The Big Vote at Siemens, plus Julie Robertson’s hire/firing and the Strive of Europe goes after BP
PROXY COUNTDOWN SCRIPT
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This is Proxy Countdown. Welcome to the big show for the week of January 29nd, 2024 alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:
A strange game of Musical Board Chairs at Superior Energy Service;
A climate denier activist at BP;
Vote results at Becton, Dickinson and Walgreens;
And our first foray into a non-US annual shareholder meeting at German technology conglomerate Siemens, where we test Matt’s analytical patience and prowess
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Trade Wire - BUY/SELL
Top Stories:
Let’s begin on our Trade Wire where it’s been a quiet week in player moves as it seems that most large cap companies have an idea of their early 2024 rosters: Cintas Corporation added Beverly K. Carmichael. Beverly is a director at Viad and brings decades of Human Resources expertise to Cintas, as she was formerly Chief People Officer at Red Robin, Cracker Barrel, and Ticketmaster, as well as having executive-level HR experience at Southwest Airlines.
Trimble added two new directors: Kara Sprague and Ron Nersesian.
Kara is Chief Product Officer at F5: this is her first directorship.
While Ron is the former CEO and current chair at Keysight Technologies, where he controls a board-leading 19% of influence.
At S&T Bancorp, say goodbye to Steven J. Weingarten who is stepping down at the company’s 2024 annual shareholders meeting
And lastly at Superior Energy Services, we have an unusual director dance that I haven’t seen before.
First, Julie Robertson resigned and then shareholders elected Ian Foster three days later to fill the vacancy created by the resignation of Julie Robertson.
Then Timothy Winfrey also resigned and shareholders elected Julie Robertson 3 days later to fill the vacancy created by the resignation of Timothy Winfrey.
The same Julie Robertson whose resignation created a vacancy that was filled by Ian Foster.
So the real question is: why couldn’t Julie Robertson replace Julie Robertson?
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PROXY CAGE MATCH
Moving over to our Proxy Cage Matches, nothing new at Disney to report so let’s move over to a strange case at BP, where
Activist investor Bluebell Capital Partners has called on BP to ditch its commitment to cut oil and gas output as well as other key parts of its strategy to transform the company into a clean energy provider.
In the letter, seen by the Financial Times, Bluebell said BP’s pledge to reduce oil and gas production by 25 per cent by 2030 compared with 2019 levels meant it was destroying shareholder value by moving away from hydrocarbons faster than society.
The hedge fund also challenged the pace and extent of investment in BP’s transition businesses — biofuels, convenience, charging, renewables and hydrogen by stating that BP should reduce investments in bioenergy, hydrogen and renewables between 2023 and 2030 by $28bn, or approximately 60 per cent. Most of the reduction, according to Bluebell, could be achieved by stopping all investment in renewables, a sector where BP “has no right to win” against specialist incumbents.
Matt: Bluebell, for memories’ sake, is the Strive of Europe - they started an activist campaign in 2021 to axe Larry Fink from BLK because of his focus on ESG, they wanted Glencore to do more coal stuff, and now they are at BP. Mostly they write letters, but they have just $250m in AUM which is even less than Strive. File this firmly in the “idiot with a megaphone” category
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VOTE RESULTS TABLE
Moving over to our vote results table:
Let’s start with one notable vote at a smaller cap company:
At Enerpac Tool Group, there were 14,610,614 votes against Say on Pay, representing 29% of the vote, but only an average of 1,471,457 votes against the Compensation Committee board members who crafted the pay policies.
At large cap companies, the votes are in at two companies previewed here at The Proxy Countdown:
Becton, Dickinson & Company and Walgreens Boots Alliance
At Becton, shareholders are more than happy as no single proposal received more than 10% votes against.
On the Big Vote, Matt recommended a vote against Chair/CEO Thomas Polen based on a Network Power analysis: 8% of shareholders agreed with Matt’s analysis while the other 92% voted for the CEO’s reelection
Matl also said No on Pay but again 92% of voters disagreed with that assessment.
