The Big Vote at Airbus, plus Peltz loses and Calhoun walks from Caterpillar
PROXY COUNTDOWN SCRIPT
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This is Proxy Countdown. Welcome to the big show for the week of April 1, 2024 alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:
Boeing CEO Dave Calhoun continues to quit stuff
Board Drama at drama-maker Warner Brothers Discovery
The Disney war is over
Shareholders sort of getting it right at Jefferies Group
And on the Big Vote, Boeing’s better looking–and better smelling–sibling Airbus
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Trade Wire - BUY/SELL
Top Stories:
Dead Man Walking Boeing CEO David Calhoun is also stepping down from the board of Caterpillar. This time, however, we know precisely when he will be leaving: at the company’s 2024 Annual Meeting of Shareholders.
Warner Bros. Discovery is losing two directors named Steven: Steven Miron and Steven Newhouse. According to the filing, “The resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operation, policies or practices.”
But alas, Warner Brothers Discovery is burying the lead and not practicing honest storytelling:
The Stevens stepped down after the company learned about a Justice Department investigation into whether their presence on the board violated antitrust law.
Federal law forbids most corporate officers and board members to simultaneously serve on the boards of their competitors.
The Stevens are both executives at Advance, a private, family-held business owned by the Newhouse family whose holdings include Charter Communications (12%) and Warner Brothers Discovery (8%).
Steven Miron, who is CEO at Advance, is a director at Charter while Steven Newhouse, whose family controls Advance, has a family member who also serves on the board of Charter. 10% influence
And United Airlines has been busy adding members to its board with experience in selling drugs: first former Walgreens CEO and Starbucks COO Roz Brewer and now Michelle Freyre, President at makeup brand Clinique, a part of the Estee Lauder Companies
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PROXY CAGE MATCH
Let’s get back to our Disney Proxy Cage Match at Walt Disney:
It’s over!
Disney fended off activist investor Nelson Peltz for the second time in two years, as its shareholders rejected his effort to win two seats on its board.
Disney claimed a “substantial” margin of victory, although no official results have been released yet
Unofficial results show that Disney’s board candidates won the backing of 75% of individual shareholders.
Overall, Nelson Peltz received the support of 31% of the vote while CEO Bob Iger received 94%
Blackwells, while also failing to receive support for its three nominees had this to say: “[our] primary objective was achieved – keeping Nelson Peltz out of the Disney Boardroom”
We’ll dive into official results on our next episode
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VOTE RESULTS TABLE
Moving over to our vote results table, there wasn’t a whole lot going on last week:
Small (leagues 0&1&2)
At Jefferies Financial Group, a portion of shareholders are likely avid listeners of THe Proxy Countdown
29% of the vote rejected Say on Pay… and at the same time… the entire Compensation Committee also received significant votes against their reelection: starting with Committee Chair Robert Beyer (26%), and continuing with other members MaryAnne Gilmartin (20%); Michael O’Kane, and Melissa Weiler… al at 20% against
One primary concern was lopsided pay granted to CEO Richard Handler and President Brian Friedman over the past 3 years: a combined $221M, $60M of which is annual bonus cash at the discretion of the board
For the record, Board Chair Joseph Steinberg, who has been there since 1978, received 97% support so it’s clearly not his fault; and the executives who received outsized pay who are also board members each received 99% of the vote.
Large (leagues 3&4)
And lastly, at large cap spice company McCormick & Co, which we covered on this show… meh…. There’s nothing interesting to report here. Shareholders are either happy or not paying attention.
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THE BIG VOTE
Airbus
AGM Date: April 10, 2024
Documents
General Observations
Ownership
Government (subject to a shareholders’ agreement)
French State 10.9%
Spanish State 4.1%
German State 10.88%
Public 74%
Goldman Sachs ~3%
BlackRock ~4%
Performance outliers:
Overall: .354
Stephan Gemkow .506
EBITDA .296
Stephan Gemkow .591
TSR .461
Irene Rummelhoff .716
Carbon .598
Stephan Gemkow .298
Controversies .150
Stephan Gemkow .614
Board stuff
Committees
Ethics, Compliance and Sustainability Committee (e)
Audit Committee (a)
Remuneration, Nomination and Governance Committee (cn)
Matt: Is this a committee that pays itself, pays the CEO, sets the bylaws, and nominates itself??
