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Robeco rejects Monsanto proposals at AGM

01-02-2012 | Nieuws | Peter van der Werf Robeco voted against the re-election of two audit committee members and a new share-issuance proposal at Monsanto’s AGM. Engagement Assistant Peter van der Werf explains why.

Monsanto is no stranger to controversy. Normally, the debate centers on the company’s position as the leading producer of genetically-modified seeds, or its role—back in the 1960s—as a manufacturer of Agent Orange, the defoliant used in the Vietnam war that is blamed for birth defects.

This time, the focus is different. This time, the company’s corporate governance is in the spotlight. That is because an investigation by the US Security and Exchange Commission (SEC) resulted in the biotechnology giant being forced to restate its annual reports for 2009 and 2010, as well as three quarterly statements from 2011.

That is not all. The company has also disclosed a material weakness in its internal controls related to the accounting for customer-incentive processes.

Robeco voted against re-election of audit committee members
Because of these developments, Robeco voted (at the company’s AGM in St Louis on 24 January) against the re-election of two directors who were members of the audit committee in 2009 and 2010.

“We believe these board members should be accountable for the failure to provide financial reports stating correct information,” explains Peter van der Werf. “Their position on the board can therefore no longer be justified.”

Proposed incentive plan was overly dilutive for shareholders
Another proposal at the AGM concerned amendments to the company’s long-term incentive plan that would authorize the issuance of an additional 25 million shares. This would cause considerable dilution for current shareholders.

“We’re not against a certain amount of dilution, as we see clear added value in having a proper long-term incentive plan,” says Van der Werf. “However, it is important that this does not overly disadvantage current shareholders.” Robeco thus decided to vote against the proposal.

Monsanto’s reporting on genetic modification is satisfactory
A final point to note about the Monsanto AGM was that Robeco voted against an anonymous shareholder request for a report on genetically modified organisms and their risks for Monsanto.

“In this case, given that Monsanto already discloses sufficient information on these matters, we didn’t see added value in the proposal,” says Van der Werf. Even so, that is not a recognition that controversy around Monsanto’s activities in genetic modification has evaporated. Van der Werf stresses that Robeco will keep on carefully monitoring the way that Monsanto addresses these risks in the future.
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