At Walgreens, Matt passionately advocated against Executive Chair Steffano Pessina, Compensation Committee chair Nancy Schlichting, and Lead Independent Director Ginger Graham.
All 3 directors were reelected with ease, but it’s worth pointing out that their ‘votes against’ represented the three highest values on the board.
Matt said NO on pay: 14% of shareholders agreed.
Matt said NO on a “Cigarette Waste” report proposed by the Sisters of St. Francis of Philadelphia: unfortunately for the nuns, 94% of voters agreed with Matt and rejected this proposal
Matt said Yes on Kenneth Steiner’s proposal for an independent board chair: 31% of voters agreed but the proposal still falls short of a majority. This is down from 34% support in 2023.
A living wage proposal brought by John Chevedden was rejected by just over 90% of the vote
An anti-woke/anti-ESG proposal from the troll group known as the National Center for Public Policy Research received a very sad support of just 1% of the voters
And finally, a pro-choice church requesting a report on risks of reproductive healthcare legislation received the support of only 8% os share voters
Before we move onto our Big Vote at Siemens, two other notable votes at large cap companies include 27% against Say on Pay at Air Products and Chemicals and 22% of votes were against Compensation Committee Chair Nancy McKinstry at Accenture, despite the fact that Say on Pay was approved by 91% of shareholders.
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THE BIG VOTE
Siemens AG
AGM Date: February 8, 2024
Report of the Supervisory Board
General Observations
Ownership
Institutional voting power 67%
Siemens family 6%
Performance outliers:
Overall: .368
Nathalie von Siemens .510
Martina Merz .283
EBITDA .376
Benoit Potier .567
Martina Merz .195
Carbon .721
Benoit Potier .312
TSR .511
Werner Brandt .415
Controversies .198
Nathalie von Siemens .538
Board stuff
10 employee representatives
7 shareholder representatives
The Mediation Committee
submits proposals to the Supervisory Board in the event that the Supervisory Board cannot reach the two-thirds majority required for
the appointment or dismissal of a Managing Board member on the first ballot
Jim Hagemann Snabe (Chairman), Dr. Werner Brandt, Jürgen Kerner and Birgit Steinborn.
The Chairman’s Committee
makes proposals regarding the appointment and dismissal of Managing Board members and is responsible for concluding amending, extending and terminating employment contracts with members of the Managing Board.
Jim Hagemann Snabe (Chairman), Dr. Werner Brandt, Jürgen Kerner and Birgit Steinborn
In accordance with the German Stock Corporation Act, the Supervisory Board is composed of at least 30% women and at least 30% men
The Nominating Committee shall continue to include at least one female member.
Independence
The Supervisory Board shall include what the shareholder representatives on the Supervisory Board consider to be an appropriate number of independent shareholder representatives
More than half of the shareholder representatives shall be independent of the Company and its Managing Board.
No more than two former members of the Managing Board of Siemens AG shall belong to the Supervisory Board.
only individuals who are no older than 70 years of age shall, as a rule, be nominated for election to the Supervisory Board
membership on the Supervisory Board restricted to a maximum of three full terms of office
Past AGM results
2023
To resolve on the appropriation of the Net income 99.8% yes
All directors ratified btw 99.2% and 99.8% yes
Independent auditors 98% yes
Say on Pay 92% yes
Director elections
Brandt, Duga, James, Merz, Potier, von Siemens, Zachert
Only Merz above 10% no (11%)
Allowing the Managing Board to hold virtual meetings?
