Thursday, 15 March 2018

ITF recommends shareholders vote against ICTSI directors

ITF recommends shareholders vote against ICTSI directors

The International Transport Workers’ Federation (ITF) today released a shareholder advisory note detailing governance issues at International Container Terminal Services Inc. (ICTSI). 
The ITF is recommending that ICTSI shareholders vote against directors Stephen A. Paradies and Jon Aboitiz at ICTSI’s 2018 Annual Stockholders’ Meeting on 19 April 2018. The ITF believes that these directors bear meaningful responsibility for major governance and operational issues at the company.
Paddy Crumlin, president of the ITF and vice-chair of the ITUC’s Committee on Workers Capital (CWC) said: “ICTSI has grown over the last decade. This growth has been accompanied by a failure to put in place decent and sustainable governance structures in line with accepted international best-practice.
“Proxy advisor Institutional Shareholder Services (ISS), the ASEAN Corporate Governance Scorecard and the Philippines’ Securities and Exchange Commission (SEC) all recommend that firms have at least three independent directors. Yet ICTSI only has two independent directors, out of a board of seven.
“The fact that the Razon family hold over 60 per cent of the voting rights at ICTSI, the lack of board independence should be a major concern for shareholders.”
The ITF notes that even ICTSI’s own documents highlights this as a risk to outside shareholders:
"…the Razon Family exercises control over or has significant ability to influence major policy decisions of the Company, including its overall strategic and investment decisions, dividend plans, issuances of securities, adjustments to its capital structure, mergers, liquidation or other reorganisation and amendments to its Articles of Incorporation and By-laws.
"If the interests of the Razon family conflict with the interests of other shareholders of the Company, there can be no assurance that the Razon Family would not cause the Company to take action in a matter which might differ from the interests of the other shareholders.”
Paddy Crumlin added: “The Board Risk Oversight Committee, chaired by Mr. Paradies, has failed to ensure that ICTSI’s internal controls are significant enough to avoid major operational issues, including major port disputes and relationships with censured regimes.
“In the last 18 months, ICTSI has seen protracted disputes at five terminals, disputes that have directly affected multiple port stakeholders, including governments, global brands and shipping lines. 40 per cent of ICTSI’s ports are operated with partnerships involving regimes that are either internationally censured or under investigation for crimes against humanity.
“These directors seem to have been unsuccessful in guiding the company towards outcomes that are better for all shareholders. We call on shareholders to vote against these directors and send a message to ICTSI management that these governance issues must be addressed.”
The ITF believes greater board independence will help ensure that minority shareholder interests are safeguarded. Additionally, the Philippines SEC recommends that directors with more than nine years of Board membership should not be considered independent. If this recommendation was rigorously enforced at ICTSI, none of its directors would qualify as independent. 
View the proxy statement here 
For more information
Contact Luke Menzies, ITF Asia Pacific | +61 433 889 844 |  
The ITF is a global union federation of over 700 transport unions, representing over 19 million transport workers from 150 countries. The ITF advises union benefit funds and their trustees on matters of corporate governance and other policy issues. The ITF is interested in the long-term success of ICTSI, its employees, and other key stakeholders. The CWC connects labour union organizations around the world to advance the responsible investment agenda on the global stage.

More on GKN / Melrose

So it's been quite a few days in terms of GKN's continued attempt to fend of Melrose Industries' hostile bid.

Last week saw Melrose get overwhelming shareholder approval for its bid. It will be interesting to dig into Q1 voting disclosures once they are online to see how these votes break down. By that stage we will know if the bid has been successful.

But in the last 24 hours we have seen a significant intervention as Airbus has basically said it would find it almost impossible to do business with GKN in the event of it being taken over by Melrose. That has to be material for shareholders planning on remaining invested in GKN.

In terms of shareholders, Aviva has gone early - before the Airbus news - saying that it supports the Melrose bid, but Jupiter has come out against it. Meanwhile the speculators are still a-speculating. Total disclosed short positions in Melrose slumped back down to about 11.5% earlier this week, but then went back over 13%. I reckon some hedge funds must be getting the jitters.

And there continues to be lots of churn in the GKN register. Check out notifications here and here for example. At one point BoA/Merrill Lynch had almost 13%. To be clear, the banks are not holding all of the shares for themselves. A lot of this will be related hedge fund money - maybe borrowing the stock, maybe getting exposure through derivatives. These are the people that will help decide the fate of GKN workers.  

For what it's worth, I think there is a good chance that the bid will fail now. If it does some of the people who have sought to speculate on the deal are going to lose a fair bit of money,

Wednesday, 14 March 2018

Duplicate Stewardship Code statements

A month or so back, I blogged that I had found several hedge funds using similar blurb in their Stewardship Code statements. This was off the back of digging into Carillion a bit. Then, when I looked a bit deeper at the GKN / Melrose bid, I found more of the same.

So I went and had a proper trawl, and in the end found 34 examples of managers using versions of the same text. So we added this list to our submission to the FRC's consultation on the UK Corporate Governance Code and Stewardship Code, which is here. I now know there are more out there.

We've picked up a bit of media interest off the back of this, which is welcome. Hopefully we can use this to develop some ideas about what needs changing under the next Labour government.

As a starter, I would question why any firm that can have a significant impact on the future of an investee firm should be allowed to get away with not saying anything meaningful. The Code itself might be tightened to capture issues such as: how managers approach stewardship where they have both long and short positions in the same company (on the long side they'll want to address causes of any underperformance, but not on the short side), managers shorting their own clients, approach to M&A issues and political donations.

But that's for another day....

Monday, 5 March 2018

Two interesting things

1. There are two different pieces about shareholder primacy, and why it might be a bad idea, in the FT today. One from the City editor of the FT and one from Rana Foroohar. Meanwhile Theresa May (remember her?) has criticised directors getting paid in way that is based on returns to shareholders.

I know I keep saying this, but I really feel that the ground is shifting, and that public policy will shift away from its 1990s focus on shareholders (and trying to make them act as a proxy for the public). There are people on Left and Right who think shareholders just aren't up to the job, for often quite different reasons. But what comes next is far from clear, hence that's where we on the Left should be busy.

2. There is a really interesting idea from Joe Dromey here: auto-enrolment into union membership (based on the experience of pensions). I can think of a couple of issues here. Part of the justification for pensions AE was that many people said that they should be saving but weren't getting around to it. So AE was helping them do what they thought they should be doing. I'm not sure we are quite in the same place with unions. Second, which union should you be enrolled into where there isn't one active?

But these are quibbles, I really like the idea. And it cuts very much with the grain from all the behavioural stuff that you should make things that you want people to do as easy as possible (which is why the Tories want to making joining a union harder, and don't want to make voting in a ballot easier).