The week in GRC: Director pay ticks up, and tech board members said to skip AGMs
– The Financial Times reported that, according to a study of 1,854 public groups by the Alvarez & Marsal (A&M) consultancy, European businesses that have more female directors are less likely to be targeted by activist investors. The analysis found that companies not targeted by hedge fund activists had, on average, 13.4 percent more women on their boards.
Paul Kinrade, managing director at A&M, said there are many factors that can result in a business coming under scrutiny from activists, including diversity. ‘We would not go so far as to say that gender mix is a primary driver of shareholder activism, but our research shows it is certainly a factor and it demonstrates the value of a greater diversity of thinking at board level,’ he said. ‘A board that contains a broader and more rounded view on the disruptive forces in their given markets will increase a company’s resilience and flexibility.’
– Some retail investors who want to talk to big technology company directors are losing their only chance to do so because many board members are skipping AGMs, Reuters reported. Companies that hold meetings online have some of the worst records for attendance.
Although big asset managers can get access to directors, shareholder activists and corporate governance experts say the empty seats at AGMs mean small investors and campaigners challenging directors to make corporate changes may not get to engage with boards.
– The Wall Street Journal reported that CEOs in the media and telecoms industries made twice as much as their peers in the S&P 500 even though the sector’s performance lagged. The median pay for industry CEOs was $28.7 million in 2017, more than double the overall median of $12.1 million for the heads of all S&P 500 companies, according to a WSJ analysis of pay data from MyLogIQ.
Media and telecom companies posted a median total negative return of 3.8 percent, compared to a positive return of around 19 percent for all S&P 500 companies. Total returns reflect share price appreciation and dividends.
– The WSJ reported that a federal judge dismissed lawsuits by the cities of San Francisco and Oakland alleging that five of the world’s largest oil companies should pay to protect the cities’ residents from the impacts of climate change. US District Judge William Alsup granted a motion by the companies – BP, Chevron, ConocoPhillips, ExxonMobil and Royal Dutch Shell – to dismiss the suits, ruling that although global warming was a real threat, it must be fixed ‘by our political branches.'
‘Reliable, affordable energy is not a public nuisance but a public necessity,’ said Chevron’s general counsel. ‘Using lawsuits to vilify the men and women who provide the energy we all need is neither honest nor constructive.’ Spokespeople for Shell and ConocoPhillips said the companies were pleased with the ruling. Representatives for Exxon and BP didn’t immediately respond to requests for comment.
Oakland City Attorney Barbara Parker said the city was ‘disappointed’ by the ruling and is weighing an appeal. A spokesperson for San Francisco said the city would decide on its ‘next steps’ shortly.
– According to the FT, Alternative Investment Market-listed technology company Telit’s chair Richard Kilsby has been ousted after shareholders unseated almost all of the firm’s independent directors. Kilsby was appointed to the post in November and appointed new directors as Telit looked to restructure by selling off divisions and closing product lines. But at the company’s annual meeting the appointment of three non-executive directors, including Kilsby, was rejected. Telit declined to comment.
– The Guardian looked at a US Supreme Court ruling that non-union members no longer have to pay their ‘fair share’ for union representation in collective bargaining negotiations. The case may permanently weaken public unions, according to some experts, and will affect public sector employees in 22 states.
In a 5-4 decision, the court overturned a previous decision that had protected the right of public sector unions to collect administrative fees from non-members, ruling it was inconsistent with the first amendment right to free speech. Without that protection, unions may not only lose fees from non-members but also lose members who are happy with the union’s work but do not want to pay for it.
– The FT reported that UK public companies will need to appoint women to 40 percent of their board positions over the next two years if they are to meet government-backed targets to improve gender diversity. Philip Hampton, who chairs GSK and the Hampton-Alexander Review of women on boards, said that at the halfway point since the targets were set in 2016, far too many companies still had no women – or only one woman – on their board.
The review, which is backed by the Department for Business, Energy & Industrial Strategy, set a target in 2016 for FTSE 350 companies to have women make up a third of their boards and executive committees by the end of 2020. FTSE 100 companies are on track to meet the target, with 29 percent of board roles held by women, up from 12.5 percent in 2011. But among the next largest 250 public companies, only 23.6 percent of board roles are female-held.
– Meanwhile, the WSJ said the real estate investment trust (Reit) sector has named a record number of women to board positions in 2018, a sign the mostly male-dominated industry is reacting to pressure to diversify. Of the 94 Reit directors newly elected during the spring proxy season, 49 – or 52 percent – are women, according to a study by Ferguson Partners. It was the first time men comprised less than the majority of the new directors, Ferguson Partners said. Reits also did much better than the overall market: so far in 2018, 32 percent of newly elected directors in the Russell 3000 are women.
– The SEC proposed amendments to the rules governing its whistleblower program, which was established in 2010 to incentivize individuals to report high-quality tips to the agency and help it detect wrongdoing. The proposed changes would, among other things, give the SEC additional tools in making awards to ensure that deserving whistleblowers are appropriately rewarded for their efforts, increase efficiencies in the claims review process and clarify the requirements for anti-retaliation protection.
– The SEC also voted to propose easing its rules for approving low-risk exchange-traded funds (ETFs), Reuters noted. The rule would allow companies that sell ETFs to launch plain vanilla versions without first seeking approval from the agency. It would apply to open-ended ETFs, a type of mutual fund that does not have restrictions on the amount of shares it can issue, which covers the clear majority of ETFs.
– The WSJ reported that, according to a survey by Compensation Advisory Partners (CAP), compensation for directors of large US companies continues to creep upward, with half paying a typical board member $300,000 or more last year. Median pay for the non-management directors of 100 of the largest US companies rose 3.4 percent from $290,000 in 2016. Median director pay for a similar group of companies was $257,000 in 2012 and $225,000 in 2008.
Companies in the analysis are increasingly limiting director compensation, but not necessarily in meaningful ways. The change comes in response to challenges from shareholders, said Dan Laddin, founding partner of CAP. ‘The view was that directors had paid themselves too much, and because directors get to decide their own pay, there’s an inherent conflict of interest.’