Dean Foods Group | 2015

For the first year, on 13 May 2015, Etica Sgr voted at the annual shareholders’ meeting of Dean Foods Group, a US food company engaged in the production and sale of milk, cheese or vegetable based drinks, ice creams and other foodstuffs. Etica Sgr attended to call management’s attention to some aspects linked to corporate sustainability.

The first point on the agenda related to the election of the Board of Directors and Etica Sgr expressed a favourable vote to the election of all the proposed Directors, except for four directors who make up the Remuneration Committee, for which a contrary vote was given. Etica Sgr’s Ethics Committee and Board of Directors took that decision in light of the decision by Dean Foods not to hear in full the minority motions submitted and approved by majority on the occasion of last year’s shareholders’ meeting. Despite the motion being precise and transparent, the Board of Directors of Dean Foods did not submit a proposal containing a partial and pro rata vesting period, as requested; on the contrary, a double-trigger vesting period was proposed without providing further motivations on the reason it had not followed the proposal voted by majority at last year’s shareholders’ meeting.

As regards the ratification of the independent auditing company, Etica Sgr voted against, as Deloitte & Touche LLP has been the Company’s auditor for 88 years and, despite it declaring its independence, that period of time places the correct completion of its role in doubt.

Etica Sgr also expressed a contrary vote to the advisory approval of the remuneration policy. Despite the documentation being clear and comprehensible, various criticalities were identified, including the lack of minimum thresholds and maximum limits at the basis of payment of the short-term variable components linked to individual targets. As regards the long-term variable component, it is noted that the component of remuneration paid in Cash and the Restricted Stock Units are not linked to performance targets and there is no provision of thresholds for their achievement; it is therefore impossible to assess the actual correspondence between the fees paid and the business performances.

Dean Foods declares that the Remuneration Committee can review the basic annual salary and can make adjustments to the corporate and individual performance indicators identified. In addition, despite there being provision for a vesting period of three years, it is noted that, for the attribution of the long-term variable component, there is a clause to the benefit of the executive directors in possession of financial instruments assigned prior to 2014, meaning there is provision for an accelerated vesting system in the case of a change of corporate control;

Etica Sgr expressed the criticalities it had identified and suggested that Dean Foods introduce, among the parameters underlying the definition of the variable components of the remuneration of the Chairman and the Chief Executive Officer and the other Managers with Strategic Responsibilities, objectives of a social and environmental nature. Etica Sgr also asked the Company to publish the figure on the ratio between the average remuneration of Dean Foods employees and that of the Chief Executive Officer.

During the shareholders’ meeting, a motion was submitted by the shareholders regarding the use of GMOs in products. That motion, brought by Sustainvest Asset Manager, asks the Company to publish a report in which it provides information on the potential financial and operational risks deriving from the use of genetically modified organisms in products. The aim of the proposal is to ensure that Dean Foods can also work with the government organisations to define Guidelines for including the presence of genetically modified organisms in the labels of US products. Having considered that that request may further improve the company’s socio-environmental profile, Etica Sgr decided to express its support by voting in favour.

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