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Sempra's half-hour in London
Annual meeting draws 1 shareholder question
Union Tribune 6 April 2005
Sempra Energy traveled 6,000 miles for an annual meeting that included
one shareholder question, not many more actual shareholders and a total
elapsed time of 30 minutes.
Shifting from its customary meeting sites in Southern California to the
tony Mandarin Oriental Hyde Park Hotel in London, Sempra – the parent
company of San Diego Gas & Electric – said it hoped to raise its profile
in Europe.
In fact, a spokesman for the San Diego company noted that two of Sempra's
largest shareholders are based in this financial capital.
But Barclays Global Investors, one of the company's large London-based
shareholders, did not attend yesterday's session. And UBS Asset
Management, Sempra's other large London-based shareholder, also seemed to
be absent, although a spokesman said the company wouldn't comment on
whether it attended.
About 50 people were present, and at least half were Sempra officers,
directors or employees. But while London-based institutional investors
were keeping a low profile or absent, two activist shareholders made
themselves known through proxy representatives.
The activist shareholders won a majority of votes on three of four
proposals they raised, despite the opposition of Sempra's board.
The winning proposals included a resolution calling for the annual
election of Sempra directors, who currently serve staggered terms. Also
capturing majorities were measures calling for expensing of stock options
– making some provision for their cost on the company's books – and a
proposal to repeal Sempra's so-called poison pill, which is designed to
force a company attempting a takeover to deal directly with the board.
But a shareholder proposal to link the award of stock options with
corporate performance targets was defeated.
The company did not disclose the specific totals for any of the votes.
Under the company's bylaws, the votes were only advisory, Sempra chief
executive Stephen Baum reminded those gathered in the hotel's ballroom,
which overlooks Hyde Park.
For the activist shareholders, however, the reminder was unneeded.
Representing a coalition of labor union pension funds holding nearly
800,000 shares, Greg Kinczewski of the Marco Consulting Group said his
clients were concerned with what he called Sempra's "pattern" of ignoring
previous shareholder votes on similar proposals.
What's more, he said, Sempra officials appeared to ignore a recent letter
from his pension fund clients seeking a meeting about corporate governance
issues.
Baum, who will retire in January, characterized yesterday's annual meeting
as more typical than unusual.
"This is much more like a normal annual meeting," Baum said. "Normally the
meetings aren't heavily attended by shareholders."
Sempra's session last year in Costa Mesa attracted 270 people. The
previous year's meeting in Newport Beach drew 400. And a session in San
Diego in 2000 attracted more than 1,000.
John Chevedden, the other shareholder represented by a proxy at
yesterday's meeting, said last week that he was disappointed by the London
location and questioned Sempra about why it didn't schedule an
informational session for California shareholders.
Twice as many
About 8 percent of Sempra's shares are held by owners with California
addresses, twice as many as held by owners with addresses in Europe.
Chevedden's proxy at the meeting, Neil Millar-Robinson of the Manifest
Voting Agency, a British corporate governance research firm, noted that
firms based in the United Kingdom aren't allowed to hold annual meetings
abroad without making them available for Internet broadcast.
Baum responded that Sempra has offered two recent Internet broadcasts –
one of its quarterly earnings report and the other of an analysts'
conference.
The company offered an informational session for California shareholders
four years ago, when Sempra's annual meeting was in New York, but Baum
said that it was prompted by the turmoil of California's then-raging
electricity crisis.
There are no such pressing matters now, he said.
Sempra is facing dozens of lawsuits and regulatory proceedings related to
its actions during the power crisis, however, including a class-action
suit alleging natural gas market-rigging.
Baum repeated yesterday that he hopes to settle these matters before he
retires.
He also said, "I do think it's important to be open to the owners of the
company. Next year we'll likely hold a meeting in the U.S."
Baum smiled when a reporter noted that while union pension funds are
critical of the company's governance, they've also raised their holdings
in Sempra by about 60 percent in recent months.
"I guess they don't hate the corporate governance all that much," he said.
Kinczewski said the increased holdings and concerns about Sempra's
governance do not pose a contradiction. And he said that an adverse
outcome from some of the pending litigation against Sempra could reverse
its recent gains.
"No one can guarantee the future performance," he said. "But you can
guarantee corporate governance."
Spain is next
Following the annual meeting, Baum said, he and Sempra board members
were off to Spain to tour a liquefied natural gas receiving terminal. He
said the facility is similar to one Sempra is building near Ensenada in
Baja California and to others in operation in the United States.
But touring one of the domestic LNG plants was not possible because they
are owned by competitors, Baum said.
After visiting Spain, Baum said, he would return to Europe for
face-to-face sessions with large institutional investors. He said these
efforts would raise the profile of San Diego-based Sempra on the continent
and perhaps back home.
The company, whose subsidiaries also include Southern California Gas Co.
and a commodity trading unit with offices in London, employs 13,000
people. About 250 are based in Europe.
"My impression is that many people in San Diego don't know what Sempra
is," Baum said. "The fact that you and others are writing stories about
Sempra in Europe helps highlight that we have big operations here."
But Paul Hodgson, a senior research associate with The Corporate Library,
an independent corporate governance research organization in Maine, said
the London meeting was a mistake. Annual meetings are investors' sole
opportunity to speak directly to management, he said.
And shifting the session to London made that difficult or impossible.
"You can take directors to view LNG facilities at any time," Hodgson said.
"It does not have to be combined with the annual meeting."
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