www.proxyinsight.com

September 2017Volume 4, Issue 8

VOTING NEWS

PROXY MONTHLY

SYMBIOTIC VOTING: AN INTERVIEW WITH ALLIANCE BERNSTEIN’S LINDA GIULIANO

PELTZ’S LATEST GAMBLE: COMPARING TRIAN’S PROXY CONTESTS AT P&G AND DUPONT

This month has seen Proxy

Insight concentrate on the

N-PX filings, with our analysts

working around the clock to import the

US mutual fund disclosures into our

system. We can once again say that

Proxy Insight has beaten its record, as

our team finished going through the

N-PXs by mid-September.

The topic of diversity has dominated

North America this month. In the

US, the New York Comptroller, Scott

Stringer, has written to 151 companies

asking for disclosure of their policies

regarding board diversity and

independence. As part of this effort, Mr

Stringer has requested that these firms

include the race and gender of board

directors in their reporting processes.

Similarly, in Canada, some

of the country’s largest asset

managers – including BMO Global

Asset Management, CIBC Asset

Management, the Ontario Teachers’

Pension Plan and the Canada

Pension Plan Investment Board –

have joined together to call for greater

representation of women on boards

and among company executives.

Dubbed the ‘30% Club Canadian

Investor Group’, the coalition has

called for 30 percent of all directors

and executives in S&P/TSX composite

index-listed companies to be female

by 2022. The coalition explains that it

perceives 30 percent representation

as approximately the critical mass by

which the contributions of a minority

group are no longer ascribed to that

group, but rather to the individuals that

carry them out.

The environment has also featured

heavily in this month’s news. Most

recently, the UK government has

announced new measures designed

to support environmentally-friendly

investment. These measures include a

new set of voluntary standards for green

investments and an endorsement of

existing recommendations on climate

risk reporting, which was published

earlier this year by the Financial Stability

Board’s Task Force on Climate-related

Financial Disclosures.

On the topic of climate change, an

investor group representing over $1

trillion combined assets has recently

written to 60 of the world’s largest

banks in order to urge them to

confront the risks associated with

temperature increases. In particular,

the group has asked banks to

remain compliant with the 2015 Paris

Agreements and provide details of

the climate risks to which they are

currently exposed, and their plans to

manage them.

Finally, the ongoing debate over dual-

stock structures continues, with some

commentators echoing W. Robert

Main III’s sentiments in our July issue

by advocating sunset provisions.

These provisions require founders

to surrender their superior voting

rights after a specific time period. It is

hoped this will bridge the gap between

advocates of corporate governance

best-practice and the monetary

interests of stock exchanges and

indices.

Our headline interview this month

is with Alliance Bernstein’s Head

of Responsible Investment, Linda

Giuliano. We discuss with Linda

how Alliance Bernstein approaches

diversity and ESG issues, as well as

the main corporate governance issues

facing the asset manager during this

year’s proxy season.

This month’s article compares the

upcoming Procter & Gamble proxy

contest with Nelson Peltz’s earlier

attempt to get on DuPont’s board in

2015. The article not only summarizes

the similarities and differences

between the two proxy contests, but

also underlines the likely factors that

could swing it in favor of either P&G’s

management or Mr Peltz.

Proxy Insight is the only tool to offer

the voting intelligence necessary to

navigate today’s investor relations

market. If you are not a client and

would like to take a look, we would be

delighted to offer you a trial. Please get

in touch.

nick.dawson@proxyinsight.com.

Proxy StatementNick Dawson, Co-Founder & Managing Director, Proxy Insight Limited.

2

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Could you give our readers a brief

outline of how AllianceBernstein

approaches its proxy voting

responsibilities?

We think of proxy voting as an integral

part of being an active manager and

owner, since voting directly impacts our

overall investment process. We take a

principles-based approach to proxy

voting, supporting strong corporate

governance structures, shareholder

rights and transparency. We are also

transparent as a firm in what we do,

and make our proxy voting policy

and records publicly available on our

website.

But, primarily our proxy voting

procedures involve close co-

operation between our analyst

and corporate governance teams

throughout the voting process. Our

corporate governance team brings

the expertise in corporate governance

best practices, whereas our analyst

team brings their comprehensive

knowledge of issuers to the table. For

us, this binary partnership between

the teams results in the best-informed

proxy voting decisions.

