21st Proxinvest Report on General Meetings and Shareholder Activism – Proxy Season 2017

Press Release

 

21st Proxinvest Report on General Meetings and Shareholder Activism – Proxy Season 2017

 

Paris, November 29th 2017

 

Proxy Season 2017 represented a milestone for shareholders in France: a record number of rejected resolutions, an accelerated pace of shareholder activism, the first implementation of a binding vote on remuneration policies, and a significant level of dilution from double voting rights

 

  • A record number of rejected resolutions

Since its founding in 1995, Proxinvest has never witnessed such a contentious proxy season in France. The number of rejected resolutions gained 52% to reach 85 resolutions in 352 general meetings. Interestingly, resolutions were rejected in more than 10% of companies. Shareholders were mostly concerned with authorizations to issue capital, which comprised 56% of rejected resolutions. Excessive dilution and the possibility to use said authorizations as anti-takeover devices were cited as reasons for opposition. Executive compensation came in second place at 19% of rejected resolutions followed by regulated agreements with related parties at 8%.

 

  • Double voting rights: an affront to shareholder democracy

Double voting rights played an instrumental role in the 2017 Proxy Season. Had the one-share/one-vote principle prevailed, an additional 28 resolutions would have been rejected, up from 48 and 32 in 2016 and 2015 respectively. Most alarmingly, among the 14 companies that adopted double voting rights in the SBF 120 Index, the average dilution was a staggering 22% of voting rights; an unfortunate legacy of the Florange Law. Far from their ostensible goal of promoting shareholder loyalty, double voting rights, a privilege denied to holders of bearer shares, have been exploited by large shareholders to control general meetings to the detriment of minority shareholders. Proxinvest has long advocated for eliminating double voting rights and bridging the gap between cash flow rights and voting rights.

 

  • Shareholder opposition at French general meetings did not lose steam in 2017.

True to form, Proxinvest recommended voting against 43% of the 6,867 resolutions appearing in its coverage universe during the season. Actual shareholder opposition was 5.43%, down slightly from 5.5% registered in 2016.  This remains higher than the 3% opposition rate observed across Europe (as measured by Expert Corporate Governance Service among the companies listed in the Europe STOXX 600 Index). Opposition rates were even higher in the CAC 40 Index, finishing the season at 6.5% as compared to 5.1% in the prior year period. Even more telling was the fact that opposition rates among minority shareholders reached 9.8%. Mirroring the trend observed among rejected resolutions, the most contested resolutions in 2017 largely concerned anti-takeover devices and executive compensation.

 

  • A record year for shareholder activism

Shareholder activism was on the rise this year in France. Proxinvest has yet to encounter a season with this many external resolutions (73). Shareholders at the former French Yellow Pages, SoLocal Group, were particularly active this year, proposing 56 resolutions in three general meetings. Their efforts did not fall on deaf ears as they were able to obtain more favorable terms on a complex, previously non-negotiable restructuring plan with the speculative funds holding the company’s debt, reject the free shares (6% of capital) awarded to the top brass, and most importantly, oust the company’s management (Robert de Metz and Jean-Pierre Remy). Activist fund Phitrust Active Investors rallied considerable support among minority shareholders at the Accor general meeting, where it barely fell short of overturning the company’s double voting rights regime (48% opposition rate). In this regard, Proxinvest supported the AMF (Autorité de Marchés Financiers) proposal to cut the capital threshold for proposing external resolutions in half.

 

  • Voting on strategic transactions at general meetings

After a scathing multifaceted public campaign against the lack of shareholder consultation on the Safran acquisition of Zodiac Aerospace, The Children’s Investment Fund (TCI) and its outspoken boss Sir Christopher Hohn were successfully able to lower the takeout price by over €1 billion. This confrontation brought the issue of shareholder say on strategic acquisitions to the forefront of governance discourse in a year that witnessed the acquisition of Christian Dior Couture by LVMH and media group Havas by Vivendi. Both acquisitions were carried out at rich multiples, accrued benefits to their parent companies and the bosses behind them (Bernard Arnault and Vincent Bolloré), and most regrettably, were not submitted to shareholders for approval. Echoing LR11.1 of the FCA (Financial Conduct Authority) handbook on Premium Listings in the LSE (London Stock Exchange), Proxinvest calls for a binding shareholder vote on all strategic transactions without the participation of related parties.

