Governance in Brief
March 19, 2020 | Editor: Martin Wennerström
COVID-19 disrupts proxy season
The COVID-19 pandemic is challenging firms to plan and carry out their 2020 AGMs in a manner that respects both local government restrictions and the health of attendees. At least one company, the telecommunications company Nokia, has cancelled its AGM in response to a ban on public gatherings. Others, such as supermarket chain Ahold Delhaize, will scale back ancillary activities such as lunches and post-meeting receptions. Steel producer SSAB has encouraged retail shareholders to vote by proxy and has announced that it will minimize both the length of the event and the attendance of employees, executives, and board members. In Canada, Telus has sought and received a court order allowing it to hold a virtual AGM.
Similarly, regulators are now issuing guidance to issuers on how to respond to the crisis. The US SEC has announced increased flexibility surrounding the rescheduling, relocation, and virtualization of meetings, while ensuring that shareholders are duly informed of such changes. The UK FRC has published a brochure clarifying which measures can be taken within the existing UK legal and regulatory framework. These measures are expected to intensify in step with the virus’ spread, although additional action may be required if the crisis lasts through June 30, by when most worldwide issuers would normally be required to have held their AGMs.
Following deaths, Shell slashes CEO pay
Royal Dutch Shell (“Shell”) CEO Ben van Beurden’s EUR 9.96 million remuneration for 2019 represents a 51% reduction from its 2018 level. According to the 2019 annual report, Buerden’s pay was discretionarily reduced as a result of seven fatalities that the firm had suffered during the year – a more than threefold increase relative to 2018. Similar downward adjustments were made to around 150 other senior executives’ payouts, in order to reflect their collective responsibility for safety. Shell’s safety track record, and in particular the link between safety outcomes and executive remuneration, has come under shareholder scrutiny in recent years. Approximately a quarter of votes were cast against the remuneration report at the firm’s 2018 AGM, driven in large part by a perceived failure to adjust payouts following a 2017 tanker truck explosion that claimed over 200 lives.
eBay faces renewed pressure from activist investor
US e-commerce firm eBay is facing yet another activist campaign, after hedge fund Starboard Value LP reportedly nominated a minority slate of directors to its board. The development occurs after eBay narrowly averted a proxy fight with Starboard and Elliott Management Corp at its 2019 AGM by agreeing to appoint two directors, with the firm having divested Pay Pal in 2014 after a campaign initiated by Carl Icahn. In February 2019, Starboard released a letter to eBay urging the firm to separate its classifieds group and implement “a more comprehensive and aggressive operating plan”. eBay responded that it is “taking all appropriate steps to drive the value of the company”, highlighting its decision to return capital to shareholders via share repurchases and its first dividend pay in June 2019.
Wells Fargo Chair resigns
Wells Fargo has announced the abrupt resignation of Chair Elizabeth Duke and audit committee Chair James Quigley, following the release of a damning congressional report into the bank’s compliance failures. The report of the US House Committee on Financial Services (“the committee”) outlines the results of an investigation into Wells Fargo’s compliance with five settlement agreements reached between 2016 and 2018. The latter revealed the board’s alleged failure to oversee and hold management accountable, while also stating that former Wells Fargo CEO Timothy Sloan gave “inaccurate and misleading” testimony. The resignations occurred two days before both Duke and Quigley testified before the committee in the first of three hearings examining the “megabank’s harmful practices.”