Stuff
12 directors retire every 3 years
at least a majority of the members of the Board (i.e., 7/12) must be EU nationals
and a majority of such majority (i.e., 4/7) must be both EU nationals and residents
No Director may be an active civil servant.
The Board of Directors has one Executive Director and 11 non-Executive Directors.
CEO is required to be an Executive Director and must be an EU national and resident
At least nine of the Non-Executive Directors must be "Independent Directors" (per Dutch rules)
5 directors up for election in 2024: Amparo MORALEDA, René Obermann, Victor Chu, Jean-Pierre Clamadieu, and new director Feiyu XU
Diversity Gaps
Female Power Gap 33%/17%
Industry average female influence = %
Diversity Power Gap %/%
Industry average diversity influence = %
Any diversity %/%
Insider influence: %
Industry average %
Other stuff
Order book by region
North America 16%
British/American Mark Dunkerley
Europe 34%
Asia Pacific 31%
Chinese/British Victor Chu
Latin America 4%
Middle East 7%
Other 8%
Matt notes:
Company stats:
Major competitors: Boeing, UTC/Raytheon, Lockheed, Northrup Grumman
Stock (buy):
Tale of two companies:
Analysts:
Properly valued - also the only leftover
Board stats:
Aristocracy - 75% CEOs or ex-CEO influence, more than 50% smart people influence
No gender power gap to speak of
58% of directors are connected in loops, with majority of board influence
Overall performance - under average earnings, average TSR and carbon, bottom for controversies
Mostly benchwarmer directors
Business notes:
As many problems as Boeing but totally different tenor
Persistent bribery problems - Airbus accused Boeing of using classified documents and cheating to get the Pentagon contracts, but has been accused of bribing every horrible nation and selling to dictators
Airbus has explicit state backing - and subsidies as a result - France itself was accused of insider trading on Airbus shares it owned, it’s a nightmare conflict of interest
Multiple crashes, but exonerated in all - almost entirely pilot/human error, mild doses of “bad design” but not flawed/broken engineering
ESG ratings
Two companies, similar ratings, all wrong?
MSCI the same (state owner, regs make it harder for Airbus to win)
Sustainalytics similar - Medium vs. High (difference is basically crashes for Boeing)
S&P - Airbus winning because they answer the survey better
Proposal 1: Election of 4/12 Directors
Annual Elections for ALL directors? NO
Director Slate
René OBERMANN 60, M, German Independent 2018 2024 7%
Chairman of the Board of Directors of Airbus SE, Managing Director of Warburg Pincus Deutschland GmbH
Mr Faury and Mr Obermann are not Committee members, however they are invited to attend all Committee meetings.
Other Public Company Boards: Member of the Supervisory Board of IONOS Group SE
Votes Against Last AGM: 6% in 2021
Guillaume FAURY 55, M, French Executive 2019 2015 20%
Chief Executive Office of Airbus SE
Mr Faury and Mr Obermann are not Committee members, however they are invited to attend all Committee meetings.
Other Public Company Boards: AXA SA
Votes Against Last AGM: less than 1% in 2022 (rounded to 100% FOR in statement)
Victor CHU 66, M, Chinese / British Independent 2018 2024 a 3%
Chairman and CEO of First Eastern Investment Group; lawyer
Other Public Company Boards: Grand Harbour Marina Plc; Nomura Holdings, Inc.
