May 12, 2021 | Editor: Martin Wennerström
US sees rise in failed say-on-pay votes
The US 2021 proxy season has seen an early surge in failed say-on-pay votes amidst greater scrutiny on executive compensation. Most recently, US conglomerate General Electric (“GE”) had its say-on-pay proposal rejected by 58% of the votes cast at its May 4 AGM; in addition, the remuneration committee chairman faced significant dissent regarding his re-election. The opposition came amidst widespread criticism over large equity awards made by GE to top executives in 2020 despite “difficult cost-cutting actions” taken in response to the COVID-19 pandemic. Notably, GE granted Chairman and CEO Larry Culp a USD 57 million special equity grant in connection with a contract extension, with the award vesting subject to share price performance over four years.
Days before GE’s AGM, US telecom giant AT&T faced a similar challenge as a majority of the votes were cast against its say-on-pay proposal. In 2020, the wireless carrier granted incoming CEO Jason Kilar a USD 48 million sign-on equity award vesting subject to continued employment only and a USD 9 million time-based equity grant was awarded to EVP and General Counsel David McAtee. As US say-on-pay votes introduced by the Dodd-Frank Act in 2010 are advisory in nature, it remains to be seen how companies will respond to the dissent.
GE | Bloomberg | WSJ| SEC (1)| SEC (2)| SEC (3)| SEC (4)
Nissan sells Daimler stake
On May 5, 2021, Nissan Motor Co. announced the sale of its entire stake in Daimler AG for EUR 1.15 billion, with the proceeds to be used to boost “business competitiveness, including investments to promote electrification.” The announcement came weeks after alliance partner Renault disclosed the divestment of all its shares in Daimler to reduce debt. Both Nissan and Renault stated that their partnership with Daimler remains unaffected despite the ownership changes. The three automakers swapped stakes in each other in 2010 under the leadership of Carlos Ghosn, laying the foundations of a strategic partnership originally limited to three projects but subsequently expanded to include ten more. The development occurs as the Renault-Nissan-Mitsubishi alliance has been struggling to rebound after Ghosn’s November 2018 arrest and the major impact of the COVID-19 pandemic on the auto industry.
DW | Bloomberg | Renault Group | Nissan | Alliance 2022
DuPont faces shareholder backlash on ESG issues
Over 80% of the votes cast at the 2021 AGM of US chemicals company DuPont de Nemours were in favor of two shareholder proposals opposed by management. One resolution was submitted by the New York City Teachers’ Retirement System and called for DuPont to disclose a Consolidated EEO-1 Report breaking down its workforce by race, ethnicity, and gender. The motion was aimed at holding the company accountable for “public statements condemning racism” and “connecting [its] words to concrete actions.” The second proposal was submitted by non-profit group As You Sow and requested that the company issue an annual report disclosing both the amount of plastic it releases into the environment annually, as well as the effectiveness of its policies to reduce plastic pollution.
SEC | SEC (2) | Bloomberg | NYC Comptroller
Jack Ma business empire under heightened scrutiny
China is reportedly probing how Jack Ma received quick approvals for the USD 35 billion IPO of Chinese fintech giant Ant Group, an offering abruptly halted in November 2020 over regulatory concerns. The investigation is said to focus, inter alia, on regulators and state firms, with Ma having allegedly been prohibited from leaving China until Ant Group’s restructuring and the ongoing government investigation are finalized. Recently, in April 2021, Ant Group’s parent company Alibaba was hit with a record USD 2.8 billion fine for having allegedly abused its leading market position. Reports have surfaced that Jack Ma is exploring options to divest his stake in Ant Group, a rumor denied thus far by the company.
WSJ | WSJ (2) | Regulation Asia | CNBC
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.