California Teachers Fund Votes Against ICICI Pru Life’s CEO Pay, Four Other Proposals

CalSTRS, with more than $1 billion worth of investments in India, voted against five of the nine resolutions to be put to vote at the annual general meeting of the insurer on June 25, according to information cited in CalSTRS’ website managed by American proxy advisory firm Glass Lewis.

CalSTRS declined to comment on its voting decisions.

As on June 30, 2020, CalSTRS held 12.25 lakh shares worth market value $6.9 million in ICICI Prudential Life.

The resolutions against which CalSTRS voted according to Glass Lewis' recommendations are:

Election Of Wilf Blackburn As A Non-Executive Director

Blackburn, a member of the audit committee, is a nominee of Prudential Corp., which owns about 22% of the insurer and is part of the promoter group. Blackburn is the regional CEO, insurance growth markets at Prudential. He joined ICICI Prudential Life’s board as a non-executive (additional) director in August 2020.

Glass Lewis said in its advisory that owners of more than 20% of the company’s shares should not be on the audit committees as they are not independent because their interests and financial needs may differ from that of other shareholders. That area of financial disclosure is critical to shareholders, it said.

Any potential conflict between a director’s own interests and those of shareholders should be strictly monitored, especially for board members who oversee accounting and disclosure issues, Glass Lewis said. Shareholders are best served by not having significant shareholders or their representatives serve on the audit committee, it said.

Blackburn also serves on the nomination and remuneration committee.

Revised Pay For MD & CEO N Srinivasa Kannan

Glass Lewis said it’s concerned that ICICI Prudential Life has not provided sufficient details about allowances.

Kannan will be eligible for a competitive salary and incentive-based pay based on a mix of cash and stock options.

But allowances have been set at a level comparable to the base salary, the firm said. The board has not disclosed how it valued the allowances and if these are linked to performance, the advisory firm said. And the company did not disclose the specific performance targets, often the market practice, Glass Lewis said.

The proxy advisor also flagged that Kannan may receive shares of the parent ICICI Bank Ltd. under the ESOP plan.

That creates a risk that if the insurer’s performance is poor but ICICI Bank’s “is positive, executives of ICICI Prudential Life would be rewarded, while its shareholders would not be—and not vice versa”.

All the at-risk remuneration of ICICI Prudential Life’s executives should be based on the performance of the company and any equity awards issued should be by way of the insurer’s securities, Glass Lewis said.

“We are concerned that the issuance of equity awards by way of the ICICI ESOS does not facilitate proper alignment between the company’s management and its shareholders.”

The other proposals that CalSTRS voted “against”, irrespective of Glass Lewis’ recommendation are:

Re-election of non-executive director Anup Bagchi, a nominee of ICICI Bank and an executive director at the bank — the insurer’s parent with 51.37% ownership and part of the promoter group that holds 73.48%.

Appointment of independent (additional) director Dilip Ganesh Karnik, who joined the board in April as an independent director for a term of five years, and continuation of Karnik as an independent director, who will attain the age of 75 years during his term.

In response to BloombergQuint’s queries, an ICICI Prudential Life spokesperson said the company cannot comment on the voting decisions of shareholders, which is private and confidential. “All proposals/resolutions placed before the general body of shareholders are in strict conformity with the letter and spirit of the Indian regulatory system.”

“The company would like to clarify that the MD & CEO hasn’t received stock options of ICICI Bank in FY21 and there’s no resolution proposed by the company for grant of stock options of ICICI Bank in the upcoming annual general meeting,”the company said. “The MD & CEO has only been granted stock options of ICICI Prudential Life Insurance Co. as part of the company’s employees stock option scheme, subject to requisite approvals.”

The other proposed management resolutions for which CalSTRS voted in favour relate to:

• Accounts and reports.
• Allocation of profits/dividends.
• Appointment of auditor and authority to set fees.
• Amendment to the employee stock option scheme 2005.