 

  • Inaugural year for the binding vote on Remuneration Policy (Article 161, Sapin II Law)

The Sapin II Law, which came into force in 2017, introduced an ex-ante binding vote on Remuneration Policy at general meetings; a historic development for corporate governance in France. Citing concerns over quantum and structure, Proxinvest advised shareholders to vote against 62% of these resolutions in the SBF 120 Index. Whereas no resolutions were rejected during the year, the remuneration policies at Atos and Renault came close with approval rates as low as 53% and 54% respectively. Shareholders were nevertheless far from complicit with 78 remuneration policies receiving opposition rates in excess of 20%. Tellingly, 8 companies were able to secure approval for their remuneration policies largely due to the support of their controlling shareholders (SFR, Ipsen, Bic, JC Decaux, Dassault Aviation, Iliad, Plastic Omnium and Dassault Systèmes). Key features driving shareholder approval were reasonable quantum, a demonstrated alignment with performance, and Board response time following a highly contested remuneration plan. In 2018, a binding vote on variable compensation will come into effect: in case of a rejection, no variable compensation will be paid for the year in question.

 

  • On-line voting to increase voter turnout

Participation rates continued their march upwards in 2017 reaching 73.55% vs. 68.94% in the previous year. Although this turnout is encouraging, only 56% of minority shareholders voted during the year. Exercising voting rights remains governed by an archaic and administratively cumbersome process that evidently discourages individual shareholders and non-residents from voting. It is also an unnecessarily costly process for professional investors. As advocated for in a recent AMF report  (“Pour un vote transparent et effectif en assemblée générale à l’ère du numérique”), a free voting process underpinned by a complete digitalization of custodial services and secure on-line voting holds great promise for promoting shareholder democracy.


Proxinvest is an independent proxy advisory and corporate governance consultancy. The report noted in the communiqué comprises 450 pages divided into two volumes. The first volume includes information on turnout at general meetings, opposition rates, a detailed analysis of voting results for different types of resolutions as well as a full review of the inaugural resolutions under the Sapin II Law. The second volume covers eight notable cases of shareholder activism during the season, an analysis of external resolutions and a synopsis of the principles and voting guidelines for 2018. In the annex, resolutions boasting opposition rates in excess of 20% are noted in detail.

 

Proxinvest reports are available for purchase through LDEL/JUSTICIA at the following address: http://proxinvest.ldel.fr/  –  Tel : 01.48.56.89.89 or librairie.justicia@gmail.com 

 

Contact :   Jehanne Leroy, Analyst in charge of this report (jleroy@proxinvest.fr)

Loïc Dessaint, CEO (ldessaint@proxinvest.fr)

 

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Posted in Compensations, Engagement @en, General Meetings Tagged with: , ,

Pernod-Ricard : riding high on the coattails of strong financial results

On November 9, shareholders gathered within the walls of the vast Salle Pleyel in Paris’ chic 8th arrondissment. The storied Art Deco concert hall, home of the Orchestre de Paris, played host to the Annual General Meeting (AGM) of famed French wines & spirits distiller, Pernod Ricard.  True to form, Proxinvest analysts descended upon the AGM to chronicle the events of the day.

 

Alexandre Ricard, scion of the Ricard Family, took to the stage in his capacity as Chairman and CEO to profusely thank his employees for achieving growth, year after year, reflecting the company’s expanding footprint in its key growth markets (US, China, India…). The crowd was regaled with impressive tales of organic growth, cash flow generation, and debt reduction; staples of a conventional AGM. The results, however, belied a track record of chronic underperformance (on notable operational metrics) vis-à-vis market leader Diageo Plc and the failure to uphold corporate governance best practices. Time and again, Proxinvest has publicly spoken out against the company’s practice of combining the CEO and Chairman positions (since 2015), the disproportionate number of Board seats held by its largest shareholders, and most importantly, its use of double voting rights with excessive terms (after a 10-year holding period). Unsurprisingly, this has made the maker of the famed eponymous pasitis one of the least shareholder-friendly companies in the CAC 40.

Read more ›

Posted in General Meetings, News @en Tagged with: , , , ,

Launch of Consultation : Best Practice Principles Group for Shareholder Voting Research

A consultation was launched today seeking views from investors and companies on whether the Best Practice Principles for Shareholder Voting Research and Analysis have been effective in ensuring the integrity and efficiency of the services provided by proxy advisors.

The Principles, first introduced in 2014, were developed by the industry as a voluntary standard. The aim was to promote a greater understanding of the role of shareholder voting research providers and provide more transparency about their activities.

 

Chris Hodge, Chair of BPP review Steering Group

Read more ›

Posted in Financial markets, News @en, Proxinvest Tagged with: ,

Havas-Vivendi marriage: Vincent Bolloré’s quest to create a media powerhouse

Posted in ECGS - Europe @en, Legal issues, M&A Tagged with: , , ,

Ethos News: Yes on more transparency to consultancy mandates of proxy advisors

SIX_SWISSEthos, the Swiss partner of Proxinvest within Expert Corporate Governance Services (ECGS), the unique European partnership of independent proxy advisory firms, has just released its response to the consultation of the SIX Swiss Exchange on revision of the Corporate Governance Directive in relation to consultancy mandates provided by proxy advisors. For the record, Proxinvest and its European partners do not sell consultancy mandates to issuers.

