Key Governance Developments - May 2021

Shareholders keep up pressure on oil company emissions

Shareholder pressure on oil and gas producers to set out details of strategies to reach net zero emissions is growing, but bids to establish hard targets for emission reductions have had mixed results. A resolution that would have required BP to set targets in line with the Paris Agreement goals was backed by only 20% of investors, albeit more than double the proportion that endorsed a similar resolution two years earlier. However, 58% of shareholders in US group ConocoPhillips have voted in favour of setting targets for Scope 3 emissions, resulting from use of the company's products, a step widely embraced in Europe but by few US energy groups.

Warren Buffett blocks ESG disclosure resolutions from Berkshire Hathaway shareholders

Warren Buffett and his board failed to support shareholder resolutions calling on his $630bn conglomerate Berkshire Hathaway to carry out disclosures on environmental and diversity issues for its activities and subsidiaries. BlackRock has publicly criticised Berkshire Hathaway and voted in favour of the ESG resolutions, but Buffett holds around one-third of the voting stock and was supported by other shareholders. Separately, proxy adviser Institutional Shareholder Services recommended that shareholders withhold their votes for members of the company’s compensation committee because of concerns over executive pay. Berkshire Hathaway has also been criticised for the vagueness of its succession plan for Buffett, who will be 91 in August.

Best source: Reuters

Shareholders revolt against big executive bonuses during pandemic

Shareholders are increasingly voting against the awarding of execessive bonuses to CEOs and other executives during the Covid-19 pandemic. UK estate agent Foxtons, BAE Systems, AstraZeneca and British American Tobacco face calls from institutional investors including Legal & General Asset Management and Fidelity International to limit bonuses, particularly if their businesses have been hard hit by lockdown restrictions. But some remuneration committees seem unconcerned. Norwegian Cruise Lines lost $4bn last year, but CEO Frank del Rio received $36.4m, and Yum! Brands awarded CEO David Gibbs a one-off payment of $9.5m, despite the group missing targets as earnings dropped 25%.

Best source: Financial Times (subscription required)

See also: Financial Advisor

See also: CBS News

New Credit Suisse chairman Horta-Osório promises review as risk committee head quits

New Credit Suisse chairman António Horta-Osório has promised to conduct an urgent review of risk management, strategy and culture at the bank after recent losses arising from its prime brokerage services to family office Archegos Capital, as well as to investors in Credit Suisse funds that held Greensill Capital's bonds. Credit Suisse has announced that Andreas Gottschling will be stepping down from his position as chairman of the board's risk management committee.

Best source: Financial Times (subscription required)

See also: Finews

See also: Handelsblatt (subscription required, in German)

Carbon emission risk moving up corporate priority list

The issue of carbon risk is rapidly moving up the priority list for companies and their investors. Research by environment disclosure body CDP indicates a sharp upward trend in companies accounting for the cost of carbon. Of nearly 6,000 firms surveyed last year, more than 2,000 said they already included or were planning to include carbon risk in their business plans – an 80% increase in five years.

Best source: CDP

Fitch adjusts ESG ratings over governance and reporting issues

Fitch Ratings has amended its assessment of various financial institutions covered by the interactive dashboard displaying its ESG Relevance Scores, updating scores for 390 of the 1,392 institutions it covers worldwide. Ratings for Jefferies Financial Group, Provident Financial and Avation were adjusted negatively as a result of ESG issues. Inversiones Atlantida was upgraded from a rating of five to a four in response to improvement in the clarity and timing of its financial reporting, while eight banks were moved from a score of four to three, reflecting Fitch's assessment that governance risks now have a low impact on their credit ratings.

Best source: Fitch Ratings

BP investors again reject emissions targets resolution

Only 20.6% of shareholders in oil company BP have voted for a resolution requiring the company to set tougher emission reduction targets proposed by the Dutch group Follow This and to publish short-, medium- and long-term reduction targets in line with the Paris Agreement. A previous vote in 2019 gathered support from 8.4% of shareholders. BP has already announced plans to achieve net zero emissions and reduce the carbon intensity of its products by 2050. A majority of shareholders in ConocoPhillips have voted for a resolution requiring it to set Scope 3 emissions targets, which include those resulting from the use of its products.

Best source: Reuters

See also: Reuters

UK regulator confirms formal investigation of Greensill Capital

CEO Nikhil Rathi says the Financial Conduct Authority is formally investigating potential criminal issues leading to the collapse of Greensill Capital, and co-operating with authorities in other jurisdictions including Germany, Australia and Switzerland. The UK regulator is also examining the activities of US-based Mirabella Advisers, for which Greensill Capital Securities acted as an appointed representative. Documents released by the UK parliament's Treasury committee confirm that former prime minister David Cameron lobbied extensively to have Greensill Capital included in a Covid-19 loan scheme, with repeated texts and phone calls to senior ministers including finance minister Rishi Sunak.

Best source: Financial Times (subscription required)

See also: Reuters

Solutions 30 suspends listing in Paris following allegations of wrongdoing

Luxembourg-based technology company Solutions 30 has suspended its listing on the Euronext Paris exchange while EY completes an audit of its 2020 accounts. The move follows accusations by US hedge fund manager Muddy Waters Capital of mafia links, money laundering and accounting irregularities — claims that resulted in the firm's share price falling 48% since the beginning of December. An earlier report commissioned from Deloitte did not find proof of money laundering or links to organised crime, but called for improvements in the firm's governance and internal controls.

Best source: Paperjam (in French)

See also: Les Echos (subscription required, in French)

AstraZeneca shareholders ignore proxy advisers over CEO’s pay boost

Shareholders of AstraZeneca have approved the pay deal granted to CEO Pascal Soriot, rejecting the advice of leading proxy adviser firms. Just over 60% of investors approved the pay deal, under which Soriot's bonus can rise from double to 2.5 times his base salary, and increases his long-term share package from 5.5 times his salary to 6.5 times.

Best source: Reuters

Glass Lewis opposes re-election of software firm’s chairwoman over gender diversity

Glass Lewis has recommended that shareholders in UK gambling software company Playtech vote against the re-election as a director of acting chairwoman Claire Milne. The proxy advisory firm says Playtech has has failed to comply with government recommendations that at least one-third of directors should be women, although its advice would effectively increase the board's gender imbalance even further. The company is also facing a protest vote over executive bonuses, which led to its remuneration report being voted down by shareholders last year.

Best source: Sky News