'THE DAILY CORPORATE GOVERNANCE RESOURCE’ (for public company boards, the C-suite and GCs)
Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)
(i) (more on) the soaring cost of and new impediments to obtaining cyber insurance: The soaring cost of cyber insurance due in particular to the rise of ransomware attacks was discussed recently in this his FT article, "Cyber insurers recoil as ransomware attacks ‘skyrocket’" (see item (i) from June 8/21). More on this, and the new impediments to obtaining cyber insurance, in this Washington Post article last Thursday, "Ransomware claims are roiling an entire segment of the insurance industry", which, note, includes this description of ransomware attacks:
"Ransomware is a catchall term for software that lets hackers take over control of a computer network and lock out the original owner. They usually gain access by tricking employees into giving up passwords or downloading malicious code through “phishing” emails. Attackers generally leave a digital ransom note explaining that the network owner has a set period of time to pay using cryptocurrency or risk losing access to their computers permanently."
More from the article below:
"The recent surge of ransomware attacks is upending the cyber insurance industry, pushing up the requirements and cost of coverage just as more companies need it. Ransomware attacks — in which cybercriminals take over an organization’s computer network and demand a payment to hand back control — have increased in frequency and severity over the past two years. According to blockchain research firm Chainalysis, ransom payments from companies increased 341 percent to a total of $412 million during 2020. “This is a tipping point this year,” said John Kerns, an executive managing director at insurance brokerage Beecher Carlson, a division of Brown & Brown, which sells cyber insurance. “I’ve been in business for 32 years and haven’t seen a market quite like this.”
"That’s pushing insurance carriers to reevaluate how much coverage they can afford to offer and how much they have to charge clients to do so. Underwriters are demanding to see detailed proof of clients’ cybersecurity measures in ways they never have before. For example, not using multifactor authentication, which requires a user to verify themselves in multiple ways, might result in a rejection. The majority of insurance companies are raising premiums for plans that cover damage from hacks, including ransomware attacks. Prices for at least half of insurance buyers went up 10 percent to 30 percent in late 2020......
"Many insurers are also restricting how much cyber coverage they can offer or limiting the terms and conditions, several industry executives said. In some cases, that means slashing the amount of reimbursement that can be used specifically for ransomware attacks.......French insurance giant AXA said at the beginning of May that it would stop reimbursing ransomware payments....
"It used to be that insurers would write a cyber policy with few limitations, largely taking the client’s word for it that they had cybersecurity protocols in order. That changed last year as insurers increasingly paid out cyber claims. More underwriters are now partnering with outside cybersecurity firms to vet companies’ protocols and security readiness, said Erica Davis, global co-head of cyber at global risk and reinsurance company Guy Carpenter. In the past, insurers may have just asked potential clients to fill out a questionnaire about their cyber practices, she said. Now, in addition to that, many are using cybersecurity tools to run an analysis of clients’ controls to make sure they are up to par......Even if insurers are willing to offer coverage, many are declining to take new clients or are capping amounts at about half of what they used to be for some clients......"
(ii) * unusual AGM adjournment with respect to the 'say-on-pay' vote only/press release of the day: Last Monday, June 14 at 9am, Activision Blizzard, Inc. held its 2012 AGM (via live audio webcast.) Later in the day, it issued this press release disclosing that it had taken the unusual step of adjourning the AGM for one week (until today), but with respect to the say-on-pay vote only, "Activision Blizzard Announces Results of Annual Meeting of Shareholders and Adjournment With Respect to Say-on-Pay Proposal." Below is from the press release:
"Activision Blizzard, Inc. today announced that it convened its 2021 Annual Meeting of Shareholders as scheduled and considered all items of business with the exception of Proposal 2, the shareholder advisory vote on executive compensation.....Based on requests from shareholders for additional time, the independent members of the Activision Blizzard Board believe it is in the best interest of its shareholders to extend the opportunity for shareholders to vote on this important matter, and therefore recommended an adjournment to allow additional time for shareholders to submit proxies with respect to the Proposal.