From a governance perspective, we

also have a proxy and governance

committee that I chair, which includes

members of our governance,

investment, legal and operations

teams. The committee oversees our

voting policy and processes to make

sure that we are addressing issues

as they arise, and that our policy

and processes evolve over time. The

committee meets at least several times

a year to formally review and update

the policy.

Finally, it should be mentioned that

our process involves extensive

engagement with issuers throughout

the voting process. Our analysts

attend many company meetings every

year and the corporate governance

team engages with issuers on a

regular basis, frequently alongside the

analyst team.

Would you say there are any areas

where AllianceBernstein differs

from the average asset manager

with regards to proxy voting and/or

corporate governance?

Well, there are basic standards of

corporate governance that most asset

managers adhere to in proxy voting. I

think there are differences, certainly in

terms of how different firms evaluate

specific items based on their own

policy and analysis.

Executive compensation, contentious

director elections and shareholder

proposals are generally the areas

where I believe you would see more

divergence among asset managers.

For instance, various firms approach

shareholder proposals on ESG

issues differently depending on their

respective evaluation frameworks and

perspectives.

For example, we are very strong

supporters of transparency on

shareholder proposals where we

believe that information can add value

to the investment process and we

generally will support such a proposal.

Other asset managers may not take

the same approach.

In your 2017 policy, you updated

your section on board diversity.

Could you give us a brief overview of

how AllianceBernstein approaches

diversity?

We think of diversity in the broadest

terms, and ultimately want cognitive

diversity. So, when we are reviewing

a board, we assess whether its

members bring a broad skill set

to effectively oversee the strategic

direction of the firm, including having

the right management in place. More

specifically, the things that we look

for are whether a board has members

with direct industry experience, strong

financial expertise and is diverse in

gender, age and tenure.

Symbiotic VotingDiscussing the synergy within AB’s proxy voting process with its Head of Responsible Investment, Linda Giuliano

4

I think there are differences, certainly in terms of how

different firms evaluate specific items based on their own policy and analysis.”

“

We also look at board diversity from a

geographical standpoint. For instance,

if we are looking at a multi-national

corporation, is it bringing in people with

broad international experience and,

even better, directors who reside in a

market where the corporation has a

strong presence?

The main change in our voting policy

with regards to board diversity is how

we think about board refreshment. At

AllianceBernstein, we really want to

understand how a board is evaluating

the skills of its current members, and

whether or not their skills match the

board’s current needs, i.e. where are

the skill gaps?

And most importantly, what is the

process by which the board attempts to

fill those gaps, and how are they going

about ensuring that they have a diverse

pool of prospective board candidates?

I would also add that along with

our transition to a digital economy,

cybersecurity has become increasingly

important for boards. While we can’t

expect every board to have a cyber

expert – there just aren’t enough – we

do expect boards to take this issue

seriously and look at a variety of ways

to ensure they get access to that

expertise.

So, it really comes down to process

in understanding how a board

approaches diversity.

With 2017’s proxy season coming

to a close for most countries, could

you outline the corporate governance

issues that AllianceBernstein has

focused on most this year?

The obvious issues that continue to be

discussed are around executive pay,

director elections, board composition,

shareholder rights and, as I mentioned

earlier, cybersecurity.

Shareholder rights during this proxy

season have continued to be a big

topic, as more companies have been

adopting proxy access. As of mid-

proxy season, approximately 425

companies have adopted proxy access

since 2013, including over 60 percent

of the S&P 500.

Shareholder proposals on

environmental and social issues saw

a slight uptick from 2016. Climate

change, as expected, continues

to be an important issue for many

shareholders. This was the first year in

which we saw a shareholder proposal

on climate risk reporting get a majority

vote at ExxonMobil.

Diversity was the main topic for social-

related proposals – diversity at the

board level and staff level, including

more focus on the gender pay gap. I

anticipate that these issues are going

to continue to get more attention,

not only in terms of the number of

proposals put forward, but also the

time and focus required to evaluate

them as they evolve.

Interestingly, while on the surface many

shareholder proposals sound very

simple – e.g. disclose your company’s

pay based on gender – they usually

involve very complex issues requiring

thought by both the company and its

shareholders. For example, how is

the compensation calculated, how to

normalize across different geographies,

etc. Indeed, we ask ourselves, how will

this disclosure help us evaluate the

company, provide greater insight and

ultimately drive shareholder value?

As the Head of Responsible

Investment, could you outline how

AllianceBernstein approaches ESG

issues?

At AllianceBernstein, we believe that

responsible investment is best done

through active management, with an

analyst team that has considerable

knowledge of the companies and

industries in which we invest.

