Governance in Brief
March 5, 2020 | Editor: Martin Wennerström
UBS overhauls compensation policy over tax fraud case
On February 28, 2020, Swiss banking giant UBS Group AG (“UBS”) revealed that it had overhauled its remuneration policy in response to the ongoing probe into whether it assisted clients in evading taxes. A French court fined UBS EUR 3.7 billion in February 2019 in the case, with an appeal trial scheduled to commence in June 2020. According to the revised policy, the trial’s outcome will decide the bonuses of CEO Sergio Ermotti, Chairman Axel Weber and other executives. CEO Ermotti already saw his 2019 pay go down by over 11% as UBS missed its earnings goal, and now stands to lose as much as CHF 1.5 million, should the appeal fail.
The developments occur two months ahead of the bank’s annual meeting and are perceived as an attempt to address the shareholder revolt witnessed at the previous AGM, which saw a majority of votes cast against discharging both directors and executives. The last time shareholders denied discharge was for FY2007, as UBS incurred massive losses amidst the financial crisis. The bank announced in February 2020 that ING CEO Ralph Hamers will take over as CEO effective November 1, 2020.
NMC Health fires CEO amid accounting scandal
Abu Dhabi-based healthcare group NMC Health PLC (“NMC”) announced on February 26, 2019 that it had ousted CEO Prasanth Manghat and granted CFO Prashanth Shenoy extended sick leave after an independent review revealed potential discrepancies in its finances. The company’s shares were temporarily suspended from trading the next day. The investigation identified supply chain financing arrangements guaranteed by NMC, and apparently used by entities controlled by NMC’s founder and a major shareholder, despite being disclosed neither to the board nor to the market. The firm’s share lost more than 60% of its value since Muddy Waters stated in December 2019 that it had “serious doubts about the company’s financial statements.” NMC appointed COO Michael Davis as interim CEO and announced that the release of its 2019 results would be postponed.
Tech giants face backlash over human rights
Apple’s 2020 AGM saw over 40% of votes cast in support of a proposal urging the tech giant to annually report on its “policies on freedom of expression and access to information”, as well as on its response to demands by state actors that would be likely to limit “free expression or access to information.” The resolution’s supporting statement criticized the company’s app removals in China, noting that the firm “cooperated with requests made by the Government of China to restrict free expression.” In November 2019, human rights organization Amnesty International published a report arguing that Facebook & Google’s “omnipresent surveillance of billions of people” poses unprecedented danger to human rights, calling for them to “transition to a rights-respecting business model.”
Hudson’s Bay Company goes private
On March 3, 2020, Canadian retailer Hudson’s Bay Company (“HBC”) announced that its go-private deal had been completed and that its shares would be delisted from the Toronto Stock Exchange the following day. Concurrently, the firm reported that it had combined the CEO and chairman positions, with Chairman Richard Baker assuming the role of CEO. Baker had led the bid to take the company private, having also steered the purchase of HBC in 2008 and taken the company public four years later. The events mark the end of a month-long takeover battle between the Baker-led consortium and private-equity firm Catalyst Capital Group, with over 98% of HBC shareholders voting in favor of the former’s offer at the February 27 special meeting.