A diverse supervisory board: This is how to unlock a wealth of talent

Aniel Mahabier, CEO of governance data specialist CGLytics, welcomes the fact that selection committees are using corporate governance analytics to assess the diversity of their own supervisory board. Technology is bridging the gap between the available talent and the knowledge and experience that committees already have in-house.

“Selection committees are looking for the right candidates outside their traditional networks”, says Aniel Mahabier, founder and CEO of governance data specialist CGLytics. Such an alternative approach, for example through the use of data analysis, has major advantages: people with unique experience and unique talent are put on the radar.

In many organizations – listed and unlisted – supervision is far from diverse. A supervisory board with only people of the same generation, background and education cannot properly monitor the continuity of the company in the changing society. Such a homogeneous council cannot sufficiently monitor the interests of the various stakeholders.

An important task therefore lies with the selection committees that are responsible for a balanced composition of the supervisory board. We see that selection committees use our corporate governance analytics to assess and benchmark the diversity of their own supervisory board. For example, to be able to answer questions from international shareholders and when planning succession. For example, they test the current composition against the various international corporate governance codes and sustainability regulations. This contributes to effective management and good risk management.  

Click here to continue reading the full article.

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What’s your flavor? Companies get a taste of CEO pay for the proxy season

This article, originally published in Dutch in Mgmt. Scope, CGLytics examines CEO compensation issues going into the 2020 proxy season

CEO Pay Continues to Increase, but Performance Often Lags

Shareholders, including large institutional investors, are continuing the growing momentum to link executive pay to company performance.

CGLytics Reponse to COVID-19

From ensuring our employees are safe and feel connected, to continuing to deliver best of class services to customers, the steps that CGLytics are taking in regard to the COVID-19 outbreak.

CGLytics Response to COVID-19

As a steward of modern governance, the CGLytics team is taking comprehensive measures to ensure our employees, products, and services continue to operate at the highest levels of performance and support as the COVID-19 epidemic continues to evolve. Governance is critical in times of uncertainty, and we want to make sure our customers and partners know that they can confidently rely on CGLytics during this time.

To provide greater visibility and assurance, we are highlighting a few ways CGLytics is upholding its devotion to supporting our customers, partners and employees.

Secure Infrastructure & Communications

Leaders and governance professionals worldwide rely on the CGLytics platform for their governance oversight, decision-making and driving modern governance best practices in their organization. We are committed to maintaining all product service levels for availability, access, and security, globally, despite any virus-related challenges that we face.

This includes continual improvement and releases of new product capabilities to support our customers’ modern governance needs.

Protecting Our Workforce

The health and safety of our employees are of the utmost importance to CGLytics. As the situation evolves, the CGLytics leadership team is ensuring that every employee has the tools and technology to work remotely to maintain business continuity. As a company that works to improve the remote work of business and organizational leaders, CGLytics use best-in class tools for collaboration, audio and video communication, messaging, and secure identity, along with other business-critical technologies.

Furthermore, CGLytics has restricted all non-essential travel, including all conferences, until risks have subsided. Executive leadership has emphasized the importance of following CDC and WHO recommendations to ensure safety. CGLytics have also adjusted its internal work structure to limit potential risks in the workplace.

Support Resources

We know that governance software and the resources available to customers are mission critical. Therefore, we want to assure customers that our Customer Success and Support Teams will continue to operate as normal and are available to assist customers with any and all account management requests.

We highly value your partnership with CGLytics. We are always here to support business continuity and wellbeing, and especially during uncertainty.

Aniel Mahabier
CEO
CGLytics

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What’s your flavor? Companies get a taste of CEO pay for the proxy season

This article, originally published in Dutch in Mgmt. Scope, CGLytics examines CEO compensation issues going into the 2020 proxy season

This article by CGLytics CEO, Aniel Mahabier, first appeared in Dutch in Mgmt. Scope on 11th March 2020: https://managementscope.nl/opinie/bestuurdersbeloningen-bedrijfsprestaties

Executive compensation gains attention in the run-up to annual shareholder meetings. The key question is whether compensation plans are socially responsible and align with company performance relative to its peers.  In 2019, companies already got a taste of the increasing interest in CEO pay from shareholders. “That attention is only increasing,” says Aniel Mahabier, founder and CEO of CGLytics, the leading global provider of governance data and executive compensation tools. “Executives  and directors  who are not sufficiently prepared are facing reputational risks.”

As shareholders and other stakeholders prepare themselves for annual shareholder meetings, it’s the moment to speak out on these important issues. Shareholders will again make themselves heard this year. For several years now, engagement between shareholders and companies has been growing. Parties are more likely to vote and use their voting rights to steer business policy: the number of votes against remuneration policies are increasing proportionally at the meetings of the 5,900 listed companies we track. An increasing number of shareholders want compensation to reflect the company’s long-term performance and value creation (in other words, pay for performance and earnings per share).

Pay for performance

It is obvious that the compensation of executives should reflect the company’s performance, however data shows a different picture.

In a large number of the publicly listed companies, there is pay for performance misalignment. The CEO’s compensation is – consciously or unconsciously – not in line with the value create by the company over multiple years.

More than half of companies in the US S&P 500 Index lack a correlation between CEO compensation in 2019 and the development of the company’s earnings per share over the past three years.

In some instances, the CEO compensation is lower than expected based on CEO value creation. With a much larger proportion of companies, the value created by the CEO is much lower than you would expect based on the level of their compensation received. In many situations, at the general meeting of shareholders, companies proposed increasing executive pay, although the company’s performance declined.

Mismatch

This misalignment between CEO compensation and company performance is increasingly gaining the attention of shareholders, employees, governments and other stakeholders. The top 35 executives of companies in the S&P 500 collectively earn almost more than $3 billion, which contributes to the discussion. In Europe we see a similar picture. For a third of the listed companies in the Benelux, the CEO’s compensation does not align with the realized value creation. A similar picture is seen at a third of companies in Britain’s FTSE 350 Index.

Drivers of change

The focus on responsible compensation is in line with the focus in society on sustainable business growth.

Large investors – pension funds and insurers – are drivers of the change in compensation.  Passive investors, such as asset managers Vanguard and BlackRock, are also increasingly using their control to influence compensation proposals.  We see that they are trying to encourage a more socially responsible compensation policy in different ways. For example, by engaging  on compensation  policies and proposals with shareholders and other stakeholders before the general meeting of shareholders and underpinning this with data. We see signs that this is reducing the number of dissent votes against the proposed policy.

