Icahn, Elliott and Activist Peers Grab the Mic in Meeting Season

(Bloomberg) -- Investors who want to make sure executives deserve the big pay they got in last year’s bull market are set to descend on annual meetings in coming weeks to vote on compensation and elect directors. They’re also set to agitate for strategic moves and ensure companies have a handle on climate change, diversity and cybersecurity.

Environmental and social proposals submitted in the U.S. have outpaced governance proposals for the second year in a row, according to proxy adviser Institutional Shareholder Services. Like last year, companies in the U.K. that register a vote of 20 percent or more against any resolution will be listed on a public website of offenders.

Here are some of the big issues coming up at meetings on both sides of the Atlantic.

Executive Pay

The Anglo-Dutch consumer group Unilever will encounter significant investor opposition on executive pay at its May 2 annual general meeting, which could result in an embarrassing defeat for its new remuneration policy. Unilever already is clashing with some investors over its plan to move from two legal entities into one based in the Netherlands.

Opposition to the new policy, which could lead to larger raises and bonuses to executives, has been led by two influential shareholder groups, the Investment Association and Institutional Shareholder Services. Chief Executive Officer Paul Polman was paid 11.7 million euros in 2017, up from 8.4 million euros the year before.

Shire Plc’s shareholders gather in Dublin today to elect board members and vote on pay, but the talk of the meeting is likely to be Takeda Pharmaceutical Co.’s tentative bid for the company of more than $60 billion.

Activists

Activist activity is up this year as investors hunt for returns, with at least 90 different campaigns started this year, according to Lazard Ltd. At Xerox Corp., for example, Carl Icahn and Darwin Deason, two of the company’s largest shareholders, have alleged widespread corporate governance failures in the negotiation of its $6.1 billion sale to Fujifilm Holdings Corp. and are calling to unseat board members and block the deal.

Shareholders in Telecom Italia SpA meet today, the first of their two chances to weigh in on the battle between the company’s largest shareholder, French media conglomerate Vivendi SA, and hedge fund Elliott Management Corp. Elliott is calling for a board shakeup and a breakup of the Italian phone company. A judge on Monday delayed a vote on Elliott’s board slate until a special shareholder meeting on May 4.

Barclays Plc’s May 1 meeting may top its tempestuous gathering in 2017 when CEO Jes Staley had just revealed he was under regulatory investigation for trying to hunt down a whistle-blower. While Staley found out last week he survived that probe with only a fine, he still has to face shareholders underwhelmed by performance at the investment bank. Most notable among these skeptics is activist investor Edward Bramson, who has built a 5 percent stake and is reportedly going to push for the financial trading arm of the bank to be cut back. It’s not known whether Bramson plans to attend, but his presence will loom over the meeting regardless.

Governance

Wells Fargo & Co. is set to meet shareholders today and disruptions could be more intense than in 2017, when investors were being urged to vote out two-thirds of the board amid a long-running fake-accounts scandal. New York State Comptroller Thomas DiNapoli is urging shareholders to back his proposal asking the bank to report on whether its incentive-pay practices exposed it to financial losses.

Many companies, including Bank of America Corp. and AT&T Inc., are being called upon this year to commit to having an independent chairman, separate from the CEO. Such proposals won majority support at five large U.S. companies last year, including Netflix Inc.

In June, advertising giant WPP Plc will face shareholders after CEO Martin Sorrell stepped down amid a leak of a probe into his conduct, laying bare the company’s lack of a plan to appoint a full-time successor. Shareholders including Standard Life and Hermes have long been asking the company for a fully fledged succession plan that included a search for potential replacements from outside the company.

Diversity

Corporate directors are likely to also see lower support levels, with investors from State Street to Legal & General indicating they’ll withhold votes this year over a lack of board diversity. Last year, U.S. investors were already at their most willing to withhold votes from directors since 2011.

The Investment Association, which represents asset managers in the U.K., has warned a number of companies in the FTSE 100 about their lack of diversity among senior managers, singling out 14 companies including BP Plc. “Investors want boards and leadership teams to urgently address gender diversity,” the IA said in a recent letter to the companies it is targeting.

BP, which meets shareholders on May 12, said it has an all-male executive committee but a 26 percent representation of women if direct reports are included. There are 11 FTSE 250 companies, including Sports Direct, that have all-male boards, up from eight earlier this year.

Climate change

The climate organization Follow This is asking Anglo Dutch energy group Shell to publish specific greenhouse-gas reduction targets aligned with the Paris Climate Agreement. Shell has asked shareholders to vote against the resolution since it already aims to cut its net carbon footprint in half by 2050. “The resolution could, if supported, tie the hands of existing and future Shell management to measures which could force the company to move too quickly -- or too slowly -- through the energy transition,” Shell said.

Shareholders plan to press companies even harder on quantifying their climate risks this year after an unprecedented majority support vote on the issue at Exxon Mobil Corp. last year. The largest U.S. pension fund, Calpers, said last month it will hire proxy solicitors again this year to help get out shareholder votes in support of climate-risk proposals.

Industries outside of energy are also confronting proposals related to climate. One at JPMorgan Chase seeks more information on its financing of Canadian tar sands projects. Ford Motor and General Motors shareholders are expected to vote on proposals about auto emissions and the automakers’ plans to develop electric vehicles.

Politics

Ahead of the 2018 U.S. midterm elections, about 80 companies received shareholder proposals about lobbying and election spending, according to the Sustainable Investment Institute. Facebook Inc. at the end of May will also hear from shareholders on a proposals about risk oversight, and its governance policies around harassment, fake news, election interference and violence on its platform. While votes on this topic have previously received scant support, investors this year are hurting from a $50 billion drop in market value after revelations that millions of users’ private data had been improperly obtained by Cambridge Analytica, a firm that did work for Donald Trump’s campaign in the 2016 presidential election.

--With assistance from Stephen Morris

To contact the reporters on this story: David Hellier in London at dhellier@bloomberg.net, Emily Chasan in New York at echasan1@bloomberg.net.

To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Kevin Miller, Phil Serafino

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