Our overall framework involves taking an

integrated approach to environmental,

social and governance issues in our

investment decisions across our equity

and fixed income products.

It is the primary responsibility of our

analysts, given their expertise, to

assess the material ESG issues that

a company or industry may face,

and subsequently to factor that into

their research process. Ultimately,

this feeds into the portfolio decision-

making through research reviews

and discussions with the portfolio

managers who make the final

investment decisions.

We also have a subset of clients that

want to go beyond integration of ESG

issues, and we provide solutions across

asset classes for those investors who

want their capital to work towards a

better tomorrow. Over the past few

years, we have developed responsible

investment-focused solutions for

clients who want to do more.

5

“THIS BINARY PARTNERSHIP BETWEEN THE [ANALYST AND CORPORATE GOVERNANCE] TEAMS RESULTS IN

THE BEST-INFORMED PROXY VOTING DECISIONS.”

Cybersecurity has become increasingly important for

boards.”“

“

“IT IS THE PRIMARY RESPONSIBILITY OF OUR ANALYSTS, GIVEN THEIR EXPERTISE, TO ASSESS THE MATERIAL ESG

ISSUES THAT A COMPANY OR INDUSTRY MAY FACE.”

6

Local best practice is...an ongoing discussion

that we continue to have and re-evaluate as regional standards change.

“AllianceBernstein’s voting policy

contains many sections that apply

only to specific markets. Given how

much corporate governance dif fers

from market to market, do you find

it dif ficult to keep up to date with

regional best practice? Would it not

be better to divide your global policy

into several regional ones?

This is a very interesting question

from my standpoint because as of

a few years ago our voting policy

had no regional carve-outs. We

basically had a broad policy with

a philosophy that there are strong

corporate governance practices that

we believe that all markets should

adhere to. The policy was generally

written with that concept in mind.

Since then, we have added extra

sections for particular markets,

as we have evolved our thinking

to modify policies to address local

market standards. However, those

markets with lower standards

are also the ones where we try to

engage with issuers to influence

their behaviors.

A good example is Japan, where we

have seen a significant increase in

the number of companies adding

independent directors to their

boards. So, we try to find the right

balance between driving strong

governance policies in markets

that are less developed in their

governance practices, and adhering

to our own principles of good

corporate governance.

Local best practice is therefore an

ongoing discussion that we continue

to have and re-evaluate as regional

standards change.

The past few years have seen

considerable improvements in

corporate governance worldwide.

However, some countries/regions

have seen more improvements than

others. Are there any countries/

regions that you believe require a

similar renaissance in corporate

governance?

We are starting to see steps taken in

‘developing’ markets, particularly by

some stock exchanges, to improve

transparency. For instance, we

have seen the Johannesburg stock

exchange put forward some strong

corporate governance practices

in their listing rules, with a comply

or explain principle. This is a good

first step, as it illustrates that there

are certain practices that listed

companies are expected to at least

work towards.

If I had to pick regions, I would say that

Latin America and Asia have room to

improve. I think what investors are

looking for is more transparency

across the board, including better

financial transparency. So, I do think

we have a way to go in emerging

markets.

Thank you Linda.

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TWO CAN’T-MISS EVENTS INEXECUTIVE COMPENSATION

Procter & Gamble (P&G), with a market

capitalization of over $220 billion, recently

became the largest company ever to face

a proxy fight following a bid for a board

seat by Trian Fund Management. With

the contest coming up next month, we

thought we would take this opportunity

to compare it with Trian’s last record-

breaking proxy battle, the 2015 clash with

DuPont.

The P&G proxy contest began when

Trian purchased a $3.5 billion stake in

the company in February 2017. David

Taylor, CEO of P&G, said in June that the

company was in “ongoing constructive

talks” with Trian. Then, in the same

month, Trian said it was seeking to put

Nelson Peltz on the board and P&G

rejected the proposal. Evidently, the five

months of negotiations were not enough

to reach a compromise.

The contest with DuPont began in the

latter half of 2015. Trian accused the

chemical giant of underperforming,

and sought to have several directors

elected to the board. As with the current

battle, potential compromises were

discussed but neither side managed to

propose something that the other would

accept. Trian’s argument was that the

conglomerate structure was unwieldy

and a burden on results. The activist

wanted to split DuPont’s seven business

lines into three companies: one aimed

at agriculture and nutrition, another

for industrial materials and a third for

performance chemicals.