Shareholders do not hesitate to enforce change where necessary. For example, by voting against incentive proposals including equity plan proposals at the meeting. A large investor has stipulated that if more than 25% of shareholders speak out against a compensation proposal, they will in turn vote against the reappointment of the chairman of the compensation  committee. The same strategy is used if the compensation proposals provoke a substantial number of counter-voters in two consecutive years.

Reward regulators

All efforts to promote sustainable value creation are having an effect: short-term pay is making way for a long-term performance-based compensation structure. Several listed companies have either decreased, shifted or changed the variable compensation component of their executives’ pay plan into fixed compensation. The latter includes, more often, a combination of cash and shares of the company. Using shares as an incentive, there is a direct alignment between the pay of the CEO and the performance of the company.

The same development is also seen when looking at the compensation of directors (non-executive directors). Where it is common practice in the United States to reward directors with, among other things, shares of the company, this was not common, or even prohibited, in Europe for a long time. That has changed. For example, the new corporate governance code in Belgium offers the possibility to reward non-executives partly in shares. This creates a shared interest with shareholders.

Sustainable criteria

An important development is seen in the use of non-financial metrics for executive and CEO compensation.

Shareholders expect companies to include non-financial guidelines such as ESG criteria in their compensation system in addition to financial guidelines – such as earnings per share and Total Shareholder Return (TSR). These criteria show how the company takes into account various ESG  sustainability criteria: Environmental, Social (social policy) and Governance (good governance).

In many countries in Europe, listed companies are obliged to include such non-financial disclosure in their annual reports. It therefore seems logical to also link the compensation of the executives to the goals set by the company in the field of corporate social responsibility. The recent governance crisis at a major Swiss bank illustrates how the lack of good governance can affect the oversight and value creation of a company in the long term.

Although attention to the inclusion of non-financial metrics is increasing, the application is still limited in practice. Only 27% of FTSE 350 and ISEQ 20 companies have included some form of measurable ESG criteria in incentive plans. And even in these companies, the proportional share of compensation determined by ESG performance is small. This deserves attention: if the sustainable objectives are not included in executive compensation, there is a risk that the compensation policy will lose connection to the business strategy.

Risk factors

A responsible compensation plan based on financial and non-financial metrics is more important than ever. An increasing number of directors, regulators, compensation committees and investors are therefore scrutinizing CEO compensation and use CGLytics data and pay for performance benchmarking tools to review compensation proposals and policies. Directors are using this information to prepare their engagement with active shareholders, proxy advisors like Glass Lewis and other stakeholders. Investors are looking for red flags, undiscovered risk factors that threaten the quality of governance in the company. Having access to similar information and tools ahead of the proxy season, is allowing compensation committees to respond in a timely manner to pitfalls in the existing compensation plan and proposal to avoid potential reputational and activism risk.

Would you like to gain instant insights into more than 5,900 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Click here to request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

About the Author

Aniel Mahabier: CEO of CGLytics

Aniel Mahabier  is CEO and founder of CGLytics, the leading global provider of governance data and executive compensation tools. Mahabier interviews and writes for Management Scope about the remuneration of directors and corporate governance analytics.

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Concern over Wesfarmers’ executive pay?

Wesfarmers, which owns some of Australia’s most recognizable brands, sees concerns from shareholders and proxy advisors regarding its CEO and executive pay during the last proxy season

Wesfarmers, one of the biggest conglomerates in Australia, saw concern from its shareholders with a negative response during the recent 2019 Annual General Meeting (AGM) that was held last November 14, 2019.

Although all resolutions were passed, there was a large number of shareholders that voted against the adoption of the remuneration report, resulting in a 21.45 percent disapproval. One of the biggest causes of the pessimistic response from shareholders was due to proxy advisor ISS advising investors to go against the remuneration report because of an “excessive” compensation plan.

Although Wesfarmers’ demerger from Coles supermarket resulted in a 360 percent increase in after-tax profit to AUD 5.5 billion, the company will neither give incentive nor penalize its executives [1].

Shareholders were concerned over the pay for both Chief Executive Officer (CEO) Robert Scott and Independent Chairman Michael Chaney [2]. Mr. Scott has received over AUD 4 million in total realized pay and Mr. Chaney has received AUD 780,000 in total compensation, which ISS claims is higher than its industry peers.

CGLytics Pay for Performance Analysis

According to our CGLytics analysis, Wesfarmers has a higher CEO total realized pay over three years than its three-year increase in total shareholder return (TSR), when compared against its country and industry peers.

This misalignment of the CEO pay compared to company performance may have been the cause of the company almost undergoing a first-strike. A first-strike occurs when 25 percent of shareholders vote against the adoption of the remuneration report and the company would need to either amend or justify its remuneration policies before the next AGM [3].

Wesfarmers Limited's CEO Pay for Performance

wesfarmers CEO pay
Source: CGLytics Data and Analytics

Not only was there concern over the CEO pay for Wesfarmers, but the ambiguous changes in awards policies [4]. This was also seen as an issue for other proxy firms such as Glass Lewis and the Australian Shareholders’ Association (ASA).

What is the KEEPP bonus scheme?

The 2016 and 2017 Key Executive Equity Performance Plan (KEEPP) bonus had been cancelled following the demerger of Coles supermarket, but a bonus will be rewarded with the same principles as KEEPP, however with different performance conditions.

The 2017 KEEPP Allocation for the CEO and the Chief Financial Officer (CFO) had the following performance metrics: 50 percent weighting on Wesfarmers relative to the TSR of the ASX 100 Index, 20 percent weighting on absolute Return on Equity (ROE) and 30 percent weighting on strategic measures.

Because of the demerger in 2018, the company has removed the performance condition on absolute ROE as it may have an impact on the targets of executives. The 2018 KEEPP allocation for the CEO and CFO is as follows: 60 percent weighting on the Wesfarmers’ relative TSR against the S&P/ASX100 Index, 20 percent weighting on Wesfarmers’ portfolio management and investment outcomes and 20 percent weighting on strategic measures. However, the company was not able to be fully transparent and clear in its disclosure of strategic measures and investment outcomes, only stating the improvement of data analytics and better progress in gender balance.

Wesfarmers underpays due to complications in payroll

After the release of the 2019 AGM results, another scandal arose when it came to light that Wesfarmers had underpaid up to 6,000 current and former employees of its industrial division, resulting in AUD 15 million or more in underpayments [5]. The company stated that its cause was due to a defect in a payroll system. The company plans to expedite the sending of payments into the banks of underpaid current and former employees before the end of 2019, but is hindered by the complication of its payroll system [6][7].

