Exclusive: CalPERS calls out Forex.com parent Gain Capital on board diversity
FNG Exclusive… The issue of ESG investing (Environmental, Social, and Governance) has entered a good part of the mainstream activity on Wall Street. A number of leading institutional investors are making it very clear that they expect companies that they invest in to follow certain ESG rules, with a key one being diversity on companies’ boards, and adherence to certain good-governance practices.
The latest example of such comes from the Retail FX space, with leading public market investor CalPERS calling out Gain Capital, parent of the Forex.com and City Index brands, for a lack of diversity on the company’s board of directors.
FNG has learned that CalPERS issued a letter (see full text below) late last week to Gain Capital’s shareholders, indicating that it will vote against the re-election of Gain Capital director Glenn Stevens (the company’s longtime CEO) and outside director Peter Quick (former President of the American Stock Exchange) at the company’s upcoming annual shareholders’ meeting on August 6.
CalPERS, which is a relatively small Gain Capital shareholder holding 39,400 GCAP shares worth about $236,000, said that “these two board members have demonstrated a lack of responsiveness to multiple CalPERS shareowner engagement requests to address board composition related to diversity.” CalPERS, which manages more than $400 billion on behalf of 1.6 million California public employees, said that its multiple requests to engage the company starting in July 2017 and throughout 2018 and 2019 have been unanswered.
CalPERS stated that Gain has a classified board (with director election staggered each year), does not allow proxy access, and has failed to align pay with performance. The letter also noted that Gain has a non-independent director who serves on a key board (compensation) committee, and has adopted a shareholder rights “poison pill” plan without shareholder approval.
CalPERS’ efforts are of course just for show, at least in this case. As noted above its shareholding in Gain Capital is tiny. And, Gain Capital is about to disappear from being a public company once its $236 million acquisition by StoneX gets final regulatory approval, expected at some point before the end of September.
The text of the letter sent out by CalPERS reads as follows.
July 17, 2020
Dear GAIN Capital Holdings, Inc. Shareowner:
Vote AGAINST Re-election of Peter Quick and Glenn H. Stevens
At the August 6, 2020 GAIN Capital Holdings, Inc. Annual General Meeting CalPERS will be voting AGAINST Peter Quick (Nominating and Corporate Governance Committee member) and Glenn H. Stevens (long-tenured director with 12 or more years of service) who are standing for re-election at the company’s 2020 Annual General Meeting. As of record date June 12, 2020, CalPERS owned 39,400 shares of GAIN Capital Holdings, Inc. common stock. As a long-term shareowner of the company, we believe these two board members have demonstrated a lack of responsiveness to multiple CalPERS shareowner engagement requests to address board composition related to diversity.
CalPERS Governance & Sustainability Principles Advocate for Board Diversity
Consistent with the CalPERS Governance & Sustainability Principles1 we believe the board should facilitate a process that ensures a thorough understanding of the diverse characteristics necessary to effectively oversee management’s execution of a long-term business strategy. Specifically, board diversity should be thought of in terms of skill sets, gender, age, nationality, race, sexual orientation, gender identity, and historically under-represented groups. Consideration should go beyond the traditional notion of diversity to include a more broad range of experience, thoughts, perspectives, and competencies to help enable effective board leadership.
Growing Evidence Diversity is Good for Business Performance
The 2015 McKinsey & Co. study, “Why Diversity Matters,” shows that companies in the top quartile for gender diversity and racial and ethnic diversity are respectively 15% and 35% more likely to have financial returns above their respective national industry median, while those in the bottom quartile are less likely to do so.2 Another report from McKinsey titled “Delivering Through Diversity” shows that companies in the top-quartile for gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation than companies in the fourth quartile. For ethnic/cultural diversity, top-quartile companies were 33% more likely to outperform on profitability.3
Hold Directors Accountable for Not Engaging with Shareholders
CalPERS believes Nominating and Corporate Governance Committee member, Peter Quick, and long-tenured director, Glenn H. Stevens, participate in the consideration of director nominees. These two directors can play a major role in identifying and recruiting diverse qualified directors in the director selection process. We believe these board members should be held accountable for repeatedly ignoring our shareowner engagements on board diversity. Shareowner engagement can strengthen oversight of companies and can be beneficial for the company and its shareowners.
Governance Concerns at GAIN Capital Holdings, Inc.
In addition to our request to vote AGAINST Peter Quick and Glenn H. Stevens, we would like to highlight the following governance concerns at the company:
- Non-responsiveness to CalPERS’ requests to engage the company regarding improving its board diversity. CalPERS’ multiple requests to engage the company starting in July 2017 and throughout 2018 and 2019 have been unanswered
- Has classified board
- Does not allow proxy access
- Compensation concerns – CalPERS believes the company has failed to align pay with performance
- A non-independent director serves on a key board committee (compensation committee)
- Adopted a shareholder rights plan (poison pill) without shareholder approval
Accountability Concerns at GAIN Capital Holdings, Inc. – Vote AGAINST Re-election of Peter Quick and Glenn H. Stevens
We believe Nominating and Corporate Governance Committee member, Peter Quick, and long-tenured director, Glenn H. Stevens, should be held accountable for demonstrating a lack of board responsiveness to shareowners’ concerns and engagement efforts on board diversity issues. Please vote AGAINST the re-election of these two board members.
Should you have any questions please feel free to contact Todd Mattley, CalPERS Associate Investment Manager, at Engagements@calpers.ca.gov or 916-795-0565.
Thank you for your support.
Investment Director, Global Equity
CalPERS Investment Office
1 California Public Employees’ Retirement System Governance & Sustainability Principles
2 McKinsey & Company, “Why Diversity Matters,” by Vivian Hunt, Dennis Layton, and Sara Prince, January 2015.
3 McKinsey & Company, “Delivering through Diversity” by Vivian Hunt, Sara Prince, Sundiatu Dixon-Fyle, Lareina Yee, January 2018.