Trian is not seeking a breakup of P&G and

the company even agrees with some of

its changes, such as cutting costs and

restructuring management. However,

Trian believes P&G has failed to move fast

enough to arrest its market-share losses

and convert cost cuts into profit.

Similarities and Differences

Aside from the activist involved, there are

a number of similarities between the two

campaigns. For example, in both cases

the objectives of Trian are partly aligned

with management. DuPont was already

planning to spin off its performance

chemicals unit, but did not support a

further break-up as it felt that its various

businesses benefited from integrated

research and sales efforts.

Similarly, P&G agrees with some of Trian’s

ideas, but does not wish to pursue the

level of aggressive cost-cutting that

has been proposed. According to a

statement, “The board is confident that

the changes being made are producing

results, and expresses complete support

for the company’s strategy, plans and

management.”

Of course, both campaigns stand out for

their scale, though there is also a sizeable

gap between them. P&G is now the single

biggest company to face a proxy battle

and, with a market capitalization of $67.5

billion, DuPont was among the largest

ever targets of a proxy fight by an activist

investor at the time. However, DuPont’s

market cap was less than a third (around

31 percent) of P&G’s current $220 billion,

highlighting the increased scale of Trian’s

ambitions. Trian owned around 2.7

percent of DuPont’s shares at the time of

the proxy contest, compared to roughly

1.5 percent of P&G’s today.

While the two contests may have some

similarities, there are also differences. In

particular, it is interesting that Trian sought

to add not just Peltz, but three other

directors to the board of DuPont. This

time, Peltz is the lone candidate. None

of the DuPont nominees were ultimately

elected, but it was Peltz who came

closest. It could be that Trian learnt from

this, and that is why they are only seeking

to add Peltz to Procter & Gamble’s board.

Trian began its campaign more amicably

this time. The battle against DuPont was

launched alongside accusations that

acquisitions had not brought rewards and

expenses were too high. The campaign

became personal when Trian claimed

that performance had been disappointing

during the reign of CEO Ellen Kullman.

At P&G, Trian may have accused the

company of not doing enough to cut

costs, but has also expressed its support

for CEO David Taylor and the company’s

11 directors. If Trian wins the proxy

contest, it promised to expand the board

and re-nominate Ernesto Zedilio, who

Peltz is seeking to replace. Nonetheless,

these amicable beginnings have recently

devolved into a tit-for-tat between Trian

and P&G’s management.

Peltz’s Latest GambleComparing Trian’s proxy contests at P&G and DuPont

8

9

“IF TRIAN WERE TO GARNER SIMILAR LEVELS OF SUPPORT FOR THIS PROXY CONTEST, THEN PERSUADING

JUST ONE OF THE THREE BIGGEST SHAREHOLDERS COULD TIP THE SCALES IN THE ACTIVIST’S FAVOR.”

Factors at Play

Procter & Gamble has no single

shareholder that could do much to swing

the vote. The activist’s $3.5 billion stake

represents less than 1.5 percent of the

consumer goods giant’s outstanding

shares. Vanguard, BlackRock and State

Street, the three largest shareholders,

have positions of 6.9 percent, 6 percent

and 4.5 percent respectively. Bank of

America, Capital World Investors, BNY

Mellon, Fidelity, Northern Trust, Geode

Capital Management and, of course, Trian

follow with stakes of between 1 percent

and 1.7 percent.

However, these investors could still

be crucial if it comes down to the wire

as it did at DuPont. Peltz received 43

percent support at that meeting, despite

Vanguard, State Street and BlackRock

all voting in favor of the management’s

slate. If Trian were to garner similar levels

of support for this proxy contest, then

persuading just one of the three biggest

shareholders could tip the scales in the

activist’s favor.

Trian recently gained the support of ISS,

Glass Lewis and Egan-Jones. Obviously,

winning the support of leading proxy voting

advisers could be key to the success

of Trian’s attempt to install Nelson Peltz

on the board of P&G. However, proxy

adviser support may not be sufficient. As

Proxy Insight data has shown in the past,

gaining proxy adviser recommendations

is not the be-all and end-all. At the DuPont

meeting, Trian gained partial support from

ISS, Glass Lewis and Egan Jones but this

was not enough to secure victory.

The correlation of Vanguard, BlackRock

and State Street’s votes in proxy contests

with the recommendations of ISS and

Glass Lewis is modest. Of the three,

BlackRock follows the main proxy

advisers most often. Yet, since 2011, the

asset manager has still done the opposite

of what ISS and Glass Lewis suggested

36.4 percent and 30.8 percent of the time

respectively. Usually, P&G’s three largest

shareholders back management even if

proxy advisers are siding with the activists.