Linking director pay to competency and expertise

Companies not only link executive pay to performance, but more often than not, companies also link director pay to competency and expertise [8]. With the current events that Wesfarmers has experienced, it is suggested that the company would benefit from a board that can guide it towards its strategic direction, mitigate risk and oversee company performance.

According to our analysis (performend using the CGLytics application), Wesfarmers’ board has strengths in the areas of ‘advisory’ and ‘finance’. Wesfarmers recent acquisition of the Catch Group in 2019 (an e-commerce company that runs Catch.com.au, Mumgo, Grocery Run and Brands Exclusive), should see greater skills and expertise added in the area of ‘technology’, which is currently very low. ‘Governance’ experience, to spot and mitigate risks, is also worth looking at to ensure issues are resolved smoothly in the future.

Wesfarmers board's expertise and skills

Wesfarmers skills and expertise
Source: CGLytics Data and Analytics

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills?

Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Request a demo to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, currently utilized by world-leading institutional investors, activist investors and advisors.

Request a Demo

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The DOs and DON’Ts when rethinking incentive plans

Why have 75% of first-time say-on-pay votes failed in 2019? A large number of negative votes can be attributed to incentives. Companies need to rethink their incentive plans and make sure metrics truly benchmark performance.

Seventy-five percent of first-time say-on-pay (SoP) votes failed in 2019, and a large number of these negative votes focused on incentives.

There is an increasing need for companies to fully rethink their incentive plans, as the CGlytics whitepaper “How to take the testing of equity-based compensation plans into your own hands” points out.

“It is imperative that companies design their equity pay plans to ensure they receive shareholder approval first time, every time. In order to meet investor expectations, companies need to understand how they, and the proxy advisors they rely on, evaluate equity plans and make voting decisions.”

Marc Ullman, a partner with Meridian Compensation Partners explains what to do and what not to do in rethinking incentive plans.

First of all, companies need to fully rethink their compensation plans, and not to just tweak them. Making just a few cosmetic changes will not suffice to ensure that incentives are effective. At least every two years, a real restructuring is needed.

Often shareholder pushback will incite a rethink, but even with shareholder support, benchmarking for effectiveness is critical as priorities change and the business climate evolves. The plan must reflect the new realities the business faces.

Or the incentive plan may simply become too complicated to be useful, as continually including more metrics and other add-ons makes application confusing. This often happens as businesses try to simply tweak the plan instead of really rethinking it.

 

Here are the do’s and don’ts to achieve as near optimal alignment between pay and performance as possible:

– If you need a full-scale rethink, don’t settle for a mere tweak. Make sure that what you do matters, don’t nibble around the edges. Make sure the metrics truly benchmark performance.

– But don’t overdo it. Pick out the key metrics and focus on that; don’t try to transform the whole structure unless you really feel that you have to.

– As the rethinking process is underway, take note of the solid rationale that stems from the business model. This will be something to communicate at the end of the process, and one that can be used for grounding the basis of your thinking.

– Make sure you include all the right people: Finance, HR, Corporate leadership, corporate leadership and the business unit. Everyone should buy in to the metrics and the targets that are being set.

– Make sure your plan pays something in year one. After a big rollout you need to make sure that design provides results. Otherwise it could hurt your credibility.

– Take advantage of feedback from shareholder outreach. More and more companies are actively talking to shareholders, and their points of view should at least be considered as the design is taking shape. Consider investor relations and investor perspective and proxy advisors like ISS and Glass Lewis.

– Communicate internally and externally. You have multiple audiences internally.

 

Predict Shareholder Approval with Glass Lewis’ Equity Compensation Model

 

The Glass Lewis Equity Compensation Model (ECM) allows you to instantly test and review your incentives plan using the same key criteria and scoring system as leading proxy advisor Glass Lewis. The ECM supports testing of 4,300+ publicly-traded U.S. firms including the Russell 3000 and exclusively available via CGLytics.

With the ECM you can confidently engage, knowing the strengths and weaknesses of your current and future equity plans. Ensure you get the votes to legally grant equity compensation to your executives, board members and staff.

Click here to learn more about the ECM application or request a no-obligation demonstration.

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Blue Sky Downfall – What went wrong?

While no company wants to find itself in a state of voluntary administration, it is a stark reality faced by the Australian-based fund manager Blue Sky Alternative Investments Limited. The company is currently undergoing administration, following years of challenging circumstances starting as early as 2017.

When facing bankruptcy or insolvency, companies have the option of going into voluntary administration. This is when an independent and qualified person (a voluntary administrator) takes over a company’s assets and business operations in an attempt to salvage the company [1].

While no company wants to find itself in a state of voluntary administration, it is a stark reality faced by the Australian-based fund manager Blue Sky Alternative Investments Limited. The company is currently undergoing administration, following years of challenging circumstances starting as early as 2017. The future of a company that was once named one of Brisbane’s top companies is now uncertain [2] after US-based short-seller Glaucus reported that the company had overstated its valuation and disregarded some of its key business obligations [3].

Despite Blue Sky’s former Chief Executive Officer Robert Shand’s claims that the company had grown by 50 per cent across key performance metrics, Glaucus expressed skepticism regarding the credibility of Blue Sky’s valuations [4]. The research company’s analysis showed that Blue Sky’s real fee earning asset under management was valued at maximum AUD 1.5 billion, which was 63 per cent short of the AUD 3.9 billion that Blue Sky had reported [5]. The inflated representation of figures may have helped with boosting share prices and more access to capital. Blue Sky was also criticized for allegedly overcharging its clients with inflated management fees.

Shortly after the release of the Glaucus report, Blue Sky suspended its trading to review the claims of the short-seller hedge fund [6]. Just one week later, the company’s share prices dropped by 41 per cent by April 5, 2018 [7]. Despite its free falling share prices, Blue Sky’s response in the face of such accusations was to call on the Australian Investments and Securities Commission (ASIC) to investigate and question the integrity of Glaucus rather than to refute the latter’s claims with evidence, fostering even more pessimistic investor sentiments.