17% said no
Allowing directors to attend AGM virtually
97% yes
Amending Section 4 of the Articles of Association in relation to the recording of shares in the share register
99.8% yes
2022 outliers
Nothing really
92% yes on Say on Pay
Michael Diekmann 1.5% NO on ratification; all others around 0.3% NO
To receive and consider the adopted Annual Financial Statements of Siemens AG and the approved Consolidated Financial Statements of the Siemens Group, together with the Combined Management Report of Siemens AG and the Siemens Group as of September 30, 2023, as well as the Report of the Supervisory Board for fiscal year 2023
To resolve on the appropriation of the net income
EXECUTIVES: To ratify the acts of the members of the Managing Board
Glass Lewis: “primarily a vote of confidence and does not release its members from liability for their actions”
Dr. Roland Busch 2011
CEO
Cedrik Neike 2017
Matthias Rebelliu 2020
Prof. Dr. Ralf P. Thomas 2013
Judith Wiese 2020
DIRECTORS: To ratify the acts of the members of the Supervisory Board (It is intended to let the Annual Shareholders’ Meeting decide by separate ballot whether to ratify the acts of each individual member of the Supervisory Board.)
Jim Hagemann Snabe caN 2013/59/m/Italian/German
Known for: Chairman of the Supervisory Board of Siemens AG (E602k)
Other boards: C3.ai, Inc., USA; Northvolt AB, Sweden (Chairman); Urban Partners A/S, Denmark (Deputy Chairman
Birgit Steinborn ac 2008/64/f/German
Known for: Chairwoman of the Central Works Council of Siemens AG
First Deputy Chairwoman
Employee representative
E450k
Dr. Werner Brandt An 2018/70/m/German
Known for: Chairman of the Supervisory Board of RWE AG
Second Deputy Chairman
E464k
Other Boards: RWE AG, Essen (Chairman)
Tobias Bäumler a 2020/45/m/German
Employee representative
Known for: Deputy Chairman of the Central Works Council and of the Combine Works Council of Siemens AG
Michael Diekmann (member until February 9, 2023)
Dr. Regina E. Dugan 2023/61/f/American
Known for: CEO of Wellcome Leap Inc.
Other boards: HPE, Houston, Texas, USA
Dr. Andrea Fehrmann a 2018/54/f/German
Employee representative
Known for: Trade Union Secretary, IG Metall Regional Office for Bavaria
Other boards: Airbus Defence and Space GmbH, Taufkirchen; Siemens Energy AG, Munich; Siemens Energy Management GmbH, Munich
Bettina Haller 2007/65/f/German
Employee representative
Known for: Chairwoman of the Combine Works Council of Siemens AG
Other boards: Siemens Mobility GmbH, Munich (Deputy Chairwoman)
Oliver Hartmann 2023/56/m/German
Employee representative
Known for: Head of the Regional Office Erlangen/Nuremberg, Germany, Chairman of the Committee of Spokespersons of the Siemens Group and Chairman of the Central Committee of Spokespersons of Siemens AG
Keryn Lee James 2023/56/f/Australian
Known for: Chair of the Board of Directors of OPUS Talent Solutions
Other boards: OPUS Talent Solutions, UK (Chair)
Harald Kern c 2008/64/m/German
Employee representative
Known for: Chairman of the Siemens Europe Committee
Jürgen Kerner ac 2012/55/m/German
Employee representative
Other boards: Airbus GmbH, Hamburg; MAN Truck&Bus SE, Munich (Deputy Chairman); Siemens Energy AG, Munich; Siemens Energy Management GmbH, Munich; Thyssenkrupp AG, Essen (Deputy Chairman); Traton SE, Munich
Martina Merz a 2023/61/f/German
Known for: Member of supervisory boards
Other boards: AB Volvo, Gothenburg, Sweden
Dr. Christian Pfeiffer 2023/55/m/German
Employee representative
Known for: Innovation manager at Siemens Mobility GmbH, member of the Combine Works Council of Siemens AG and of the Central Works Council of Siemens Mobility GmbH
Other boards: Siemens Mobility GmbH, Munich (Chairman)
Benoît Potier n 2018/67/m/French
Known for: Chairman of the Board of Directors of L’Air Liquide S.A
Other boards: L’Air Liquide S.A., France (Chairman)
Hagen Reimer a 2019/57/m/German
Employee representative
Known for: Trade Union Secretary of the Managing Board of IG Metall
Dr.-Ing. Dr.-Ing. E.h. Norbert Reithofer (member until February 9, 2023)