Votes Against Last AGM: 1% in 2021
Jean-Pierre CLAMADIEU 65, M, French Independent 2018 2024 E/cn 11%
Former CEO of Solvay SA
Other Public Company Boards: ENGIE; TE Connectivity
Votes Against Last AGM: 16% in 2021
Ralph D. CROSBY, Jr. 76, M, American Independent 2013 2026 e
Member of the Board of Directors of Excelitas Holdings, LP
Other Public Company Boards:
Votes Against Last AGM: 4%
Mark DUNKERLEY 60, M, British / American Independent 2020 2026 a/cn 11%
Former CEO Hawaiian Airlines
Other Public Company Boards: Spirit Airlines Inc.; Volotea Airlines
Votes Against Last AGM: 4%
Stephan GEMKOW 64, M, German Independent 2020 2026 a 6%
Former CFO Deutsche Lufthansa
Other Public Company Boards: Amadeus IT Group; Flughafen Zürich AG
Votes Against Last AGM: less than 1%
Catherine GUILLOUARD 59, F, French Independent 2016 2025 Ae 9%
Former CEO RATP (public transportation operator)
Other Public Company Boards: KPN; Lottomatica; Air Liquide; Chairwoman of Ingenico
Votes Against Last AGM: less than 1% in 2022
Amparo MORALEDA 59, F, Spanish Independent 2015 2024 CN/e 17%
Former COO of Iberdrola SA
Other Public Company Boards: A.P. Moller - Maersk A/S; Caixabank SA; Vodafone Plc • Member of the Advisory Board of SAP Spain
Votes Against Last AGM: 13% in 2021
Claudia NEMAT 55, F, German Independent 2016 2025 cn 10%
Deutsche Telekom's Board of Management--Technology and Innovation
Other Public Company Boards: Deutsche Telekom AG
Votes Against Last AGM: 1%
Irene RUMMELHOFF 57, F, Norwegian Independent 2022 2025 e 1%
EVP of Marketing, Midstream and Processing and Member of the Corporate Executive Committee of Equinor ASA
Other Public Company Boards:
Votes Against Last AGM: 1%
Antony WOOD 57, M, British Independent 2022 2026 a 4%
Former CEO Meggitt plc (aerospace)
Other Public Company Boards: National Grid plc; Aero Accessories
Votes Against Last AGM: less than 1%
Feiyu XU 55, F, German Independent 2024 NEW 1%
Former Global Head of AI at SAP SE; AI expert
Other Public Company Boards: Non-executive member of the Management Board of ZF Friedrichshafen AG
German Research Centre for Artificial Intelligence
Votes Against Last AGM: less than n/a
Matt:
Requirements
the preference for the best candidate for the position;
the preference for gender diversity between equal profiles;
the maintenance of an appropriate skills mix and geographical experience;
the maintenance, in respect of the number of members of the Board of Directors, of the observed
balance among the nationalities of the candidates in respect of the location of the main industrial centres of the Company (in particular among the nationals of France, Germany, Spain and the United Kingdom, where these main industrial centres are located); and
- at least a majority of the members of the Board of Directors (i.e., 7/12) shall be EU nationals (including the Chairman), and a majority of such majority (i.e., 4/7) shall be both EU nationals and residents (including the UK and its constituent countries, notwithstanding the withdrawal of the UK from the EU).
In practice, this means that at all times the Board of Directors needs to have: (i) two Directors who should also be French Defence Outside Directors (as defined above) of the French Defence Holding Company (as defined above) who have been proposed by the Company and consented to by the French state, and (ii) two Directors who should also be German Defence Outside Directors (as defined above) of the German Defence Holding Company (as defined above) who have been proposed by the Company and consented to by the German State.
Not listed: be connected to other board members
The biggest overlap reminds me of something we were asked by a portfolio manager - do you expect to see a lot of overlap in people who are in the same industry?
The answer would be yes except these are two different jurisdictions, two very different rule sets between Airbus and Boeing, and yet the same result: a heavily heavily connected board historically and today
Involved in loops:
Catherine Guillouard - 10 loops
Jean-Pierre Clamadieu - 21 loops - on nom, up for election
Maria Amparo Moraleda Martinez - 28 loops - chair of nom, up for election
Guillaume Faury
Claudia Nemat
Rene Obermann, up for election
Stephan Gemkow
Looped are largely involved in other partially state owned companies (Energie, Iberdrola, Caixa, Vodafone)
This is an apparatchik government if they actually had skills? Highly political, highly intertwined, high state participation, but actually qualified?
Skills vs. Boeing
Rene Obermann - telecomm, air force, econ
Victor Chu - lawyer, securities law, investing, PE/VC
Jean-Pierre Clamadieu - engineer, technical autocrat, energy
Ralph Crosby Jr - military (army), bachelors in science, masters in international relations, law, northrop grumman (technology)
Mark Dunkerley - bs econ, ms air transport, strategy/sales at british air
Stephan Gemkow - MBA, consulting, sales, IR, finance at lufthansa
Catherine Guillouard - french treasury, HR, finance, CFO, PhD in European law
Amparo Moraleda - industrial engineer, energy engineering
Claudia Nemat - telecomm, McKinsey (tech), studied physics and taught theoretical physics
Irene Rummelhoff - oil and gas (renewables), all at Equinor, masters in petroleum geosciences
Antony Wood - engineering degree, MBA, director of aerospace trade association
SCORE: 4 engineering/technical, 3 airlines, 2 telecomm, 1 oil, 1 finance, 1 law, 1 military
Is that literally the perfect board for a company in aerospace and defense??