The opposite only happens rarely.

None of the consumer goods giant’s

top 10 shareholders are prejudicially

opposed to activism, but they side with

management more often than not. Geode

Capital was an exception in 2015, using

dissident proxy cards to cast its votes on

more than half of all possible occasions.

In the 2017 proxy season, BlackRock and

State Street voted using the dissident’s

proxy card in Engaged Capital’s proxy

contest at Rent-A-Center, Richmond

Brothers’ proxy contest at Rockwell

Medical and Macellum Advisors’ proxy

contest at Citi Trends. State Street also

backed Land & Building at Taubman

Centers. Both asset managers backed

management in the board battles at Fiesta

Restaurant Group, Buffalo Wild Wings,

Consolidated-Tomoka Land, Innoviva and

Immunomedics. BlackRock also backed

management at Senomyx and Cypress

Semiconductor.

Engaged, Richmond and Macellum all

had at least partial support from ISS and

Glass Lewis. Like Trian at P&G, they did

not seek control of the majority of the

board.

The fact that the majority of the Top 10

P&G shareholders in Table 1 supported

Trian at DuPont illustrates the high level

of support Peltz received. Hopefully,

this will provide some comfort to Trian

because, with the exception of Capital

World which has only voted at five

proxy contests, the average level

of support from these investors for

dissidents is fairly low. However, the

encouragement Trian can draw from

this is limited. P&G’s top three investors

all supported management at DuPont,

and the combined stakes of any two

of them outweigh the remaining seven

put together. Measured by actual votes

instead of individual investors, using

DuPont as an indicator suggests a

strong bias towards management.

Of course, DuPont is not necessarily

a firm indicator, and the fact that only

a small number of investors account

for the difference should, in theory at

least, make it easier for Trian to reverse

the situation. Once again, this suggests

that winning over even one more

investor could make the difference in a

close-fought battle.

Ultimately, with Peltz having come

so close to success at DuPont, the

question is whether he will be able

to push himself just a bit further this

time around. He might hope that his

relatively amicable approach to this

contest could be the factor that pulls

that off, though this may be hampered

by the fact that his dialogue with the

company has soured somewhat since

his challenge first launched.

If Trian can also conquer retail

shareholders – one of the most hard-

fought battlegrounds of the contest

– this group could also collectively

make the difference. And, once again,

so could winning over even one of the

three top investors. Ultimately, these

look like the main deciding factors, and

it is hard to say how any one of them

will go. It looks like whoever wins may

only secure victory by a narrow margin,

but with things being so close, it is

impossible to say who that will be.

10

“IF TRIAN CAN ALSO CONQUER RETAIL SHAREHOLDERS...THIS GROUP COULD ALSO COLLECTIVELY MAKE THE

DIFFERENCE.”

Investor Shares Held Slate Supported at DuPont % Times Voted Dissident Card

Vanguard Group, Inc. 180,730,770 Management 23.7

BlackRock 156,361,011 Management 30.1

SSgA Funds Management, Inc. (State Street) 114,947,577 Management 24.1

Capital World Investors 38,986,037 Dissident 60.0

Northern Trust Investments 33,510,076 Dissident 25.9

Fidelity Management & Research Co. (FMR) 31,835,998 Dissident 28.6

BNY Mellon 31,722,606 Management 31.4

Geode Capital Management 25,923,937 Dissident 47.0

Norges Bank Investment Management 22,813,845 Dissident 28.6

Wells Fargo Advisors LLC 21,744,314 Dissident 38.6

Table 1: Voting of the Top 10 P&G investors at the DuPont proxy contest Source: Proxy Insight

Both sides claim superior shareholder returns – 16-Aug-17

The spat began with Procter & Gamble saying it has outperformed companies where Peltz serves as director. P&G said that “since the CEO transition on November 1, 2015, our team has delivered total shareholder returns... of 27% – well above the vast majority of peers selected by Trian.” Over the same period, P&G said, “the weighted average return of the companies where Mr. Peltz serves as a board member has been only 8%.”

Trian questioned Procter & Gamble’s calculations, particularly the weighting of stocks by market capitalization. The activist said consumer products companies where Peltz has been a director outperformed Procter & Gamble over similar periods by 10%, and beat the S&P 500 index by 8.8% while delivering higher earnings growth. Trian also favored a ten-year timeframe, while P&G prefers to measure returns from the point when the company changed leadership. Whether investors credit the company with beginning the turnaround is likely to be a central issue in this proxy contest.

