2019 to September 2020. […] Analysis of the governance and compensation information published in 2020 by SBF 120 companies shows that the degree of compliance with the Code's provisions continues to improve in a context of mature governance. The report explains the positions taken by the High Committee in 2020, particularly on the obligation of discretion imposed on the permanent representatives of corporate directors or on the inclusion of at least one environmental criterion in the determination of the executive's variable compensation. Finally, starting this year, following the publication of a revised version of the AFEP-MEDEF Code in January 2020, the High Committee conducted an initial analysis of the implementation of targets for increasing the number of women in management bodies and of ratios on pay differentials. With regard to gender diversity, the Committee stressed the need to plan ambitious action plans with quantified targets that include the implementation of targets for increasing the number of women at the highest levels of management. With respect to the ratios on the compensation gap, it recommends that the calculation methodology adopted be more explicit with respect to the inclusion of the compensation components selected and that the scope of the entity or entities concerned be clearly stated, together with an explanation of the reasons for this choice.”
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- Bloomberg reports that Top Canada Pension Funds Ask for Better ESG Disclosure: https://www.bloomberg.com/news/articles/2020-11-25/top-canada-pension-funds-ask-for-better-esg-disclosures “The heads of eight large Canadian pension funds are pleading with companies to improve their environmental, social and governance disclosure by giving investors “consistent and complete” data. The leaders backing the initiative include the chiefs of the Canada Pension Plan Investment Board, the Caisse de depot et placement du Quebec, Ontario Teachers’ Pension Plan and PSP Investments, which manages the pensions of federal government employees and the Royal Canadian Mounted Police.”
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- Fitch Ratings says in a new report about China’s new 5-year plan that Green Finance to Expand to Support China's Low-Carbon Goals: https://www.fitchratings.com/research/corporate-finance/green-finance-to-expand-to-support-china-low-carbon-goals-03-11-2020 “The green finance market in China will expand, driven by supportive policies and government initiatives, as it is an important tool for policymakers to achieve the country's pledge of net zero carbon emissions by 2060.”
- SCMP reports that Trump bans US investments in what he calls Chinese ‘military-controlled’ companies, sending Hong Kong, China markets lower: https://www.scmp.com/business/markets/article/3109662/hong-kong-china-markets-tumble-after-trump-bans-us-investments “The executive order, Trump’s first policy action since the November 3 presidential election, would ban investments in 31 companies including China Mobile and China Telecom, from a list of 20 names compiled in June and a list of 11 Chinese entities highlighted in August. The order takes effect from January 11 next year, nine days before the inauguration of president-elect Joe Biden, and US investors holding the stocks will be given a grace period until November 11, 2021 to sell them.”
- AsianInvestor reports that China’s combined QFII, RQFII could boost futures usage: https://www.asianinvestor.net/article/chinas-combined-qfii-rqfii-could-boost-futures-usage/463954 “China’s move to ease capital market access for foreign investors by combining two of its major inbound investment programmes will broaden asset class choices, with investors showing particular enthusiasm for increased futures trading, say investment industry advisers.”
- S&P reports that China’s recovery could bring more defaults to light: https://www.spglobal.com/ratings/en/research/articles/201117-china-recovery-could-bring-more-defaults-11742601 “We don't anticipate this run of SOE distress will cause systemic risk, given the default rate in China is still well below 1% of outstanding bonds. However, the government will likely take steps to address investor concerns on information disclosure or poor governance--such as failure to pay even with cash at hand, or moving assets around to limit recovery.”
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Daniele Vitale Georgeson Head of Governance UK & Europe > 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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