SIX Swiss Exchange has launched a consultation on a new provision of its Corporate Governance Directive. The consultation deals with the obligation of listed companies to publish the names of the proxy advisors to whom they have entrusted services other than proxy voting advice. In such a case, the fees paid to these proxy advisors must also be disclosed. Ethos supports this new provision which aims at reigning in conflicts of interest of certain proxy advisors.

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Posted in Financial markets, General Meetings Tagged with: , , , ,

Solocal Group’s CEO and Chairman ousted by shareholders

bdp

 

The commitment of two modest indivisual shareholders at the beginning of May, Pierre-Henri Leroy, the chairman of Proxinvest,and of his wife, with only 12,000 shares corresponding to € 13,000 euros, was enough to trigger this major change.

This had been precisely the target of the shareholders group gathered by Baudoin de Pimodan (pictured here) Read more ›

Posted in Compensations, Engagement @en, General Meetings

Renault entertains a Superbonus scheme project

In an article dated June 13 2017,  just two days before the Renault AGM in Paris, Reuters revealed that the French group was contemplating a special bonus plan designed by investment banker Ardea “to channel millions of euros in additional undisclosed bonuses to Carlos Ghosn and to other managers” of  Renault-Nissan : Read more ›

Posted in Compensations, General Meetings, Governance-BOD Tagged with: , , , ,

Say No to CEO’s 59% remuneration increase at VALEO

Valeo_CEO_CompensationHow should shareholders vote when a company has excellent financial performance, good transparency on executive remuneration but whose total compensation for the Chairman-CEO goes from € 3.3m in 2015 to € 5.3m in 2016, i.e. + 59%?

Simply say NO …

 

The total compensation of Jacques Aschenbroich, Chairman-CEO of the automotive supplier Valeo, rose 59% to € 5.3 million in 2016, 30% more than the median of the CAC40 index according to Proxinvest.

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Posted in News @en Tagged with: , , ,

Shareholder engagement for aligning SHELL with the Paris Climate Agreement

Shell_wind farms

On the 23rd of May 2017, SHELL Shareholders will be asked to approve a shareholder proposal submitted by Follow This to request the board to set and publish targets for reducing greenhouse gas emissions that are aligned with the goal of the Paris Climate Agreement

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Posted in ECGS - Europe @en, Engagement @en, General Meetings, News @en

Ira Millstein tells us the worries of US CEOs under TRUMP and the need for engaged Directors

Ira M. Millstein is a highly respected figure of corporate America. This great business lawyer has held a building role in the development of corporate governance  at is best, deserving the admiration from both  the Sell and the BUy Side ,  the big issuers such as GM , GE, Pfizer or DuPont and also the most important asset managers and pension funds.   Geoff Colvin of Fortune Magazine ask him at Columbia Law School about his last book, The Activist Director: Lessons from the Boardroom and the Future of the Corporation.
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Posted in General Meetings

Vivendi shareholders tackle Vincent Bolloré at the AGM

The extraordinary grip over all of his asset  by Vincent Bolloré was confirmed during the general meeting of Vivendi on 25 April by the adoption of all the resolutions, notably thanks to the double voting right and following very questionable threats against foreign shareholders made in 2015 by Vivendi…

A magician of language, a no-nonsense industrialist and a great financier, Bolloré never ceased to prove his talent. He might succeed at achieving what Jean-Marie Messier failed to s: the convergence of contents and carriers, the alliance between the creation and the media, and the appearance of a unique French media group facing the greatest Americans. With his disturbing but effective financial opportunism, the  problem with Vincent Bolloré is that he does not like to comply with the rules of good governance.

And  even his peers, the big French bosses blame him. Created in 2013, under the pressure of the French  government, Medef and Afep to extinguish the fire of abusive remuneration  new version of the “Code of Government of listed companies”, was written and a High Council of Corporate Governance (HCGE) was created, charged with enforcing the Code and privately admonishing offenders. According to the Les Jours website, which reveived some confidential stories,  the HCGE President Denis Ranque alleged that Vivendi had explicitly objected to Vincent Bolloré, chairman of a supervisory Board at Vivendi: ” You are more involved as a real executive officer than as the chairman of the supervisory Board responsible for overseeing but not managing the company and its group. “No one needs to see Bolloré in a general assembly to find out who caries the sheriff’s star, who is the operational boss and who specifically calls the managers of the various subsidiaries to tell publically he beautiful story of Vivendi.

Vivendi’s minority shareholders in fact strongly sanctioned the leader maximo for its multiple directorships at listed companies, while he was demanding to be  re-elected for a four-year term at the Supervisory Board: his score was only 82.12% and would have been only 62 to 66% of the AGM  votes without the artifice of the double voting right.

