Filing of Definitive Additional Materials
Regulatory News:
TechnipFMC plc (“TechnipFMC”) (NYSE:FTI) (Paris:FTI)
(ISIN:GB00BDSFG982) announced today that it has filed definitive
additional materials (“Additional Materials”) related to its
definitive proxy statement on Schedule 14A with the U.S. Securities
and Exchange Commission (the "SEC").
On April 9, 2021, TechnipFMC filed its definitive proxy
statement (the “Proxy Statement”) for the 2021 Annual
General Meeting of Shareholders (the “Annual Meeting”). In
connection with the Annual Meeting, shareholders are being asked
to, among other proposals, elect Ms. Sophie Zurquiyah and approve
the prospective directors’ remuneration policy, as described in
proposal 1(i) and proposal 4, respectively, in the Proxy Statement.
In May 2021, Glass Lewis, a proxy advisory firm, issued voting
recommendations relating to the Annual Meeting. Glass Lewis
recommends voting against Ms. Zurquiyah’s nomination for election
to the board of directors and our prospective director remuneration
policy. The statement below constitutes a Report Feedback Statement
in response to Glass Lewis’ analysis of the nomination of Ms.
Zurquiyah and our prospective director remuneration policy and is
intended to provide additional information that we believe
shareholders will value as they review the Glass Lewis report and
bring more clarity on Glass Lewis’ analysis of each of these
proposals.
A copy of the Proxy Statement and the Additional Materials can
be found on the SEC website (www.sec.gov) and on the TechnipFMC
website (investors.technipfmc.com).
About TechnipFMC
TechnipFMC is a leading technology provider to the traditional
and new energy industries, delivering fully integrated projects,
products, and services.
With our proprietary technologies and comprehensive solutions,
we are transforming our clients’ project economics, helping them
unlock new possibilities to develop energy resources while reducing
carbon intensity and supporting their energy transition
ambitions.
Organized in two business segments — Subsea and Surface
Technologies — we will continue to advance the industry with our
pioneering integrated ecosystems (such as iEPCI™, iFEED™ and
iComplete™), technology leadership and digital innovation.
Each of our approximately 20,000 employees is driven by a
commitment to our clients’ success, and a culture of strong
execution, purposeful innovation, and challenging industry
conventions.
TechnipFMC utilizes its website as a channel of distribution
of material company information. To learn more about how we are
driving change in the industry, go to www.TechnipFMC.com and follow
us on Twitter @TechnipFMC.
May 6, 2021
RE: 2021 TechnipFMC plc Glass Lewis Report
Dear Glass Lewis,
TechnipFMC plc (the “Company”, “TechnipFMC”, “its” or “our”)
appreciates the opportunity to respond directly to the 2021 Glass
Lewis Proxy Research Report (the “Report”) regarding the proposals
within our 2021 Proxy Statement (the “Proxy Statement”) for our
2021 Annual General Meeting of Shareholders (the “Annual Meeting”).
We are writing to express disagreement with the Report’s
recommendations with respect to certain proposals in the Proxy
Statement and urge Glass Lewis to revise its recommendation based
on the reasons set forth in this letter. Specifically, the Company
urges Glass Lewis to recommend voting “FOR” the following
proposals:
Proposal 1(i) – Election of Sophie Zurquiyah
as a Director; and
Proposal 4 – Prospective Directors’
Remuneration Policy.
In order to assist Glass Lewis’ review of these voting
recommendations, it should be noted that, although the Company is
incorporated in the United Kingdom, it is listed on the New York
Stock Exchange and Euronext Paris, is headquartered in the United
States, its Chairman and CEO works principally from our Houston,
Texas, USA office, and a large portion of its shareholders are
based in the United States. The Company’s securities are not listed
on any securities exchange in the United Kingdom. As a result, the
Company should be largely analyzed in the context of its large U.S.
presence, except in the few instances where certain laws and
regulations from the United Kingdom and European market regulations
dictate the existence or form of a specific Proxy Statement
proposal.
Proposal 1(i) – Election of Sophie
Zurquiyah as a Director
We urge Glass Lewis to recommend that shareholders vote “FOR”
Ms. Zurquiyah because of her uniquely relevant global background
and expertise in our industry, demonstrated commitment to the Board
of Directors of TechnipFMC, the immense value she brings to our
Company as a diverse director, which harmonizes with the views of
our shareholders who have advocated for more diversity on our
Board, and her commitment to take action within the next
year to address guidelines from proxy advisors and institutional
investors.
The Report’s current recommendation to vote against Ms.
