June 17, 2021 | Editor: Martin Wennerström
Netflix shareholders revolt over board inaction
Netflix faced significant backlash at its 2021 AGM, as shareholders expressed discontent over the streaming giant’s governance structure and unresponsiveness towards past non-binding shareholder proposals. Following a recommendation by proxy adviser Institutional Shareholder Services to withhold votes on their election, the four board nominees each received between 27.2% and 56.6% support. Moreover, the management say-on-pay proposal received only a razor-thin majority. Despite the board’s opposition, shareholders approved two out of the three non-binding shareholder proposals, with over 90% and 80% of votes supporting the resolutions that concerned a simple majority voting standard and political disclosures, respectively. The 2021 AGM marked the fifth time that a majority of votes approved the recurring simple majority vote resolution, which would replace the firm’s supermajority voting standard for articles and bylaw amendments. Notably, Netflix maintains a restrictive shareholder rights regime, with shareholders being unable to call special meetings or act in writing, while directors are elected for multiyear terms and can be removed only for cause.
Market Watch | S&P Global| Netflix (1) | Netflix (2)
Probe finds Toshiba interfered with shareholder vote
An independent investigation into Toshiba’s 2020 AGM found that the company sought the help of Japan’s Ministry of Economy, Trade and Industry to influence shareholders into supporting management proposals and opposing activist shareholder proposals. Notably, the probe was launched following months of intense investor pressure, marking a rare success for shareholder activism in Japan. In response to the report, Toshiba amended its slate of board nominees for the upcoming AGM and nominated three new outside directors.
Morrison shareholders revolt over executive pay
At Wm Morrison’s 2021 annual meeting, 70% of votes opposed the advisory approval of executive remuneration. Shareholders revolted over the remuneration committee's decision to apply "selective discretion" in calculating executive awards to adjust for the direct costs of the COVID-19 outbreak. Responding to the dissent, the company stated that it performed “exceptionally well” in 2020, and that their decision was “the right course of action” in light of the COVID-19 pandemic. Going forward, the remuneration committee will reengage with investors while continuing to defend its decision.
Market Watch| Morningstar | Wm Morrison
Germany adopts new audit and governance rules
In July 2021, the new German Financial Market Integrity Strengthening Act (FISG) will come into effect. Prompted by the impact of the Wirecard affair, the FISG will now require all listed companies and other public interest entities to establish an audit committee that would include at least one accounting expert and one auditing expert. Moreover, companies will be explicitly required to establish internal control and risk management systems. Finally, the maximum term of the key audit partner will be reduced from seven to five years and the exemption to extend the 10-year maximum engagement term for audit firms will be abolished.
Governance in Brief – March 23, 2023
SVB Financial Group sued after the collapse of Silicon Valley bank unit SVB Financial Group, the parent company of Silicon Valley Bank, and two of its top executives, CEO Greg Becker and CFO Daniel Beck, are being sued by shareholders following the bank’s collapse. The lawsuit, filed by retail shareholder Chandra Vanipenta on behalf of a group of shareholders, accuses the bank and its two top executives of filing false and misleading financial reports.
Governance in Brief – March 16, 2023
Canada introduces climate reporting framework Canadian regulators have issued new guidance for the country's banks and insurance companies to better manage climate-related risks. The framework, which requires disclosure on governance, strategy, risk management, and metrics related to financial institutions’ greenhouse-gas emissions, was first drafted in 2022.
Governance in Brief – March 9, 2023
The U.S. Congress has passed a resolution repealing a Department of Labor (“DOL”) rule empowering retirement plan managers to consider climate change and ESG factors in their investment decisions. The rule, introduced by the Biden administration, falls under the Employee Retirement Income Security Act (“ERISA”), a federal law which sets protection standards for participants in private pension plans. Biden’s ruling entered into force in January this year, overturning prior Trump-era DOL rules that limited pension fund managers to restrict their investment strategies to “pecuniary factors.”
Governance in Brief – March 2, 2023
Indian regulator proposes enhancement to ESG disclosure rules India’s securities and market regulator SEBI has released a new ESG disclosure framework for public consultation. The proposed regulations impact India’s 1,000 largest companies by market capitalization, ESG funds and ESG ratings providers. For the largest companies, the regulator proposes areas of assurance of ESG disclosures and reporting and assurance of ESG footprint of the supply chain. The proposals expand on the 2021 Business Responsibility and Sustainability Report (“BRSR”) guidelines and propose mandatory assurance of certain KPIs under ESG disclosure. The KPIs contain intensity ratios such as GHG emissions, water consumption, and waste generation. For supply chain, SEBI will introduce a comply-or-explain approach for the top 250 companies starting in 2024, and assurance beginning in 2025. For ESG funds, SEBI proposes that at least 65% of AUM be invested in companies reporting on comprehensive BRSR and provide assurance on BRSR core disclosures. Under the proposed rules, ESG rating providers should also provide a “core ESG rating” based on assured information in addition to their own products.