Governance in Brief
March 28, 2019 | Editor: Martin Wennerström
SEC sues Volkswagen over defrauding US bond investors
In the latest fallout from Dieselgate, the Securities and Exchange Commission (“SEC”) filed a lawsuit against Volkswagen and its former CEO Martin Winterkorn on March 14, 2019, over an alleged defrauding of US bond investors. The lawsuit alleges that Volkswagen made false and misleading statements to investors and underwriters in connection with bonds and asset-backed securities sold in the US between April 2014 and May 2015, allowing the German carmaker to pay lower interest rates, and thus “defrauding investors out of hundreds of millions of dollars.” The SEC’s complaint seeks that VW “disgorge all ill-gotten gains” resulting from the alleged misconduct, civil penalties, as well as that Martin Winterkorn is barred from serving as an executive or director of a public company.
Martin Winterkorn, currently also under investigation by German prosecutors, stepped down as Volkswagen’s CEO days after the fraud surfaced. Nevertheless, the company’s supervisory board today remains largely unchanged. Although the former CEO is unlikely to face US prosecutors, as Germany does not extradite its own citizens, his indictment would likely convey the message that the car giant’s misconduct in the emissions scandal was rooted at board-level.
AMP cuts executive bonuses
Australian wealth manager AMP has disclosed that the it will not be awarding short-term bonuses to its leadership team for FY2018, reportedly to avoid a potential board removal. At the latest AGM, over 60% of votes were cast against the remuneration report. Under Australian legislation, if more than 25% of votes oppose the remuneration proposal for two consecutive years, shareholders may request the re-election of the whole board under the “two-strikes” rule.
AMP has faced significant changes at board and management level following the launch of the Royal Commission investigation at the beginning of last year, including the departure of both its CEO and Chairman. The company has been accused of charging its customers without providing any actual service and providing misleading information to the Australian Securities and Investments Commission (ASIC).
Panalpina investor opposes changes to voting rules
Swiss company Panalpina will hold an EGM on April 5, pursuant to a request by major shareholder the Ernst Goehner Foundation (“EGF”), which holds 46% stake in the company. The shareholder seeks to remove the 5% voting rights ceiling that is currently in effect under the company’s articles of association. EGF has been grandfathered out of the voting ceiling, triggering activist investor Cevian, which holds of a 12% stake, to call for the dismissal of the exemption. Cevian is now opposing EGF in its attempt to implement the one share-one vote system, citing the need to protect minority shareholders. More recently, proxy adviser ISS announced that it has recommended against the proposal to lift the vote restriction.
Google fined EUR 1.5 billion over anti-competitive practices
On 20 March, the European Commission (“EC”) announced that it had imposed a EUR 1.5 billion fine on Google for abusing its market dominance in online advertising. The alleged abuse occurred from 2006 to 2016, during which the EC claims that the US tech giant generally controlled over 85% of the online advertising space. The EC argues that Google imposed restrictive clauses on third-party websites to prevent or limit competitors placing search ads. Moreover, Google allegedly exercised an effective veto rights over publishers’ ability to alter how competitors’ ads were displayed. This is the third time since 2017 that the EC has fined Google for abusing its dominance. The penalties in the three cases of misconduct now amount to EUR 8.3 billion.