Even in the midst of battling to keep themselves afloat and avoiding more trade suspensions, Blue Sky nonetheless remained optimistic. This was until September 2018, when it confirmed that a US-based investment firm, Oaktree Capital, would be providing the Australian company with a seven-year-loan facility of AUD 50 million to facilitate the recovery of the company [8].  However, not long after the loan agreement, Blue Sky announced it will fail to meet its obligations to Oaktree [9], breaching its financial covenant as it reported an after tax net loss of AUD 25.7 million for the first half of 2019. Blue Sky Alternative Access Fund, Blue Sky Alternative Investment’s fund management subsidiary, also decided to withdraw from its parent company until ongoing legal actions were concluded [10].

After many failed deals and breaches of financial obligations, Blue Sky was suspended from the ASX 300 on May 2019. The company has also announced that the advisory and investment firm, KordaMentha, has been selected as its receiver and manager, and is currently still in administration [11].

What went wrong?

Not only did Blue Sky fail to display transparency during the short-seller report, but it also failed to comply with the 3rd edition of the ASX’s Corporate Governance Principles and Recommendations, where a listed entity must maintain a majority of independent directors in their board [12]. In early 2017, John Kain, who served as the Chairman of Blue Sky, was the only independent member of the board, the other six being Executive Directors. This pushed Blue Sky to appoint two more independent directors in February 2017 but still failed to compose a board with an independent majority board of directors [13]. The Australian Institute of Company Directors states that Non-Executive Directors provide independence and objectivity to the board. An objective and outside perspective supports the idea of acting in the best interest of the company and monitoring the Chief Executive Officer and senior executives without partiality [14]. Independent directors also act as expert advisors in areas where the company aims to grow and develop [15].

Board diversity Blue Sky

As of February 2017, the board of Blue Sky was composed of: John Kain (Independent Chairman), Michael Gordon (Independent Non-Executive Director), Philip Hennessy (Independent Non-Executive Director), Alexander McNab (Executive Director), Kim Morison (Executive Director), Timothy Wilson (Executive Director) and Mark Sowerby (Founder and Executive Director). Based on the CGLytics analysis, only 43 per cent of the board in 2017 were independent non-executive directors, even after the appointment of two additional independent directors. In addition, the analysis also shows that there are no female members, resulting in a less diverse board [16].

Board expertise Blue Sky

The board expertise tool of CGLytics that provides insight of the board skills matrix shows that the company lacked an expertise in risk. Although Blue Sky’s Board is strong in the finance expertise due to its company sector, independent directors experienced in risk management could facilitate in monitoring and assuring the reliability of the financial information provided by the company. However, both independent members and risk expertise were lacking.

There was also a high turnover of board members and senior executives during the whole debacle. The first to depart the company in 2016 was founder Mark Sowerby. This raised concerns due to his sale of approximately AUD 27 million worth of company shares and may have started the downfall and speculation of Blue Sky’s future [17]. In April 2018, Robert Shand, the supposed optimistic managing director of Blue Sky has also stepped down from the board [18]. Moreover, the company had to appoint three different Chief Financial Officers in a span of seven months [19]. Mr. Joel Cann was appointed as Chief Executive Officer as he had extensive experience in rebuilding Aspen, where he was also appointed as CEO in 2016 [20]. After just two months, Blue Sky announces that it no longer required a CEO, forcing Joel Cann to depart the board [21]. The high rate of departures could have led to an inefficiency in productivity [22]. A recent analysis performed by CGLytics on executive departures from S&P 500 companies reveals that having more than one executive resignation in a year may cause the company’s Total Shareholder Return to decline [23].

exec departures

A significant number of departures may potentially lead to a lack of confidence for the future and can slow down the growth of shareholder investments.

Conclusion

Although no one would have expected the drastic plunge of Blue Sky, it could have been minimized or mitigated with good governance practices and decisions throughout the volatile season of the company. Appointing competent and independent directors that have the right skills to oversee executive management can effectively and ultimately add value to the company and avoid risks of uncertainty in businesses.

Click here to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, used by institutional investors, activist investors and advisors.

[1] https://asic.gov.au/regulatory-resources/insolvency/insolvency-for-employees/voluntary-administration-a-guide-for-employees/

[2] https://www.businessnewsaus.com.au/articles/2017-brisbane-top-companies-21-30.html

[3] https://www.bonitasresearch.com/company/blue-sky-alternative-investments-ltd-asx-bla/

[4] https://www.asx.com.au/asxpdf/20161006/pdf/43brx5pyfghn67.pdf

[5] https://www.bonitasresearch.com/company/blue-sky-alternative-investments-ltd-asx-bla/

[6] https://www.businessnewsaus.com.au/articles/short-seller-hits-blue-sky–sends-shares-tumbling.html

[7] https://www.businessnewsaus.com.au/articles/blue-sky-shares-take-another-big-hit-on-glaucus-stoush.html

[8] https://www.businessnewsaus.com.au/articles/oaktree-saves-blue-sky-with–50m-investment.html

[9] https://www.businessnewsaus.com.au/articles/blue-sky-fails-to-meet-oaktree-loan-conditions.html

[10] https://www.businessnewsaus.com.au/articles/blue-sky-s-alternative-access-fund-cuts-supply-to-mothership.html

[11] https://www.businessnewsaus.com.au/articles/blue-sky-calls-in-receivers.html

[12] https://www.businessnewsaus.com.au/articles/critics-call-for-more-independent-directors-on-blue-sky-board.html

[13] https://www.asx.com.au/asxpdf/20170220/pdf/43g3njpm12fzft.pdf

[14] https://aicd.companydirectors.com.au/-/media/cd2/resources/director-resources/director-tools/pdf/05446-1-11-mem-director-tools-bc-non-executive-directors_a4_web.ashx

[15] https://medium.com/@theBoardlist/five-reasons-you-need-an-independent-director-on-your-board-dc300f668a41

[16] https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf

[17] https://www.businessnewsaus.com.au/articles/blue-sky-in-freefall–calling-for-asic-intervention.html

[18] https://www.businessnewsaus.com.au/articles/blue-sky-md-and-executives-resign-in-the-wake-of-glaucus-saga.html

[19] https://www.businessnewsaus.com.au/articles/blue-sky-appoints-third-cfo-in-seven-months.html

[20] https://www.businessnewsaus.com.au/articles/joel-cann-takes-the-reins-at-blue-sky.html

[21] https://www.businessnewsaus.com.au/articles/blue-sky-ceo-no-longer-required.html

[22] https://boardmember.com/sudden-ceo-departures-can-upend-an-unprepared-board/

[23] https://cglytics.com/the-effect-of-executive-departures-on-company-performance/

About the author

Alex Co: APAC Research Analyst

Alex graduated from the S P Jain School of Global Management in Sydney with a degree in finance and entrepreneurship. She previously worked in the compliance division at a large financial institution and gained her experience as a research analyst.