Kasper Rørsted 2021/62/m/Danish
Known for: Member of supervisory boards
Other boards: A.P. Møller-Mærsk A/S, Denmark
Baroness Nemat Shafik (DBE, DPhil) (member until February 9, 2023)
Dr. Nathalie von Siemens n 2015/53/f/German
Known for: family; Member of supervisory boards
Other boards: Messer SE & Co. KGaA, Bad Soden am Taunus; Siemens Healthcare GmbH, Munich; Siemens Healthineers AG, Munich; TÜV Süd AG, Munich; EssilorLuxottica SA, France
Michael Sigmund (member until August 31, 2023)
Dorothea Simon 2017/55/f/German
Employee representative
Known for: Chairwoman of the Central Works Council of Siemens Healthcare GmbH
Other boards: Siemens Healthcare GmbH, Munich
Grazia Vittadini ac 2021/55/f/Italian/German
Known for: former CTO of Rolls-Royce Holdings; Special Advisor of Rolls-Royce Holdings since 10/2023
Other boards: The Exploration Company GmbH, Gilching
Matthias Zachert aC 2018/57/m/German
Known for: Chairman of the Board of Management of LANXESS AG
Gunnar Zukunft (member until February 9, 2023)
To resolve on the appointment of independent auditors for the audit of the Annual Financial Statements and the Consolidated Financial Statements and for the review of the Half-year Financial Report
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft
To resolve on the approval of the compensation system for the members of the Managing Board
According to Section 120a (1) of the German Stock Corporation Act (AktG), the annual shareholders’ meeting of the listed company resolves on the approval of the compensation system for the members of the managing board proposed by the supervisory board at least every four years and whenever there is a significant change to the compensation system. The Annual Shareholders’ Meeting of Siemens AG last adopted such a resolution on February 5, 2020, which means that a new resolution is due and required.
As part of the regular submission of the compensation system to the 2024 Annual Shareholders’ Meeting, the Supervisory Board reviewed the compensation system for the members of the Managing Board. Since the compensation system has proven its worth in past years, even in times of major challenges, no fundamental adjustments were required, but only selective changes.
95% YES in 2020
Features
Target pay for CEO: €8M/Maximum pay for CEO: €16.5M
Base salary:
CEO: €1,770,000
Other Managing Board members: €1,101,600
Benefits
Maximum of 7.5% of base salary
CEO: max. €132,750
Other Managing Board members: max. €82,620
Annual bonus
EPS/ROCE/individual financial targets
Target amounts (based on 100% target achievement; Max is 200%)
CEO: €1,770,000
Other Managing Board members: €1,101,600
Long-term equity bonus
Relative TSR (80%)/internal ESG/Sustainability index with three equally weighted key performance indicators (20%)
Climate neutrality by 2030
Target amounts (based on 100% target achievement; Max is 200%)
CEO: €3,340,000
CFO: €2,145,000
Cedrik Neike: €1,470,000
Other Managing Board members: €1,380,000
To resolve on the approval of the Compensation Report
Say on Pay for 2023
92% YES last year
Total pay for CEO €7.6M
Matt:
Pay notes:
Cash (1x, 2x):
Salary, pension, fringe benefits
Bonus ⅓ Seimens performance (EPS), ⅓ “managing board portfolio” (return on capital employed), ⅓ “individual targets” (revenue growth, cash conversation rate)
Stock (3x):
80% MSCI World Industrials TSR benchmark (12 months, 36 months, +/- 20 percentage points)
20% ESG (CO2, digital learning hours per employee, net promoter score)
End result - 36-43% fixed/cash, 20-28% short term bonus, 30-42% long term stock
CFO is way over the stock minimum requirements, CEO and COO no as much
It’s hard to argue pay here given how structured it is, but if there ever was an argument for random ESG bumping up pay, it should include “digital learning hours per employee” as a metric - this is bogus metrics used to auto generate effectively 7% of total pay - a low number, but still…
The TSR metric seems constructed well - it can be a 0% if they underperform peers by 20% or worse!