Peltz accused of having outdated view of P&G – 28-Aug-17

P&G then criticized Peltz for not understanding the company today. It pointed out that Peltz’s view of the company relies on the experience of Clayton Daley, a former executive who left P&G nearly a decade ago. “Mr. Peltz’s argument that P&G should be targeting the same organic growth targets today as it did in 2005 shows a misunderstanding of the significantly different global economic conditions and industry dynam-ics today,” the company said in a lengthy letter to shareholders. Trian, which prefers to be described as a “highly engaged shareowner” instead of an activist investor, believes the firm’s organic growth has trailed its peers over the past five years, resulting in subpar total shareholder returns. In a relatively small presentation, Peltz suggested he will lobby for cost cuts, better allocation of capital and increased investment.

Trian proposes restructuring in white paper – 06-Sep-17

Trian then released a 94-page presentation on Procter & Gamble, laying out its case at length for the first time. The activist focused its fire on the company’s operating performance and also aimed a shot at CEO David Taylor. Taylor has led a vigorous campaign against Peltz’s candida-cy for the board, despite the activist saying it did not want to topple him as part of its proxy contest. “We are committed to working with David Taylor but good governance mandates robust succession planning,” Trian said.

Trian accused the consumer products giant of fudging reorganizations designed to make its global business units more accountable. It said that centralized selling and marketing operations groups had created additional reporting lines and pushed costs down the chain of command, leading to “near worst-in-class international margins.” While emphasizing that it does not intend to push for a breakup, Trian believes that the business should be restructured into three units with roughly equal revenues: Beauty, Grooming & Health Care; Fabric & Home Care; and Baby, Feminine & Family Care.

As the date of the meeting draws closer, news on this proxy contest has devolved somewhat into a mud-slinging match. Through

reports and counter-reports, each side is criticizing the other for not acting in the best interest of the company.

Heating Up

11

“NONETHELESS, THESE AMICABLE BEGINNINGS HAVE RECENTLY DEVOLVED INTO A TIT-FOR-TAT BETWEEN

TRIAN AND P&G’S MANAGEMENT.”

P&G says restructuring plan is precursor to breakup – 07-Sep-17

In the middle of a nine-page rejoinder focused on its achievements, P&G claimed that Peltz’s ultimate goal is to carve up the company. “[Peltz’s] playbook appears to be code for another restructuring and a precursor to a breakup of the company - his ‘cookie-cutter’ plan,” the company said in a statement. P&G also said it had studied “numerous organizational design struc-tures,” including the one proposed by Peltz, and concluded that his approach “would result in higher costs, lower efficiency, reduced profits and an added layer of management complexity.”

“Today, as a result of the actions we have taken over the past several years, P&G has an even more granular and more account-able structure,” P&G said. The company then reiterated that its board is “best-in-class,” and said Peltz was not filling a current need for experience in “digital, health care [or] global.”

Trian says restructuring plan is not precursor to breakup – 08-Sep-17

Nelson Peltz rebuffed Procter & Gamble’s claim that he wants to split the company into three. In an interview with CNBC, the activist said, “They can say whatever they like, we point very clearly that we are not suggesting a company breakup.” Peltz has proposed a “very lean” holding company, and said all the geographies, the R&D and sales and marketing have to report to one of the three global business units. He told CNBC that his proxy contest at DuPont was not a loss, just “a minor setback.” The company recently merged with Dow Chemicals, leading Peltz to say he lost the proxy battle but won the war.

P&G releases 85-page criticism – 12-Sep-17

P&G then filed an 85-page presentation outlining its strategy and criticizing the activist’s proposals. P&G said Trian’s proposal to create a holding company to oversee its entire structure is the activist’s only idea, “and it is a bad idea.”

Peltz claims P&G will spend $100m on proxy contest – 18-Sep-17

Peltz said Procter & Gamble will spend more than $100 million to keep him out of the boardroom. “The company is spending a huge amount of money on an army of lawyers, bankers and other advisers. All of P&G’s costs related to this proxy fight are coming out of P&G shareholders’ pockets,” Peltz said in a letter to investors on September 18. “Just think what that $100+ million could do if put to work to regain lost market share.” By contrast, the activist noted that Trian will pay the costs associated with the proxy battle from its own pocket, suggesting it will not ask for reimbursement from the company if it wins the fight.