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Harvey Norman AGM; Strike 2 in the making?

Harvey Norman’s Annual General Meeting is to be held this Wednesday November 27, 2019. With leading independent proxy advisor CGI Glass Lewis advising to vote against the reappointment of the company’s chief executive, Katie Page, and the remuneration report, the gloves are off.

Shareholders have braced themselves for the upcoming Harvey Norman Annual General Meeting (AGM) to be held on November 27, 2019. The meeting will not be taken lightly following the shocking results of the 2018 AGM. Here we take a look at the controversial corporate governance practices that has investors and proxy advisors concerned.

Votes against remuneration report in 2018

What happened in 2018? Majority of the shareholders voted against the adoption of the remuneration report, resulting in 50.63 per cent of shareholders disapproving the resolution earning the company a first strike. Not only did a large percentage of shareholders vote against the remuneration report, but an average of 27.76 per cent opposed the re-election of the following directors: Non-Executive Director Mr. Michael John Harvey, Non-Executive Director Mr. Christopher Herbert Brown, and Executive Director and Chief Operating Officer (COO) Mr. John Slack-Smith. An average of 17.5 per cent of shareholders also voted against the grant of performance rights under the Harvey Norman 2016 Long-term Incentive Plan to the following Executive Directors: Executive Chairman Mr. Gerald Harvey, Chief Executive Officer Ms. Kay Lesley Page, Executive Director and COO Mr. John Slack-Smith, Executive Director David Ackery, and Executive Director and Chief Financial Officer and Company Secretary Chris Mentis.

Questions over what will happen at 2019’s AGM

Harvey Norman is now in hot waters, especially if majority of the shareholders continue to vote against the adoption of the remuneration report in the 2019 AGM, leading to a spill resolution. The Corporations Act 2001 has been amended to include a “two-strike” rule [1]. A company will be given a first strike if 25 per cent or more vote against the remuneration report. Until the next AGM, the company is required to review and respond to the shareholders’ growing concerns regarding executive pay. The next AGM will determine whether a company gets a second strike [2]. This occurs when 25 per cent or more shareholders still vote against it. During the same AGM, shareholders will establish whether directors need to stand for re-election. If 50 per cent or more shareholders vote for to pass a “spill” resolution, a “spill” meeting will be held within 90 days. Proxy advisors Ownership Matters and CGI Glass Lewis have advised investors to vote against the remuneration report and face a spill resolution to effectively improve its corporate governance [3].

ASX’s Corporate Governance Principles comes into question

Minority shareholders are dissatisfied with the number of independent directors present in the board. The board is currently composed of: Executive Chairman Gerald Harvey, Chief Executive Officer Katie Page, Executive Director and Chief Financial Officer/ Company Secretary Chris Mentis, Executive Director and Chief Operating Officer John Slack-Smith, Executive Director David Ackery, Non-Executive Director Christopher Brown, Non-Executive Director Michael Harvey, Independent Non-Executive Director Maurice Craven, Independent Non-Executive Director Kenneth Gunderson-Briggs and Senior Independent Non-Executive Director Graham Paton.

There are 10 board members and only three of which are independent. The company disregards the 4th edition of ASX’s Corporate Governance Principles and Recommendation that states majority of board members must be independent [5].

Data from CGLytics suggests that only 30% of the Harvey Norman board members are independent. Independent directors are vital members of the board because they provide more transparency to shareholders and fill the gap of skills required by the company [6]. The lack of independent directors poses a huge problem for minority shareholders especially when the board of directors have a total of 56.9 per cent stake in the company, making them the majority shareholders. This gives a disadvantage to minority shareholders that want to voice concerns regarding re-election of directors and the adoption of the remuneration report.

HN Board

Proxy advisory firm Ownership Matters even goes so far to propose the voting against the re-election of non-Independent Directors to force the company to make board changes [7]. In the Harvey Norman 2019 Annual Report, the company responded to the reason behind appointing fewer independent directors, stating that each executive director (including non-executive directors that are not independent) still provide quality independent judgment to the issues that arise.

Tenure reveals a stale board

The board also appears to be stale. The average tenure of the board directors is 20 years. For some time now, corporate governance stakeholders; governance experts and shareholders alike have paid substantial attention to the issue of board refreshment or entrenched boards. Usually, when a board is stale, there is the concern that they may lack new perspectives, become complacent which may affect the long-term performance of the company as well as provision of effective oversight and management.

One more independent director added to the board

In March 2019, the company added John Craven who was an independent director to the board. This was the first time in 14 years that the board had appointed an independent director to its fold since Graham Paton joined the board in 2005.

Data from CGlytics shows that although there are 10 board members, most of their skills are concentrated on three areas: finance, advisory and technology. This shows that the composition of the skills matrix is not balanced between the members and is not aligned with the skills that the company requires. Having a skill such as risk is a vital key competency a board needs, especially in turbulent times that may make or break the company.

Harvey Norman's board expertise

What are the proxy advisors’ view?

Because of the criticism and frustration of stakeholders, proxy advisors such as ISS Governance and Ownership Matters  encourage investors to vote for the appointment of self-elected Mr. Stephen Mayne as a director. Mr. Stephen Mayne is a journalist and a shareholder activist that constantly offers himself up for election on boards. Executive Chairman Gerald Harvey has urged Australian regulators to question the credibility of the proxy advisors that advise shareholders to appoint someone who has no experience in the retail industry [8].

Different proxy advisory firms Ownership Matters and CGI Glass Lewis are also recommending against the re-election of Chief Executive Officer Katie Page [9].  The company is being questioned by the Australian Securities and Investment Commission regarding the high increase in pay for Ms. Page despite the decrease in the Total Shareholder Return (TSR) of the company [10].

Where does Harvey Norman’s CEO Pay for Performance rank?

The CGLytics Relative Positioning Pay for Performance tool compares Harvey Norman’s CEO pay with that of the industry peer group’s three year TSR. The performance evaluation shows that it is misaligned. The company’s total realized pay is in the 45th percentile while the three-year TSR ranks in the 15th percentile and shows that the CEO is compensated more than the increase in TSR.