Zurquiyah is based on a belief that she serves on three public
company boards (CGG S.A., Safran S.A., and TechnipFMC plc), one
more than the allowable amount under Glass Lewis’ 2021 U.S. Proxy
Voting Guidelines (the “Guidelines”). However, the Guidelines
enumerate certain other factors that should weigh in Glass Lewis’
consideration of whether a director’s service on other boards would
limit his/her ability to devote sufficient time to the Board of
Directors of TechnipFMC (the “Board”), such as:
- the director’s attendance record at all companies;
- the size of the companies on whose board the director nominee
serves; and
- other sufficient rationale for continued board service, such as
contributions to the Board, including specialized knowledge of the
Company’s industry, strategy or key markets, diversity of skills,
perspective and background, and other relevant factors.
Ms. Zurquiyah’s skills, experience, expertise, and
characteristics make her a uniquely qualified and transformative
director.
Ms. Zurquiyah was nominated as a director to the Board after a
thorough, thoughtful, and rigorous recruitment process with Spencer
Stuart, a nationally recognized third-party director search firm.
After engagement with the Company’s shareholders, as described in
our Proxy Statement, the Board set rigorous criteria for the
director search, including deep expertise in the Company’s
industry, executive management experience, and financial expertise,
in part to overcome the losses from directors who departed in the
recent spin-off of Technip Energies N.V. (the “Spin-off”) and from
the Company’s director retirement policy. The Company also took to
heart its shareholders’ desires to increase diversity on the Board.
With Spencer Stuart’s assistance, Ms. Zurquiyah was identified as
uniquely suited to meet these criteria. Ms. Zurquiyah has deep
expertise in the oil and gas industry, having served in the
industry since 1991 and in a series of leadership roles since 2007,
including her current role as chief executive officer of CGG S.A.,
a management position that is exceptionally, and woefully, rare for
a woman to hold. Moreover, Ms. Zurquiyah has direct experience in
sustainability and technology, which tie directly to the Company’s
transformed business strategy following the Spin-off. Ms. Zurquiyah
is also an Audit Committee financial expert as defined under the
Securities and Exchange Commission’s (“SEC”) rules. Once
identified, it was clear to the Board that the combination of Ms.
Zurquiyah’s skills, experience, financial expertise, and diversity
made her a unique candidate whose transformative leadership
potential outweighed her membership on one more board than advised
under the Guidelines, resulting in her appointment in April
2021.1
In addition, Ms. Zurquiyah has informed the Company that she
expects to take action within the next year to address guidelines
from proxy advisors and institutional investors.
The Report’s recommendation to vote against Ms. Zurquiyah could
potentially deprive the Board of these valuable qualities and Ms.
Zurquiyah’s current and future contributions.
Ms. Zurquiyah’s attendance record and contributions to the
boards on which she serves are exemplary.
We acknowledge and concur with Glass Lewis’ views “that
directors should have the necessary time to fulfill their duties to
shareholders” and an “overcommitted director can pose a material
risk to a company’s shareholders, particularly during periods of
crisis.”
The Company’s views on Board composition and criteria for Board
membership, as disclosed in its Proxy Statement on pages 45-48,
include numerous requirements, including an “ability to commit the
time required for service on our Board.” We evaluate not only a
director’s skills and experience relevant to the Company, but also
changes in professional status, outside commitments, and other
public company directorships to assess the potential impact on our
Board’s effectiveness.
Ms. Zurquiyah has attended all of her CGG board meetings since
her appointment to the CGG Board in 20182 and has attended all but
one of her Safran board and committee meetings since her
appointment in 2017.3 Her appointment to our Board was effective on
April 1, 2021, and Ms. Zurquiyah has attended all four Board and
committee meetings to date, where she has been recognized by the
Board for her immediate contributions and engagement. Her combined
attendance record demonstrates her commitment and service to the
various boards, including the Company’s Board, on which she
serves.
As disclosed in our Proxy Statement, the Board believes that a
rigorous evaluation process is an essential component of strong
corporate governance. The Company’s Environmental, Social, and
Governance (“ESG”) Committee reviews regularly the Board’s
composition, including the key skills and experience represented on
the Board, to ensure it meets the changing needs of the business,
while also taking into consideration the outcomes of our annual
Board and committee self-evaluation process, feedback received from
shareholders, and evolving market best practices. Our ESG Committee
also looks to ensure that our directors possess and demonstrate a
willingness to devote the required time and attention to Board
duties and to otherwise fulfill the responsibilities required of
them, including discussions with each director regarding the time
commitments and expectations of his or her other board duties to
ensure that he or she can continue to serve the Company and its
shareholders effectively.
CGG S.A. is a small-cap company.
