Key Governance Developments - September 2019

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 German shareholders lead resistance to management in AGM votes


Shareholder revolts are gaining ground across Europe amid rising dissatisfaction among investors about executive remuneration, governance standards and corporate scandals. The proportion of resolutions at the AGMs of large German companies that met significant shareholder pushback - votes against backed by more than 10% of the company's equity - was up by more than 100% year on year in 2019, according to consultancy Georgeson, and by 21% in Spain, while there was also a significant increase in dissent at companies in the UK, France, Italy, Germany, Switzerland and the Netherlands. Germany saw a more than threefold increase in contested votes over supervisory board appointments. The number of contested discharge motions seeking shareholder approval for the running of the company in question grew by more than 230%, suggesting that this is no longer a formality. In the UK, votes on remuneration policy increased by 107% for FTSE 100 companies.



Key governance developments September 2019

Shareholders increasingly ready to vote against European company AGM resolutions

Investors in European companies are increasingly willing to vote against resolutions at annual general meetings. Consultancy Georgeson has calculated that the proportion of resolutions at large German companies that resulted in significant dissent increased by 108.6% in 2019. Significant dissent was up by 21.1% in Spain over the same period, while the overall increase in Europe’s largest markets stood at 6.7%.

Best source: Financial Times (subscription required)


Hong Kong falling behind competitors on ESG standards: Asia governance body

The Asian Corporate Governance Association says the changes proposed in a recent consultation paper by the Stock Exchange of Hong Kong on the Review of the ESG Reporting Guide and Related Listing Rules do not go far enough and will leave the jurisdiction well behind the standards of other regional markets, as well as globally. The association argues that more guidance is required in areas such as board statements, climate change impact and international ESG reporting standards.

Best source: Top1000Funds


Deadline for registering beneficial ownership in Luxembourg extended until November

The deadline for companies and non-profit organisations in Luxembourg to submit details of their beneficial ownership to the national register created in March has been extended to November 30. The original deadline was August 31, but just 47% of the country's 129,000 companies and associations had complied with less than a week to go. The EU's anti-money laundering legislation requires member states to establish a beneficial owners’ register to increase transparency. Failure to meet the deadline will make organisations liable to a €15 per late entry charge and potentially fines of up to €1.25m. Remy Bonneau, a corporate lawyer at Linklaters, says the new deadline does not legally protect non-compliant firms that missed the original date from penalties, noting that the extension is solely an administrative decision.

Best source: Paperjam (in French) 

See also: Delano 

See also: Luxembourg Times (subscription required)


Cathay Pacific chairman quits over treatment of Hong Kong protesters

John Slosar has resigned as chairman of Hong Kong-based airline Cathay Pacific after a controversy over the company's alleged willingness to silence employees protesting at China's role in the territory's governance. CEO Rupert Hogg was replaced three weeks ago after the Beijing government and the country's aviation regulator said airline staff who attended Hong Kong protests should not be allowed to work in Chinese airspace. Slosar initially insisted that Cathay would not tell staff what to think, but then dismissed two pilots and said overly radical staff would be suspended from mainland duties.

Best source: Financial Times (subscription required)


Pensions association criticises Dutch regulator over governance proposals

The Dutch Pensions Federation has accused De Nederlandsche Bank of proposing unnecessary and costly governance rule changes that it says would lead to schemes expending energy on internal reorganisation rather than external activities. The federation says the central bank’s plans, which relate to rules for assessing individuals in key roles at pension funds, lack a legal basis and that the higher implementation costs and more stringent rules have not been balanced against benefits and necessity.

Best source: Investment Pensions Europe


Mediaset forces through restructuring plan after Vivendi blocked from voting stake

Italian broadcaster Mediaset has succeeded in excluding a trust that holds two-thirds of Vivendi’s 29% shareholding in the company from voting on a corporate restructuring plan, enabling it to obtain a majority for the plan. The strategy would merge Mediaset and its Spanish business into a new Dutch holding company, MediaforEurope, which would forge alliances with other European media groups to offer a common video streaming platform. The French media group headed by Vincent Bolloré opposes the scheme because it believes the new structure disregards corporate governance principles, including a proposed loyalty share scheme that Vivendi says would benefit the family of Silvio Berlusconi, the former Italian prime minister who founded Mediaset. Vivendi, which has been a hostile shareholder in Mediaset since a dispute between the two groups in 2016, says it will challenge the restructuring plan in court.

Best source: Reuters

ESG criteria gain popularity with family offices: Deutsche wealth head

Family offices are increasingly adding environmental, social and governance criteria to their investment charters, with some institutions in California going as far as to set a 40% minimum for such investments, according to Deutsche Bank global wealth head Fabrizio Campelli. The bank is accelerating its ESG strategy in response to rising customer demand for ethical investment options, assigning sustainability and ethical ratings to assets and dedicated funds.

Best source: Bloomberg (subscription required)


Shareholders call on BHP to withdraw from groups promoting use of coal

Shareholders have filed a resolution ahead of the annual meeting of Australian-based mining conglomerate BHP calling on it to withdraw from lobbying groups whose aims run counter to the Paris climate agreement. The motion is backed by Australian private investment firm Grok Ventures and pension funds from the country as well as Britain, Denmark and the Netherlands. BHP is a member of the Australian Minerals Council and the Business Council of Australia, and also supports Coal21, which is planning a massive advertising campaign that seeks to promote the use of coal a matter of national pride.

Best source: The Guardian


New audit regulator set to revise UK corporate governance code

The UK's Financial Reporting Council is increasing its enforcement resources by 25% before its transformation into the new Audit, Reporting and Governance Authority. The audit regulator, which will have increased powers under new legislation, is also planning to revise the UK Corporate Governance Code and consult on an overhaul of the Stewardship Code.

Best source: ICAEW Economia


Swedish state pension fund dismisses CEO over trading rule breaches

The board of Swedish state pension fund AP1 has dismissed CEO John Magnusson with immediate effect for the violation of internal regulations on the holding and trading of financial instruments, although it says no crime has been committed. Magnusson has run the fund, one of the country's five state pension institutions, since 2008. Teresa Isele, the fund’s general counsel, has been appointed acting CEO by the board while the search for a replacement is conducted.

Best source: Financial Times (subscription required)