HN P4P analysis

Changes in remuneration was included in its 2019 Annual Report, changing the short-term incentive financial metric from return on net assets to earnings per share adjusted for the after tax effect of property increments decrements. The short-term incentives will be measured 50 per cent on earnings per share adjusted for the after tax effect of property and 50 per cent as non-financial conditions. Short-term incentives will still be given in cash except when the executive directors have shares lower than the benchmark level. The STI pool will also be increased to the maximum level at 120%.

As to whether, these changes have the potential to avert a potential revolt at the upcoming AGM, it remains to be seen.

Would you like to gain instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills? Or access the same CEO pay for performance insights used by Glass Lewis in their proxy papers?

Click here to learn more about CGLytics’ boardroom intelligence capabilities and executive remuneration analytics, used by institutional investors, activist investors and advisors.

About the Author

Alex Co: APAC Research Analyst

Alex graduated from the S P Jain School of Global Management in Sydney with a degree in finance and entrepreneurship. She previously worked in the compliance division at a large financial institution and gained her experience as a research analyst.

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Boeing: What has been done? And will that be enough?

Will changes to Boeing’s board be enough to sharpen focus on product and safety going forward? This article examines Boeing’s corporate governance practices and current board expertise, bringing to light some interesting findings.

This article examines Boeing’s corporate governance practices and current expertise on the board. This raises the question if recent changes will really be enough to sharpen Boeing’s focus on product and safety going forward.

Disaster strikes

Following the horrific plane crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 in October 2018 and March 2019, a mounting crisis faces Boeing. As a result, Boeing has recently received a fair share of negative publicity, been the subject of investigations and named in lawsuits. Beyond the general public, shareholders and corporate governance experts are infuriated. They collectively question the effectiveness and transparency of the board and leadership—with good reason.

Various recent studies have shown Boeing’s quality of corporate governance.  Findings reveal Beoing ranks near the bottom of all S&P 500 company boards[1]. Even more interesting is the board’s compensation data.

CGLytics data reveals that of all S&P 500 companies, Boeing ranked 91st out of the 500 with the highest paid non-executive directors; receiving an average of $345,000 per director in 2018.

In addition, new developments at congressional hearings held in October 2019 have revealed that many concerns were warranted.  Boeing executives admitted to flaws in the design of its 737 Max. Pilot error was originally thought to be the main cause of the plane crashes, however that sentiment has changed and a “pattern of deliberate concealment”[2] is now suspected. Instead of pilot error, it is now alleged that insufficient information provided to the pilots regarding the new changes to the plane caused these unfortunate results. The Boeing CEO stated at the congressional hearings that, until recently, he was unaware of the apparent issues. It seems greater oversight and communication was, and is, needed within Boeing, its executives, and the Board.

Board takes steps to increase safety

We note that Boeing has taken various actions to ensure the future safety of its aircrafts. In August 2019, the board established a permanent Aerospace Safety Committee to assist the board in “the oversight of the safe design, development, manufacture, production, operations, maintenance, and delivery of the aerospace products and services of the Company.” Along with the establishment of the committee, the company also formed a Product and Services Safety organization, which is responsible for monitoring safety related events within the company’s major businesses.  These additional layers of oversight will hopefully strengthen Boeing’s safety focus and minimize unfortunate future safety issues on the consumer end.

The board also “amended the company’s Governance Principles to include safety-related experience as one of the criteria it will consider in choosing future directors.”[3] Following this amendment, the board appointed former Chief of Naval Operations John Richardson, whose prior positions included significant safety experience, as a director. Admiral Richardson,  along with Admiral Edmund Giambastiani,  appear to be the only director on Boeing’s 14-member board that has safety experience in aviation.  It also does not appear that the board currently contains directors with technical experience in aviation, except for CEO Dennis Muilenburg who was an engineer for Boeing. This could raise the question whether the board has enough expertise to address, both technical and safety issues, to challenge Muilenburg, who previously held a dual role as Chairman and CEO of Boeing for over three years.

Skills and expertise on Boeing's board

Changes for CEO Muilenburg

In October 2019, Boeing’s board decided to remove CEO Muilenburg from his role as Chairman. This action was taken to “enable Muilenburg to focus full time on running the company as it works to return the 737 Max safely to service, ensure full support to Boeing’s customers around the world, and implement changes to sharpen Boeing’s focus on product and services safety” and to “strengthen the company’s governance and safety management processes.”[4] It is still unclear, however, whether Muilenburg will receive any pay cut or even resign following his failure to address the 737 Max issues. When asked at the Congressional hearings about whether he would take any pay cut following this mistake, the CEO said: “Our Board will make those determinations.”

How Boeing could increase board oversight

Board oversight and transparency is a significant issue in corporate governance. It is important to be aware of board composition, executives, and the information that entails when viewing any company. CGLytics provides necessary data analytics that could lend a useful hand in analyzing boards, their efficacy, and transparency. In this case, a quick look at the board expertise, committee overview and individual profile of each director on the Boeing’s board on CGLytics would have drawn attention into the Board’s lack of safety committees and technical and safety experience and expertise.

Would you like to learn more about how, you too, can have instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills? Click here to find out about CGLytics’ boardroom intelligence capabilities and obtain the same insights used by institutional investors and advisors.

About the Author

Thao Nguyen: U.S. Research Analyst

Thao completed her Bachelor of Science in International Business Management at Erasmus University in Rotterdam and spent a semester abroad at the University of Washington, Foster School of Business. She gained work experience as a Research Analyst in previous internships.

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Pressure from stakeholders brings about change

In an increasing number of companies, remuneration based on short-term results is giving way to a remuneration structure based on long-term performance. Companies should be able to indicate how the CEO’s remuneration contributes to long-term value creation, and be prepared to discuss their performance in this area.

It is an undeniable trend: in an increasing number of companies, remuneration based on short-term results is giving way to a remuneration structure based on long-term performance. The remuneration of executive directors is one of the most important governance issues for companies. Companies should be able to indicate how the CEO’s remuneration contributes to long-term value creation, and they should be prepared to discuss their performance in this area.

Supervisory and remuneration committees are expected to have assessed whether the remuneration is in perspective, both in relation to comparable roles, but also with respect to relationships within the company itself. In various countries, legislation that forces companies to explain how the remuneration of a top executive relates to the salaries of average employees within the organization is now under consideration.