In August, P&G said in its proxy statement the fight would cost $35 million. Chairman and CEO David Taylor reiterated the num-ber in a September 11 interview with CNBC, calling Peltz’s claim “preposterous.” Trian itself is expected to spend around $25 million on the proxy contest.

P&G sends shareholders 8-page letter – 20-Sep-17

Procter & Gamble has also published an eight-page letter to shareholders detailing why Pelt’s addition to the board could cause “harm.” Apparently, shareholders questioned what the harm would be in adding Peltz to the board, given that he will be only one voice among 12 directors. “‘What’s the harm?’ is a horribly low and irresponsible standard for board governance,” the com-pany said, before criticizing Peltz for his lack of desirable skills. Procter & Gamble also noted that Peltz has “a history of behavior and hidden agendas that result in derailing companies.”

P&G reiterated that it had talked with numerous CEOs, executives and directors who had worked with Peltz and “positive rec-ommendations were not forthcoming. People would only speak candidly about their experiences with Mr. Peltz if those discus-sions were kept confidential, for fear of retribution,” the company said. This is despite Trian already saying it had contacted the 13 CEOs and chairmen who had worked with Peltz, and all of them said they had not talked with P&G.

Trian says criticisms are false – 20-Sep-17

Trian responded to the letter with a statement saying it was “disappointed that P&G has been inundating its employees, retirees and alumni with misleading communication materials about Nelson Peltz’s track record and intentions.”

In a letter, Peltz added, “When I serve on a company’s board, we hold our investments for an average of seven years, which is longer than many mutual funds and enough time to help achieve real improvement... The current focus of the board and management is to sell brands, cut advertising, cut jobs and erode local capabilities, all while preserving a highly centralized and matrixed corporate structure that impedes market share growth.”

New Dutch corporate governance code

approved

The Netherlands has recently approved

an updated version of its 2008 corporate

governance code. The new code’s most

important change is its emphasis on

long-term value creation, which compels

Dutch companies to disregard strategies

that rely too heavily on short-term value

creation.

The code also stresses the importance

of corporate culture. According to the

updated code, members of both the

management and supervisory boards

will be expected to formulate a corporate

culture based on the value of integrity.

It is now obligatory that the company’s

corporate culture be explained in its

management report.

Asset managers get more aggressive on

US pay

Proxy Insight data shows that major

investors got tougher this year in their

voting on US pay resolutions. All of the

top ten asset managers voted more

aggressively this year than last on say-

on-pay proposals in the S&P 500.

In the twelve months leading up to the

end of June, all of the ten largest asset

managers reduced their support for

S&P 500 advisory compensation votes

compared to the previous period. The

biggest increase in aggression came

from JPMorgan, which cut its support

by 2.2 percent, followed closely by State

Street with a drop of 2.1 percent.

Interestingly, things were more of a mixed

bag in the UK’s FTSE 350. Some of

these asset managers showed a similar

reduction in support for say-on-pay. For

example, State Street and BlackRock

both cut their support for advisory

compensation votes by 2.0 percent.

Others, however, actually increased their

support by an even larger margin, with

the biggest shift being a 3.5 percent

increase from JPMorgan.

On average, support for S&P 500 advisory

compensation votes from the top ten

investors fell by 1.4 percent this year. They

supported 91.8 percent of resolutions,

compared to 93.2 percent last year. In

the FTSE 350, by contrast, their support

for the same kind of proposal increased

by an average of 0.8 percentage points,

hitting 94.0 percent this year.

Corporate governance in Singapore

According to the head of Securities

Investors Association Singapore (Sias),

David Gerald, more needs to be done

to improve the corporate governance

culture in Singaporean companies.

Speaking at the launch of the 8th

Singapore Corporate Governance Week,

Mr Gerald declared that an analysis

conducted by Sias of 200 annual reports

disclosed by companies based in

Singapore – mainly mid and small caps –

found relevant disclosures lacking.

Mr Gerald’s speech follows an earlier

survey, which found that just 11 percent

of chief executives in Singapore received

long-term incentive plans. This underlines

a failure to align executive remuneration

and company performance. Moreover,

31 percent did not even pay their chief

executives bonuses during the 2016

fiscal year.

UBS ups support for climate resolutions

UBS has increased its support for

shareholder proposals on climate issues

this year, according to the Swiss asset

management giant’s head of sustainable

investing research, Christopher

Greenwald.

