Governance in Brief
April 30, 2020 | Editor: Martin Wennerström
Air France-KLM receives bailouts, cuts executive compensation
Air France-KLM has announced that CEO Benjamin Smith will waive his 2020 annual bonus, after Dutch finance minister Wopke Hoekstra requested compensation cuts as the company seeks EUR 10 billion in government aid. Last month, Smith took a 25% pay cut as a result of the COVID-19 epidemic. Netherlands’ KLM CEO Pieter Elbers will also forgo his annual bonus and 20% of this year’s remaining compensation. The airline has recently caused turmoil with the publication of the CEO’s 2020 revised remuneration policy, to be put to a shareholder vote at the upcoming May 26 AGM. The metrics for the CEO’s annual bonus, which are 70%-dependent on the group’s financial performance, have reportedly been updated to focus on cash conversion and securing financial support, rather than a now-removed debt reduction target.
The French and Dutch states, each of which holds around a 14% stake in the company, have both announced bailout packages for the airline. France will, subject to European Commission approval, provide EUR 7 billion consisting of a 90% state guarantee on a EUR 4 billion syndicated loan and a EUR 3 billion direct shareholder’s loan. For its part, the Netherlands will provide an emergency aid package of up to EUR 4 billion.
India limits FDI from neighboring countries
On April 18, the Indian Government announced the amendment of its foreign direct investment (FDI) policy in order to avoid “opportunistic” acquisitions of Indian companies in the wake of the COVID-19 pandemic. The amendment will require the State’s approval for any FDI coming from India’s neighboring countries, which include China, Pakistan and Bangladesh, no matter the investment’s size or the targeted industry. While the investments from the latter two countries were already regulated, the inclusion of the remaining neighbors is seen as a move to limit China’s influence, following similar decisions by the European Union and Australia, prompting China to accuse India of breaking World Trade Organization (WTO) rules. Between 2000 and 2019, FDI from China and Hong Kong, also subject to the new restrictions, in India was approximately USD 6.5 billion.
Starboard exits proxy fight with eBay
On April 16, US-based e-commerce giant eBay and hedge fund Starboard Value revealed in a joint statement that the latter will not put forward its own nominee slate at eBay’s next AGM, planned for June. The announcement comes after eBay appointed Jamie Iannone as CEO, effective April 27. Iannone replaces Devin Wenig, who left the company in September 2019, citing strategic disagreements with the board. The IT company will also add an independent director to its board in the upcoming months, potentially from the activist investor’s list of nominees. Since 2019, eBay has faced pressure from Starboard and Elliott Management to re-organize, leading to the USD 4 billion sale of online ticket business StubHub. eBay’s share price was up 1% following the joint statement.
FTSE100 companies pressured to hold virtual AGMs
UK responsible investment campaigning organization ShareAction has called for the top 100 companies listed on the London Stock Exchange to organize virtual AGMs in 2020. The group claims that two thirds of the AGMs announced so far by FTSE100 companies will not ensure shareholders’ access at the meetings, amid the COVID-19 pandemic.
ShareAction is requesting that companies give shareholders the possibility to ask questions online, before casting their vote. In addition to denying shareholders the opportunity to question board and management decisions in a high-risk context, the organization also asserts that women are underrepresented in the process given a limited gender diversity at the head of FTSE100 companies.