Losing ground

The long-term focus in remuneration structures is also reflected in our data. For example, excessive severance payments, golden parachutes (a prior agreement on the level of severance pay) and substantial signing bonuses are becoming less and less common. In some countries, this kind of remuneration is now even prohibited. In addition, companies are increasingly using performance criteria that are in line with the long-term development of the company’s value. For example, generated cash flow as a criterion for the remuneration of executive pay is losing ground. Instead, the executive director’s performance is measured against metrics that say something about long-term value development, such as earnings per share.

Especially in financial sector

In the Netherlands, these developments can be seen mainly in the financial sector. In recent years, several listed financials have wholly or partly converted variable remuneration for executives and management into fixed remuneration. Moreover, this fixed remuneration more often consists of a combination of cash and shares of the company. With remuneration in shares, there is a direct connection between the remuneration of the executive director and the performance of the company. A similar development, but on a much larger scale, can be seen in the United States. Companies in a wide range of sectors are opting for a remuneration policy that combines cash and shares. These shares account for an average of 55 to 60 percent of the total remuneration package.

Stakeholder pressure

So the Netherlands has not got as far as the United States yet. But the trend has been set and it is irreversible. Greater attention to reasonable pay is in line with the focus in society and the business community on sustainable growth. Not all companies make the turnaround on their own initiative.

Not uncommonly, it takes pressure from stakeholders − such as major shareholders or employees − to start a discussion in the boardroom about a more sustainable remuneration policy. Large investors in particular − pension funds and insurers − are driving the change in remuneration. CGLytics data show that they are increasingly exercising their control to influence remuneration proposals. Not only are they expressing an explicit opinion on management board remuneration, but they also discuss the structure of the remuneration policy itself and the performance metrics used. Investors are calling for a sustainable and socially responsible remuneration policy by including ESG statistics (with environmental, social and governance variables). Shell sets short-term targets to reduce CO2 emissions and ties executive pay to these targets. Other groups have to keep up with such trends. If they do not do so proactively, they expose the company to financial and reputational risks.

Long-term focus

More than ever before, executive and supervisory directors need to strike a good balance between corporate strategy, remuneration of talent and the interests of shareholders. So the question is not whether Dutch companies should focus their remuneration policy more on long-term value creation, but when.

For more information about how CGLytics’ executive compensation data and tools informs companies of how they compare to their peers reumuneration practices click here.

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Good corporate governance begins with good data

Effective corporate governance starts with having the right information. In an ever-changing corporate governance landscape of continually increasing, publicly available information, shareholder involvement, activism, ongoing media campaigns and continual changes to governance regulations, having the right information from the start can be the difference between success and ongoing shareholder revolt.

Effective corporate governance starts with having the right information. In an ever-changing corporate governance landscape of continually increasing, publicly available information, shareholder involvement, activism, ongoing media campaigns and continual changes to governance regulations, having the right information on a timely basis from the start can be the difference between success and ongoing shareholder revolt.

This article first appeard in Ethical Boardroom, the premier subscription based magazine and website that is trusted for its in-depth coverage and analysis of global governance issues. Click here to access the original article.

Boardroom diversity, fair executive compensation, compliance to regulatory requirements, how companies compare against their peers and competitors and how they are perceived by investors and proxy advisors, needs to be thoroughly understood by boards of companies to stay ahead.

With heightened scrutiny of governance practices in the post-financial crisis era, it is now more important than ever for companies’ boards and their executives to be fully prepared, with the same data and information as investors and proxy advisors, before beginning engagement to avoid reputational and governance risk.

CGLytics, the leading provider for global corporate governance data analytics, provides real time data and a suite of powerful benchmarking tools to help companies and their boards with data- driven insights for sustainable practices and effective oversight. These tools support boards in making smarter, more timely and better-informed decisions.

The great debate of executive compensation

Investors over the past 12 months have continued to pay attention to, and even asked more questions about, the pay practices of companies and rewards offered to their CEOs and directors. Add to this the requirements set out in the revised European Shareholder Rights Directive (SRD II) to increase transparency of the company’s pay practices, including CEO to average employee pay ratios, CEO pay relative to company’s performance and extended say on pay rights of shareholders, companies should be sitting up and paying close attention.

During the last proxy season, executive pay was heavily and effectively challenged. Shareholders repeatedly voted down advisory remuneration reports and questioned short-term remuneration plans, urging companies to bring pay into line with performance. Many remuneration-related resolutions were voted down on the grounds of misalignment.

The UK, in particular, was at the forefront of shareholders concerns over excessive pay. To address these concerns, the Financial Reporting Council (FRC) issued a Revised Corporate Governance Code in July 2018, which encouraged directors to exercise independent judgement and discretion when authorising remuneration outcomes, by taking into account company and individual performance along with other circumstances.

Executive compensation data available in the CGLytics application

CGLytics carried out a proxy review with data from its extensive, global governance database of FTSE 100 companies and their pay practices. The study revealed that in 2018, 33 companies in the index sought a binding shareholder approval for their remuneration policies. Generally, investors questioned the earning potentials in short-term incentive plans, for example Rentokil Initial plc’s decision to increase the annual bonus from 100 per cent to 150 per cent cost the board a dissent of around 25 per cent on their remuneration policy. In addition, shareholder revolts were seen regarding remuneration reports where there was not enough clarity about contractual entitlements, as seen in the case of Royal Mail’s retiring CEO Moya Greene and new CEO Rico Back.

In other markets, shareholders became increasingly involved in company strategy, as seen in the Dutch AEX study carried out by CGLytics. Of the past years’ proposals to amend executive and supervisory directors’ remuneration, the majority encountered criticism and some were withdrawn prior to the AGM, or resulted in a large number of votes against.

“WITH HEIGHTENED SCRUTINY OF GOVERNANCE PRACTICES IN THE POST-FINANCIAL CRISIS ERA, IT IS NOW MORE IMPORTANT THAN EVER FOR COMPANIES’ BOARDS AND THEIR EXECUTIVES TO BE FULLY PREPARED”- Aniel Mahabier, CEO of CGLytics

To increase transparency and truly understand how stakeholders, including proxy advisors, are viewing executive compensation and predicting how they are going to vote, companies and their boards need access to, not only information, but also data and tools that allow them to instantly compare their company to their industry peers’.

CGLytics’ extensive database hosts more than 10 years of global compensation data and is driving good corporate governance practices by increasing CEO pay transparency and helping companies to be more prepared than ever before.

