Governance in Brief
February 20, 2020 | Editor: Martin Wennerström
JPMorgan Chase faces criticism from climate activists
Shareholder advocacy group Majority Action is urging JPMorgan Chase shareholders to oppose the reelection of former ExxonMobil CEO Lee Raymond at the bank’s May 2020 AGM, labeling him as “the architect of ExxonMobil’s climate denial strategy” and “uniquely poorly qualified to provide the oversight needed to protect long-term shareholder value.” Raymond, 81, has been serving on the Wall Street bank’s board for 33 years and has served as the bank’s lead independent director since 2001. While he left his former ExxonMobil position in 2005, Majority Action draws attention to what they characterize as Raymond’s continuing financial interest in the fossil fuel industry and his past climate denialism.
The development occurs as several activist shareholders, including Trillium Asset Management, have reported that JPMorgan Chase requested that their proposals focusing on climate issues be excluded from the 2020 proxy materials. Notably, CEO Jamie Dimon chairs the board of the Business Roundtable (BRT), a US non-profit association that issued a 2019 statement redefining the purpose of a corporation to include, inter alia, respecting the environment.
Italy releases new governance code
On January 31, 2020, Italy launched a new Governance Code (the “2020 Code”), which is meant to steer issuers towards “sustainable success” and long-term value creation. The 2020 Code introduces tailored recommendations for small, medium and controlled companies “to facilitate their access to listing.”
To this end, the revised Code recommends that large companies (defined as having over EUR 1 billion in market capitalization) with a dispersed ownership have a majority independent board and large companies with a controlled status have a one-third independent board, with all other companies to have at least two independent regular board members. Moreover, the 2020 Code allows the classification of the Chairman as independent, – while this had been ruled out by the 2018 Code. The 2020 Code will enter into force in 2021, with disclosure requirements starting in 2022.
Samsung Electronics Chairman resigns
On February 14, 2020, Samsung Electronics announced the resignation of Chairman Lee Sang-hoon, noting that a replacement will be appointed soon. The news comes two months after Lee was sentenced to 18 months in prison over violating labor laws and in the midst of the bribery trial involving the South Korean conglomerate’s heir-apparent, Lee Jae-yong. The latter is charged with bribing former president Park Geun-hye, having been sentenced in 2017 to five years in prison in the case and released after less than one year in detention when a court reduced the sentence by half and suspended it for four years. The flagship company of the Samsung group is likely to see leadership changes at its 2020 AGM, expected to take place in March.
Tesla closes USD 2 billion stock offering
On February 19, 2020, Tesla announced that it had raised USD 2.31 billion through a common stock offering, with the proceeds to be used to “strengthen [the] balance sheet, as well as for general corporate purposes.” The prospectus was released on February 13, with the carmaker revealing in its annual report published the same day that the Securities and Exchange Commission “issued a subpoena seeking information concerning certain financial data and contracts.” Tesla’s stock price surged by 14% since the announcement, having increased by more than 150% over the past three months. Under the terms of his massive 2018 pay package, CEO Elon Musk will pocket USD 346 million if Tesla maintains an average market value of USD 100 billion over one- and six-month measurement periods.