The Guidelines provide that Glass Lewis may consider the size
and location of the other companies whose board a director nominee
serves on. CGG S.A., one of the three boards on which Ms. Zurquiyah
serves, is considered a small-cap company with a market
capitalization of approximately 690 million Euros. While board
service on any public company, coupled with executive
responsibilities, necessarily entails significant effort and
attention, we respectfully urge Glass Lewis to consider that by the
terms of its criteria, the size of CGG S.A. is within the exact
use-case parameters of this mitigating factor and therefore should
weigh in favor of a recommendation to vote “FOR” Ms. Zurquiyah’s
service on the Company’s Board, all else being considered
equal.
Based on the flexibility in the Guidelines that allow
consideration of qualities beyond the specific number of boards on
which the director serves and because Ms. Zurquiyah is uniquely
well suited to serve on the Board, we urge Glass Lewis to revise
its recommendation to a vote “FOR” the proposal to elect Ms.
Zurquiyah.
Proposal 4 – Prospective Directors’
Remuneration Policy
We urge Glass Lewis to recommend that shareholders vote “FOR”
our Prospective Directors’ Remuneration Policy (the “Policy”)
proposal because when analyzed under the applicable U.S. market
standards, the Policy allows the Company to appropriately
remunerate directors in a competitive talent market in order to
achieve the Company’s and business objectives and serve
shareholders’ best interests.
We were surprised by the Report’s negative recommendation for
several reasons. The Report inappropriately assessed our Policy
through the lens of U.K. compensation practices rather than U.S.
compensation practices. In addition, the Report has overlooked the
Company’s compensation best practices, responsible executive pay
design, and strong alignment between pay and performance, which
received a positive “FOR” say-on-pay recommendation in the
Report.
The Report’s assessment of the Policy is based on U.K.
practices rather than U.S. practices.
Although incorporated in the United Kingdom, the Company is
listed on the New York Stock Exchange, headquartered in the United
States, its Chairman of the Board and CEO, as well as all of its
executive officers, work principally from the Houston, Texas, USA
office, a large portion of the Company’s shareholders are based in
the United States, and the majority of the Company’s peer group
companies, with whom it competes for talent, are headquartered in
the United States. As such, the Board and the Compensation
Committee of the Company (the “Compensation Committee”) and its
advisors have benchmarked the Policy, including that of the
Chairman of the Company, primarily against U.S. market practices in
order to attract the best talent and leadership to the Board. When
this proposal is analyzed against the correct U.S. market
practices, the Policy is within the normal parameters of similar
proposals. Additionally, the Report’s analysis of this proposal is
inconsistent with its analysis of the other proposals in this Proxy
Statement. Specifically the Report analyzes the director election
proposal under the U.S. guidelines, indicating that these same U.S.
guidelines should apply to this proposal; we quote page 11 of the
Report: “[G]iven the Company’s trading position in the U.S. and its
board structure, we believe that U.S. governance standards
regarding the election of directors should be applied to the
Company. As such, we are largely basing the following voting
recommendations on Glass Lewis’ guidelines for U.S. companies.”
The Report notes several aspects of the Company’s program that
are inconsistent with U.K. practice. As mentioned before, this is
an inappropriate standard as the Company operates primarily as a
U.S.-based company with U.S. pay practices:
- Short Term Incentive (“STI”) Deferral: It is uncommon for
companies in the United States to incorporate practices requiring
executives to defer a portion of their bonus into shares. Within
our compensation peer group, two of our non-U.S. peers disclose
this practice while none of our U.S. peers disclose this
practice.
- Long Term Incentive (“LTI”) Extended Holding Period: This is an
uncommon practice in the United States within our compensation peer
group where only two of our non-U.S. peers disclose this practice,
and none of our U.S. peers disclose this practice. In the United
States, it is more common for companies to require executives to
hold shares through stock ownership guidelines rather than an
extended holding period. We include robust stock ownership
guidelines, which require our CEO to hold 6x his base salary in
shares, our CFO to hold 5x his base salary, and our other executive
officers to hold 3x their base salary in shares.
- Plan Limits: It is not prevalent market practice in the United
States to limit equity-based awards to a specified percentage over
a 10-year rolling period. Per U.S. practice, excessive shareholder
dilution is avoided by (1) requiring shareholder votes to grant a
pool of shares that can be used for LTI grants over a period of
years and including information on potential shareholder dilution
in such proposal, and (2) including maximum limits on the LTI grant
that can be made to any one individual during a calendar year.
Additionally, the Company has been responsible with its use of
shares historically as referenced by our historical three-year burn
rate of 1.0%, which aligns with the median of our peer group.
The Report overlooked our compensation best practices,
responsible executive pay design, and strong pay-for-performance
alignment.