Speaking in an interview with Bloomberg,

Mr Greenwald said that UBS is “now

voting for a large majority of resolutions

requesting companies to report CO2

emissions, or to explain climate change

risk to investors, or to explain what

initiatives they are taking for a 2-degree

global warming scenario in the future.”

The decision to step up support on

climate resolutions, he said, stemmed

partly from work with UK pension fund

National Employee Savings Trust (NEST),

which placed a large chunk of its assets

in UBS’ climate-aware fund earlier this

year.

13

News summaryA round-up of the latest developments in proxy voting

14

“TWO THIRDS OF VOTES FROM INSTITUTIONAL INVESTORS THIS PROXY SEASON SUPPORTED CLIMATE CHANGE

PROPOSALS. BY COMPARISON, ONLY 13 PERCENT OF RETAIL SHARES VOTED IN FAVOR.”

Although Mr Greenwald did not give

specific figures, Proxy Insight data

backs up his claim that UBS has

significantly stepped up its support for

environmental proposals. The asset

manager voted on eight proposals

to assess the impact of a 2 degree

scenario between 1st July 2015 and

30th June 2016, and only supported

three (37.5 percent). In the same

period from 2016-2017, UBS voted on

11 such proposals and supported all

of them.

Plans to create non-voting shares at

Facebook abandoned

Mark Zuckerberg’s plans to create a

new class of Facebook stock with no

voting rights have been abandoned.

The new shares were intended to

allow Mr Zuckerberg to sell stock to

fund his philanthropy without losing

his majority voting power.

Facebook already uses a dual-stock

structure which allows Mr Zuckerberg

to retain control of the company

through superior voting rights.

However, the company does not

currently offer any stock with no voting

rights at all. Mr Zuckerberg hoped that

creating such a share class would

allow him to fulfill a charity pledge to

give away 99 percent of his stock,

yet maintain his current control of the

company.

The idea of creating non-voting

stock did not go down well with

shareholders, however. Critics claimed

that it would lead to dilution, and that

only Mr Zuckerberg stood to benefit

from a measure designed to maintain

his voting power as he decreased his

stake. A group of Facebook’s investors

launched a court challenge against

the move, in which Mr Zuckerberg had

been due to give evidence.

Deutsche Boerse announces pay cap

The Deutsche Boerse has recently

declared that it is imposing a cap of

€9.5 million on executive pay. This

cap includes all fixed and variable

remuneration elements and will come

into force this year.

Commenting on the new cap,

chairman of Deutsche Boerse’s

supervisory board, Joachim Faber,

said that: “In the interests of our

shareholders, we want to continue to

offer the executive board of Deutsche

Börse AG competitive incentives for

good performance and sustainable

corporate success, while at the same

time avoiding possible and unwanted

fluctuations. This is achieved with

the upper limit in the adjusted

remuneration model.”

Report shows divide between retail

and institutional ESG voting

A report by Broadridge and PwC has

shown a wide gap between the way

retail and institutional investors vote

on ESG issues. Both climate change

and board diversity resolutions

demonstrate the divide.

Two thirds of votes from institutional

investors this proxy season supported

climate change proposals. By

comparison, only 13 percent of

retail shares voted in favor of these

resolutions. The split is less marked

but still present when it comes to

board diversity. These proposals

were supported by 31 percent of

institutional votes and 14 percent of

retail shares.

The report also highlighted several

other statistics, including some

changing trends in proxy contests.

There were 38 proxy contests in

the first half of this year, down from

47 over the same period in 2016.

This year’s campaigns were also far

shorter, lasting an average of 44 days

in the first half of this year compared

to 109 days across 2016.

Divide over Saudi Aramco listing

continues

The stand-off between London’s

square mile and various corporate

governance institutions continues,

with the former supporting new rules

to attract the listing of Saudi Aramco,

whereas the latter opposes them.

The City of London Corporation has

declared that it has no problem with

the formulation of new listing rules for

state-owned companies put forward

by the Financial Conduct Authority

(FCA). It is hoped that the rules would

boost the chance of Saudi Aramco

listing on the London Stock Exchange.

According to the corporation’s policy

chairman, Catherine McGuinness:

“Good corporate governance is one

of the City’s real selling points in the

global economy. We see no problem

with adding a properly regulated and

transparent category to the LSE’s

already diverse range. This proposed

category reflects the special nature of

sovereign entities.”

However, elsewhere support for the

new listing rules has been limited,

with several corporate governance

institutions coming out against the

new regulations, including the Institute

of Directors (IoD), the Investment

Association and Aberdeen Standard

Investments.

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