To resolve on the creation of an Authorized Capital 2024 against contributions in cash and/or contributions in kind with the authorization to exclude subscription rights, and related amendments to the Articles of Association
To resolve on granting a new authorization of the Managing Board to issue convertible bonds and/or warrant bonds and exclude shareholders’ subscription rights, and on the creation of a Conditional Capital 2024, and related amendments to the Articles of Association
Proposal 1: Election of 8 Directors
Matt
Break discussion into “EU board theory”, Siemens shareholder team performance, Siemens employee team performance, and then recs on individuals
EU Board Theory
There are essentially two boards with three groups
Management board = NEOs
Supervisory board = “board of directors”
“Board of directors” = employee directors + shareholder directors
We’re going to talk about supervisory board and the influence/power
Team performance
Overall:
3rd most powerful board in Germany by network power (Zalando, Deutsche Bank)
58% influence controlled by connected directors, 57% influence control by PhDs and academics
Audit committee the most powerful committee
Purely average performing board - 82% rotation players
201 subsidiaries listed - large, complex, bureaucratic company
Shareholder:
Total influence: 66%
Jim Snabe show - 19% influence, but…
Snabe highest paid BY FAR (602k vs. 464k for Brandt, ave ~250k)
Snabe highest paid since 2019 at least
Longest tenure (10 years)
Expertise fail
Only 2 reported financial experts per German Stock Corporation Act (out of 20! - 10%)
Brandt and Zachert - both on Audit committee - but the committee has a whopping 8 members, so only 25% of the committee is actually an expert??
100% of the board has sustainability qualifications!! Really?
Family nepo alert:
Nathalie von Siemens the only family member, own ~7%, but seems pure nepo baby - company paid for PhD in philosophy, worked in “talent development”, technically a managing director but never an exec seems, acted as “spokesperson”
Network power:
Regina Dugan is most powerful given exposure to US boards (HP), but Snabe is a European power broker - Marsk, SAP, Allianz, two private companies, and a US mid cap AI company that has Condi Rice and Bruce Sewell, Apple’s ex lawyer reporting to Tim Cook, on the board
Employee:
Total influence 34%
5 “Unrated” players - rookies or not enough history, other performance almost entirely just Siemens
Only Jurgen Kerner on multiple boards as a high level rep from IG Metall, the union - three IG Metall reps out of 10 - Kerner bats an abysmal 0.033 earnings, .106 TSR, .200 overall from thysenkrupp + Siemens boards
Kerner is the connective tissue to management - sat on Airbus board, IG Metall is union rep for Airbus in Germany, and Airbus board member Amparo Moraleda also sat on AP Marsk board with both Kasper Rosted and Jim Snabe, the most influential shareholder rep
Recs:
Snabe is too busy and needs to move on, but he’s not up for re-election until 2025
There are too many IG Metall reps here, consolidated under Jurgen - cut Jurgen and let the Siemens Works Council reps lead the employee voices
Since we’re talking ratification - vote against just one member, Kasper Rorsted
7% influence, directly connected to Snabe
Bats .355 overall, worst on the board for his tenures overseeing huge controversies (.081), lowest of the shareholder members outside of Snabe himself on TSR (0.379)
Rorsted was at the helm of adidas when it brought in Kanye DESPITE reports that Ye spent meetings drawing swastikas and they still didn’t fire him until he was OPENLY anti semitic on Twitter
Do you need more reasons?
DAMION:
That’s the Proxy Countdown for the week of January 29, 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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