Using the same solution as leading proxy advisors and institutional investors, companies can replicate the peer groups of proxy advisors and investors with CGLytics’ customisable peer group modeler and easily perform a pay-for-performance alignment review. This empowers boards to know exactly what investors are looking at and scrutinising prior to engagement, be proactive with their reporting and make sure there are no hidden surprises come AGM time.

Diversity in the boardroom: where are all the women?

With companies, their boards, investors and governmental stakeholders all agreeing that goals that promote long-term value creation are imperative to corporate governance health, the issue of diversity comes into play. Why? Because having a diverse board is linked to long-term value creation.

A diverse board of directors with different ages, genders, nationalities, cultures, skills, experiences, tenure and backgrounds certainly creates new and interesting dialogue around best practices for long-term value creation and brings fresh ideas to the table.

With the speed of change happening today, driven by technology innovations, a variety of ideas, perspectives and knowledge is mandatory to keep up and make the best decisions by taking into account worldly happenings. And government and regulatory bodies are taking note. In particular, during the past year, the US has seen strict regulation changes in some states to even out the gender imbalance in corporate boardrooms.

California was the first state to legally require female representation on boards with the California Senate Bill 826 being passed. The law requires the appointment of at least one female to a company’s board of directors by 2019 and between one and three by 2021, depending on the size of the company. A fine of $100,000 can be expected for not complying. This was shortly followed by New Jersey , which mimicked California’s approach of at least one female director by 2019.

Earlier this year, using CGLytics’ software solution that provides extensive boardroom composition data and analytics, a review was carried out to evaluate the progress made in the US market and likelihood of achieving greater diversity in the coming years. By taking a deep dive into the board composition of S&P 500 companies, it was revealed that even though there is a push from investors for more diverse boards in order to maximise returns, change is not happening as fast as desired.

In CGLytic’s S&P 500 Diversity report it shows that from 2017 to 2018 total female representation on boards grew marginally, reaching 24 per cent, up just one per cent from 2017. In response to engagement with the investor community, as well as the new regulatory requirements, the number of women on boards rose from two in 2017 to three in 2018, showing only a slight increase in efforts being made. However, despite the slow growth in overall female representation, six of the seven companies that lacked at least one female director in 2017 corrected this in 2018.

The report also revealed that bringing younger directors into the boardroom does not only add value in terms of unique perspectives and improved innovation, but also impacts company performance. The findings show that there  is a clear and positive correlation between the number of younger board members and the total shareholder return (TSR).

As many investors continue to encourage and push for boardroom diversity for long-term value creation, it is now crucial for companies to, firstly, see how their boardroom composition, including skills, expertise, age and gender diversity is seen by the outside world. And, secondly, see how their company stacks up against their peers and competitors (see graph below).

Source: CGLytics Data and Analytics

Companies using the CGLytics software-as-a-service platform now have access to boardroom intelligence and can see exactly what their investors and proxy advisors see. Using this intelligence, which includes a skills and expertise matrix of more than 5,500 listed companies across the globe, boards are better preparing for AGMs, implementing effective succession plans and, at the same time, reducing their risk to reputational damage and activist investors.

In addition, having access to 125,000-plus global executive biographies in the CGLytics solution, including more than 20,000 female profiles (both existing as well as upcoming directors), with detailed information of skills, experience, compensation, interlocks and connections, nomination committees can lever new ways of scanning the market for talent, understanding corporate networks and work smarter with their search and HR firms when it comes to succession planning and recruitment. It really is helping companies to look beyond the standard practices and information available by leveraging technology to drive and implement good corporate governance practices and sustain a competitive advantage.

Why data, tools and smart technology are mandatory in the challenging times ahead

As we continue to see regulatory requirements to increase transparency of governance practices, such as CEO pay (through implementation of SRD II) and improve diversity (through legislation not only in the US but worldwide), a trend is emerging of investors becoming increasingly knowledgeable and sophisticated.

Not only are leading proxy advisors and institutional investors choosing to use data and analytics delivered to them from CGLytics, but some are building their own systems to stay informed and take advantage of investment opportunities. Companies need to have access to the same information as proxy advisors and investors, with the same sophisticated tools, in order to assess risks, better prepare for shareholder engagement and avoid potential activism. With knowledge being power, and transparency becoming a mandatory requirement, in the near future companies will have no choice but to use systems, such as those offered –by CGLytics, to keep up with investors and improve their reporting practices.

Board insights available in the CGLytics application

The need to keep up with intel on governance risk exposure was evident during the 2018 proxy season. The season saw record levels of shareholder activism, with some high-level campaigns – notably those of Elliott Management and Icahn Partners – hitting the headlines. Changes to board composition and M&A were the primary aims of these campaigns. A recent study performed by Lazard, shows that activists won 161 board seats in 2018, up 56 per cent from 2017 and continue to name accomplished candidates, with 27 per cent of activist appointees having public company CEO/CFO experience. The message is clear: boards must regularly review their governance vulnerabilities to minimise their exposure to activists, and to review vulnerabilities they must have access to the analytics and tools in platforms such as CGLytics’.

And themes that were established in the 2018 season are likely to continue. Shareholder activism will increase with institutional investors playing a more active role and driving change. It also seems likely that US activists will launch campaigns focussed on European companies. Forcing European companies to have access to global data for instant comparison of not just their country peers, but their industry peers and competitors globally.

To prepare effectively for shareholder engagement and anticipate response, companies and their boards must also be looking at past voting habits and patterns, and resolutions from other AGMs during the season. By looking at the trends of past shareholder voting and keeping abreast of happenings during the current proxy season, boards can spot patterns and predict the outcomes of shareholder voting resolutions.

CGLytics’ platform hosts an extensive database of N-PX filings with voting proposals and resolutions from 2004 onwards, covering 4,000-plus investors with more than eight million data points. With this information on hand, plus the benefit of receiving up-to-date alerts of shareholder voting outcomes, boards remain on top of voting trends and can easily identify investors for a proactive engagement.

The next era in corporate governance intelligence

The pressure on companies and their boards to increase transparency of executive compensation and pay practices, improve age and gender diversity, and constantly assess their board quality and effectiveness will not go away.

As investors and their proxy advisors gain greater insights and intelligence by use of data and smart solutions, companies will need to do the same. Boards need to ensure they are on top of their exposure to governance risks in order to avoid activism at all costs and any possibility of reputational risk – and they need to do this efficiently.

Would you like to learn more about how, you too, can have instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills? As well as access the same executive compensation data used by Glass Lewis in their Proxy Papers? Click here to learn more.

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