Governance in Brief
May 21, 2020 | Editor: Martin Wennerström
Ford brushes off shareholder dissent
At its May 14, 2020 AGM, Ford saw 35% of votes cast in favor of a proposal to abolish the class of supervoting shares held by the founding family. This was a predictable outcome, as calls for the carmaker to adopt the ”one share, one vote” principle have been securing the similar levels of support over the past decade. Shareholders are raising concerns over the concentration of corporate control among insiders “disproportionately to their money at risk”, as the company granted class A shareholders one vote per share whilst giving 40% of the voting rights to the class B shareholders – the Ford family. Each class B share currently carries 36.751 votes.
Ford went public in 1956 with this capital structure that enabled the founding family to hold 40% of the voting power while owning only 5.1% of the outstanding shares, after being exempted from NYSE’s 1926-1986 ban on dual class share IPOs. Although near-controlled companies are less likely to face activist campaigns, they have historically also been subject to activist pressure. Against the backdrop of prolonged shareholder dissatisfaction and declining profits, it remains to be seen whether Ford will become an activist target.
Standard Life Aberdeen shareholders revolt against virtual meetings
On May 12, 2020, UK asset manager Standard Life Aberdeen saw its shareholders defeat a proposal allowing future shareholder meetings to be held remotely. The resolution faced dissent from 37% of the votes cast, failing to secure the required 75% supermajority. The opposition was reportedly prompted by fears that the company could permanently shift to online meetings, as well as by concerns over Standard Life Aberdeen’s decision to hold the 2020 AGM without any live Q&A.
Notably, two thirds of all FTSE100 constituents decided to hold their 2020 AGMs “behind closed doors”, prompting criticism over a perceived lack of accountability to shareholders. These developments highlight the controversial nature of virtual meetings, brought to the fore by the COVID-19 pandemic and the resulting restrictions on public gatherings.
Uber under fire over executive pay
Nearly one in three votes cast at Uber’s first post-IPO AGM dissented on executive compensation, after proxy advisors voiced concerns over CEO Dara Khosrowshahi’s USD 42.4 million 2019 pay package. CtW Investment Group, an advisory firm working with union-sponsored pension funds which are “substantial Uber shareholders”, urged shareholders to reject the proposal based on the “overly generous” sign-on package Khosrowshahi received in 2017 “on terms that do not encourage long-term retention.”
CtW noted that the latter stands to pocket over USD 100 million if Uber reaches and maintains a USD 120 billion market cap for over 90 days. The development occurs as the ride-hailing company announced massive layoffs to cope with the impact of the COVID-19 pandemic.
Exxon under pressure on climate
US oil and gas giant Exxon blocked six climate-related resolutions from being included on its May 27, 2020 AGM proxy ballot, amidst mounting criticism over its perceived failure to act on the climate crisis. Legal & General Investment Management, which has USD 1.5 trillion under management and owns approximately 0.5% of Exxon’s shares, announced that it would vote against the Chairman’s election due to concerns over the company’s “approach to climate change, political lobbying and board independence.”
Exxon is under growing scrutiny for allegedly lagging industry peers such as BP and Shell on its climate change-related commitments, setting the stage for a potentially stormy 2020 AGM.