"The 2021 Annual Meeting will be reconvened on Monday, June 21, 2021 at 9:00 a.m. Pacific Time (the “Reconvened Annual Meeting”). The sole matter of business before the Reconvened Annual Meeting will be the Proposal. The independent members of the Activision Blizzard Board have determined, based on requests from shareholders, that it is necessary and appropriate to leave voting for the Proposal open in order to provide shareholders with adequate time to review and consider the Company’s recent responses to statements that were published and recirculated about the Company’s executive compensation practices that the Company believed to be misleading, in particular related to CEO and COO compensation.
"The Board members believe that obtaining informed shareholder feedback related to Activision Blizzard’s compensation policies and practices is of fundamental importance, and therefore, allowing additional time for shareholders to meaningfully participate in the vote better represents their interests. The Company’s recent responses highlighted the following points and corrections:
-- Despite exceptional shareholder returns the Company has made significant changes to address shareholder feedback......
-- The Company has made substantial and sustainable reductions in CEO compensation......
-- The Company has more closely aligned CEO and shareholder interests.......
-- The Company has significantly reduced the 2021 CEO incentive award.......
-- Previous support for the Company’s Say-on-Pay proposals.......
"Activision Blizzard encourages any eligible shareholder that has not yet voted their shares or provided voting instructions to their broker or other record holders to do so promptly. If a shareholder has previously submitted its proxy and does not wish to change its vote, no further action is required. Shareholders who need help voting their shares may call Activision Blizzard’s proxy solicitor, Alliance Advisors, at (855) 928-4492......"
This unusual adjournment is discussed in this FT article over the weekend, "Activision faces showdown on $155m CEO pay after dodging vote":
"Activision Blizzard faces a contentious vote on its chief executive’s $155m pay package on Monday after delaying the showdown in what critics say was an effort to avoid an embarrassing rebuke. The video games company adjourned the nonbinding “say on pay” vote after its regularly scheduled annual meeting on June 14, delaying for a week shareholders’ verdict on Bobby Kotick’s salary. Proxy adviser Glass Lewis said it knew of no precedent for such a move.......
“If we’re serious about the shareholder voting franchise, desire for a different outcome cannot drive decisions on whether to adjourn,” said Glenn Davis, deputy director for the Council of Institutional Investors, which represents pension funds. “I don’t see a good reason for doing this,” said Neil Macker, a Morningstar analyst who covers Activision. Though rare, big companies occasionally fail pay votes “and people move on”, he said. By delaying the vote, “all it does is draw attention to it,” he argued.......
"Most of Kotick’s $155m package was in awards tied to a 2016 goal of doubling its market capitalisation. Activision’s shares beat that target after jumping 58 per cent in 2020 as cooped up consumers turned to its popular franchises, from World of Warcraft to Crash Bandicoot. Strong share performance typically appeases investors upset about outsized executive pay, but Kotick’s large rewards drew concerns.
"Though Activision made substantial changes to address CEO pay concerns, his total pay is 2.55 times the median of the company’s peers, ISS said. It was also 1,560 times that of Activision’s median employee, up from a ratio of 319:1 in 2019. A meeting adjournment can be appropriate in some cases, such as when a late-breaking development alters facts in a proxy contest or M&A proposal, CII’s Davis said, adding “Activision is not one of those cases.” The vote delay appears to be “a sign of desperation” and a last-ditch effort to arm twist investors into siding with the company over Kotick’s windfall, said one director unconnected to Activision......."
(iii) (other) press release of the day: Rio Tinto announced last Thursday in this press release the appointment of its interim CFO to the position of permanent CFO, as follows:
"Rio Tinto has appointed Peter Cunningham as Chief Financial Officer with immediate effect. Peter, who has been Interim Chief Financial Officer since 1 January 2021, will also join the Rio Tinto Board as an executive director at the same time.Peter was previously Group Controller and has held a number of senior financial and non-financial leadership positions across Rio Tinto in Australia and the UK....."
The compensation terms for the new CFO are disclosed at the bottom of the press release.
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