Meanwhile, Boeing is almost entirely finance or military with zero engineers
Here’s your problem…
Vote recs here are hard, because the obvious choices are Amparo (worst controversies performance, most connected, nom chair) and Clamadieu (worst EBITDA performance, highly connected, nom) - but it REMOVES two of the four engineers, including the one lifer in Clamadieu who spent years in technical fields
Which means it’s a slow play - a very very slow play - because these are board terms
Vote AGAINST Amparo in 2024 - the head of the nominating committee needs to stop nominating friends and colleagues unless she wants to end up like Boeing, even if she is an engineer - she’s also the longest tenured at almost 10 years anyway
Vote AGAINST Claudia Nemat in 2025 - she’s connected, including directly to chair through Deutsche Telekom, and she’s a horrible performer on controversies, and she has duplicative skills on the board already - telecomm and McKinsey - and get another engineer in
Also…
I LOVE that they put on an AI person, this is the future
Meeting Agenda
Adoption of the audited accounts for the financial year 2023
Approval of the result allocation and distribution of a regular dividend for the financial year 2023
Approval of an extraordinary dividend for the financial year 2023
Release from liability of the Non-Executive Members of the Board of Directors
Release from liability of the Executive Member of the Board of Directors
Renewal of the appointment of Ernst & Young Accountants LLP as auditor for the financial year 2024
Approval, as an advisory vote, of the implementation of the remuneration policy for the financial year 2023
Adoption of the Board of Directors’ Remuneration Policy
8% NO in 2023
Reappointment of Mr René Obermann as Non-Executive Member of the Board of Directors for a term of three years
Reappointment of Mr Victor Chu as Non-Executive Member of the Board of Directors for a term of three years
Reappointment of Mr Jean-Pierre Clamadieu as Non-Executive Member of the Board of Directors for a term of three years
Reappointment of Ms Amparo Moraleda as Non-Executive Member of the Board of Directors for a term of three years
Appointment of Dr Feiyu Xu as Non-Executive Member of the Board of Directors in replacement of Mr Ralph D. Crosby, Jr. who resigned with effect of the date of the 2024 Annual General Meeting
Delegation to the Board of Directors of powers to issue shares, to grant rights to subscribe for shares and to limit or exclude preferential subscription rights of existing shareholders for the purpose of Employee Share Ownership Plans and share-related Long-Term Incentive Plans
Delegation to the Board of Directors of powers to issue shares, to grant rights to subscribe for shares and to limit or exclude preferential subscription rights of existing shareholders for the purpose of funding (or any other corporate purpose) the Company and its group companies
Renewal of the authorisation for the Board of Directors to repurchase up to 10% of the Company’s issued share capital
Matt: I’d prefer dividends and long term investments - in 2023 Airbus spent less than 5% of revenue on R&D, just the fourth time they’ve done it since 2008. In fact, prior to 2013 when they announced their first buyback program, Airbus spent 6.1% of revenue on R&D. Since they started buyback, the average has dropped to 5%, never cracked the 6% mark, and had all of their lowest spends the years after major buybacks - build planes, vote NO and end buybacks.
Cancellation of shares repurchased by the Company
Proposal 2: Auditor
PricewaterhouseCoopers: 3% NO 2023
Proposal 3: Say on Pay
8% NO in 2023
Matt:
Pay is really hard to assess here for me - usually I’d say a system that basically ends up having 50% base salary/cash payout and 50% long term or share equity would be a bit skewed relative to the alignment of share performance and investors, but actually it ends up being GOOD?
Also, the amounts are so quaint - Calhoun pulled roughly the same cash/salary as Faury, but got another $20m in equity on top of it - that now the company is expected to instantly vest on his “retirement” after the worst stretch of Boeing’s history. He got cheap options AND to keep them, while Faury gets a total under €4m?? AND didn’t crash anything that was his fault?
Hard to say NO here, so say YES and vote against every US company.
DAMION:
That’s the Proxy Countdown for the week of April 1, 2024. Join us next week when we jump back into the Alternative Democracy pool... forever on the lookout for shareholder sharks, floating bandaids, and wayward directors.
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