The Policy is designed to be based on U.S. prevalence (taking
into consideration U.K. prevalence where appropriate), and includes
the following best practices, as described in our Proxy
Statement:
- pay for performance by aligning performance measures with our
long-term strategy and shareholder interests;
- benchmarking compensation against relevant global and industry
peer groups, and salary increases and incentive awards based on
market data and performance;
- majority of executive director compensation is
performance-based, “at-risk” long-term compensation;
- short-term incentive awards are based on key financial and
individual metrics, payout is based on performance, and no payout
below minimum performance;
- a minimum of 50% of LTI payout is based on performance, with
caps on annual awards;
- no guaranteed or uncapped incentives;
- clawback provision in the event of malfeasance or fraud;
- robust director share ownership requirements;
- engaging an independent, external compensation consultant;
and
- no excessive perquisites, benefits, or pension payments.
The Report’s negative recommendation is partially driven by what
Glass Lewis has deemed a “potential for excessive remuneration
under the LTIP” due to the increase in our maximum LTI opportunity
under the program from $15 million to $18 million. The intent of
this was to provide the Company flexibility in the future, if
appropriate, to move more of the Executive Director’s short-term
cash compensation to at-risk, long-term compensation, which is in
alignment with shareholder interests. The decision to recommend
against our remuneration policy on this basis ignores our:
- Responsible executive pay design: This is a maximum potential
opportunity only. In practice, our LTI awards to our Executive
Director, including the 2021 LTI grant, have ranged from $9.1
million to $12.6 million. The Compensation Committee has been a
responsible steward of the maximum limit allowable under the LTIP
program and has set compensation based on market data and Company
performance.
- Strong pay and performance alignment: As stated in the Report’s
pay-for-performance analysis, the level of pay provided to the
Chairman and CEO is not excessive. The Chairman and CEO was paid
less compensation than the median compensation for the group of
companies selected based on Glass Lewis’ peer group methodology.
The Report also indicates an adequate alignment of pay with
performance and the Company’s pay ranking is notably less than its
performance ranking.
We acknowledge Glass Lewis’ concern that the performance targets
attached to our 2020 and 2021 performance share units (“PSUs”) are
based upon the single metric of relative total shareholder return
(“TSR”). However, the Policy does not state that a single metric
will be used each year, and this is not the intent of the Policy.
The Company’s Compensation Committee will choose one or more
measures each year, based on the long-term business objectives. A
single performance metric was used for 2020 and in 2021, because
the volatility in the oil and gas business environment and the
Spin-off made it challenging to set meaningful financial metrics
during these two years. In addition, we believe, and our
shareholders have expressed to us during our shareholder engagement
meetings, that relative TSR is strongly aligned with shareholder
interests and is a meaningful measure of our long-term performance.
If the Policy is not approved at the Annual Meeting, the Company
intends to continue compensating its directors under its existing
Directors’ Remuneration Policy that was approved at its 2018 Annual
General Meeting of Shareholders until a revised policy is approved
by shareholders.
Based on the application of the correct U.S. market practice
standard, and because the Policy has been scrupulously designed to
align directors’ incentives with shareholders’ interests while
remaining competitive in the U.S. compensation market, we urge
Glass Lewis to revise its recommendation to a vote “FOR” the
proposal to approve the Policy.
We respectfully urge Glass Lewis to revise the Report and
recommend that shareholders vote “FOR” each of Proxy Statement
proposals 1(i) and 4. For the reasons discussed in greater detail
above, Ms. Zurquiyah is uniquely and highly qualified to serve as a
director on our Board and expects to take action within the next
year to address guidelines from proxy advisors and institutional
investors related to her directorships, and our Policy on director
remuneration is aligned with U.S. market practices and shareholder
interests.
For and on behalf of TechnipFMC plc,
Victoria Lazar Executive Vice President, Chief Legal Officer and
Secretary
_____________________ 1 We also note that the policies of
another major shareholder proxy advisor with respect to director
commitments advise that Ms. Zurquiyah would be within the
acceptable range of board commitments for the CEO of a public
company. 2 Please see CGG’s 2018 Annual Report
(www.cgg.com/sites/default/files/2020-12/annual_report_2018.pdf,
page 101), 2019 Annual Report
(www.cgg.com/sites/default/files/2021-01/2019_URD_Engl_2.pdf, page
111), and 2020 Annual Report
(www.cgg.com/sites/default/files/2021-03/Annual_Report_2020_0.pdf,
page 128). 3 Please see Safran’s 2017 Registration Document
(www.safran-group.com/file/download/2017-registration-document.pdf,
page 262), 2018 Registration Document
(www.safran-group.com/sites/group/files/safran_ddr_2018_uk.pdf,
page 288), 2019 Registration Document
(www.safran-group.com/sites/group/files/safran_deu_2019_uk_mel.pdf,
page 324), and 2020 Registration Document
(www.safran-group.com/sites/group/files/opt_mel_safr_deu_2020_production_uk_202104011830.pdf,
page 356).
Category: UK regulatory
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