More clearly, the Say on Pay vote for of members of the Executive Board subjected to the iron hand of this authoritarian Bolloré paid the price for this poor governance. The remuneration of the Chairman of the Management Board, Arnaud de Puyfontaine (ie € 3.5 million for 2016) was deemed excessive and did not reach 75% of the votes,  as those of MM. Hervé Philippe (€ 2.4 million) and Stéphane Roussel (€ 2.7 million). Ironically, to accept the constant involvement in the management by the Chairman of the Supervisory Boardwould appears to be the essential contribution of these the Executive Board members…

Without the double voting rights Vivendi could no longer increase its capital.

Two years ago, the Bolloré group held 10.20% of the share capital of Vivendi, ie 138,976,805 shares.

On the day of the general meeting held on April 25, the Bolloré group held at least 20.65% of the share capital (257,689,013 of the 1,247,888,683 shares ) and, thanks to double voting rights 40, 6% of the 975 610 998 votes of the ordinary general meeting.

Several resolutions were passed with less than 75% of the votes ie less than 731,708,248 votes and would have got  60% of the votes without the Bolloré Group’s 138,976,805 double voting rights. They apparently almost all passed, even without the presumed vote of general support of the 200 727 450 double voting rights of which the 15 million double voting rights of the plan of the employees. Resolution 14 appointing Yannick Bolloré only garnered 697,709,447 votes, or only 71.52% of the vote: even without the support of the total of 200 million voting rights double its score “naked” would finally have largely exceeded 387,441 774 votes needed for the threshold of 50% of the votes cast.

But the extraordinary financial resolution to increase the capital with DPS for € 750 million, Resolution No. 21, adopted at 70.1% (691,382,945 votes) with the support of Proxinvest, would undoubtedly not have passed since it would then not have reached the 516,537,373 shares required to reach the 66.7% threshold without the double voting right.

Although this very ambitious financial resolution did not seem to be a problem, Proxinvest insists that double voting rights remained a very perverse protectionnist provision.

 

April 26 2017

Posted in Compensations, ECGS - Europe @en, General Meetings, Governance-BOD, Legal issues, News @en Tagged with: , ,

Best Practice Principles Group for Shareholder Voting Research announces Principles Review, Independent chairman

Proxinvest and the other charter signatories to the Best Practice Principles for Shareholder Voting Research & Analysis (the “BPP Group”) announced that the Principles will be reviewed by the end of 2017 following a public consultation overseen by Chris Hodge, the new Independent Chairman of the BPP Group’s Review Committee. This update will include addressing the transparency requirements for proxy advisors outlined in the amendments to the revised EU Shareholder Rights Directive 2007/36/EC, adopted on 3 April 2017.

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Posted in News @en Tagged with: ,

Accor’s Board unanimously maintains its double voting right: Proxinvest withdraws its support advice on Nicolas Sarkozy as independent director  and on Sébastien Bazin as Chairman & CEO of Accor.

Posted in Compensations, Engagement @en, General Meetings, Legal issues, News @en Tagged with: , , , , ,

Credit Suisse : Ethos demands changes to the composition of the Board

Credit suisseIn the run-up to the general meeting of Credit Suisse on 28 April 2017, Ethos opposes the re-election of several board members as well as the discharge of the board. In addition, in light of the poor results and the concerns regarding the bank’s capital ratio, Ethos also refuses the remunerations of the governing bodies and the dividend proposed by the board.

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Posted in ECGS - Europe @en, General Meetings, News @en Tagged with: , ,

Proxinvest joins investor group to urge SEC not to delay CEO pay ratio disclosure

CEOPayRatioIn the U.S. the CEO-to-worker compensation ratio increased from 20 to more than 300 over the last 50 years (1965-2014) according to the Economic Policy Institute.

Mandated by the 2010 Dodd-Frank law, the requirement to disclose CEO pay ratio went into effect in January and the ratio is expected to be disclosed in many companies’ 2018 proxy statements.

Of course, U.S. CEOs, among the most paid in the world, did not welcome the rule and most of them definitely refused any comparison with the pay level of their own employees. Their  powerful lobby group, Business Roundtable, the association of chief executive officers of leading U.S. companies, chaired by Jamie Dimon, the chairman and CEO of JP Morgan Chase,   has actively lobbied against such disclosure with some success since the  new SEC chairman Piwowar said in February the SEC was seeking comments about whether to delay the rule.

Proxinvest believes that CEO pay ratio disclosure aims to help investors better gauge the reasonableness of CEO pay. Therefore Proxinvest decided to join an investor group with $3Trln in assets to urge SEC not to delay CEO pay ratio disclosure. Read more ›

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