16/02/2023

Influential proxy advisers CGI Glass Lewis tell investors to knock down Cleanaway at AGM after issuing conflicting statements about a cut to CEO Vik Bansal’s bonus.

This week the Financial Review revealed a separate formal complaint made in August last year making allegations about Mr Bansal’s “bullying” of staff.
It was the third such formal complaint revealed in recent weeks after an investigation by The Australian Financial Review also revealed an earlier complaint, lodged in March 2019, that went to all Cleanaway board members and top HR executive Johanna Birgersson alleging much of the same conduct.
The Australian Council of Superannuation Investors which represents $500 billion worth of super fund assets held by major groups such as AustralianSuper, Cbus and HESTA held a meeting with Cleanaway last week, the group has refused to comment on the matter.
This is despite further revelations that Cleanaway is now the subject of an investigation by the federal government’s workplace health and safety agency Comcare, is being examined by the Australian Securities and Investments Commission over the disclosure of the probe into Mr Bansal, potentially breached the Fair Work Act over a plan to push employees into negative annual leave balances during COVID-19, and is also being investigated by the Environmental Protection Agency in NSW.
While Cleanaway did not disclose the independent probe in its financial accounts, the company ascribed a 25 per cent reduction in Mr Bansal’s short-term bonus to “COVID-19-related challenges”.
Although Mr Bansal had forcefully denied a link between the STI reduction and the probe saying “no, no, no, no, no, no, not at all” when asked if there was a connection the Cleanaway board last week admitted for the first time the CEO’s pay cut was due in part to his “behaviour”, following inquiries by the Australian Securities Exchange into Mr Bansal’s sale of $10 million worth of shares in August.
This week the Financial Review revealed a secret recording where the company’s negative annual leave strategy was discussed, which stood in contrast to Mr Bansal’s response when previously asked whether he had “encouraged your staff members to go into negative leave during this period?, Mr Bansal said: No.
CGI Glass Lewis said: “The company lacks transparency in disclosing the details as well as the results of the investigation into the CEO’s conduct.”
The proxy advisory said the company was “vague in disclosing the extent of the investigation” and how it played a part in Mr Bansal’s STI reduction, and said the company had issued statements that contained “conflicts”.
“We note that the story around the CEO’s conduct continues to develop and investigations continue. This contradictory story makes it unclear to the extent the board has sought to use remuneration to enforce and protectcompany culture.”
Despite these criticisms, CGI has told shareholders to vote for the election of board directors Philippe Etienne and Terry Sinclair, who are both members of the audit and risk committees and was one of the direct recipients of the March 2019 formal complaint against Mr Bansal. Mr Sinclair is also a member of the remuneration committee.
CGI has also supported the election of Samantha Hogg, who is on the remuneration, audit and risk committees.
“In our view, although legal disputes are common to many companies, shareholders should be concerned with any type of lawsuit or regulatory investigation involving the company, as such matters could potentially expand in scope and prove to dampen shareholder value,” CGI said.
“We note the company’s shares have fallen about 17 per cent since The Australian Financial Review’s revelations. Due to the ongoing nature of the Comcare investigation, we will monitor the outcomes going forward.”
Current and former employees have said Mr Bansal’s overly-assertive conduct during monthly operational review meetings, where executive team leaders pick through costs and revenue data, often resulted in a situation where senior managers were dressed down for slightly missing financial targets.
They said Mr Bansal’s behaviour was the chief reason for a high rate of manager turnover including the departure of a half-dozen employees who filled the group’s head of health and safety role over the past four years and which created an environment where bad news could not be escalated up the chain of responsibility.
Mr Bansal has apologised for the conduct and is now receiving “mentoring” and is subject to “enhanced reporting and monitoring”. He has shared his own improvement plan with the board and following the Financial Review’s reporting has agreed to forgo $2.3 million in performance rights. Mr Chellew last month described Mr Bansal’s conduct as “overly assertive”.