Board directors must demonstrate that they are “well-informed on competitive dynamics” and “seek outside opinions to better challenge management’s assumptions,” according to a Vanguard voting bulletin, citing Credit Suisse’s recent annual meeting.
On April 4, Credit Suisse was subject to an investor revolt, with shareholders criticizing the Swiss banking giant for failure to adequately oversee material risks.
In March 2023, the bank was subject to a liquidity crisis, resulting in a Swiss government-brokered acquisition of Credit Suisse by UBS. Under the deal, UBS agreed to acquire all outstanding shares in Credit Suisse in a stock transaction valued at 3 billion Swiss francs ($3.25 billion). The takeover does not require shareholder approval and is expected to close by the end of the year.
The bank’s directors all faced between 43% and 49% opposition at the recent meeting. Vanguard voted against several members of Credit Suisse’s risk committee, claiming the bank’s recent liquidity crisis “demonstrated a failure of the company’s risk oversight and controls,” resulting in “significant destruction of shareholder value.”
This marked the second year that Vanguard voted against directors at the company because of risk-oversight concerns, it revealed.
Notably, Vanguard did not oppose all board directors, on the grounds that the company would benefit from “some level of continuity on the board to facilitate the acquisition by UBS,” the fund manager said.
“When we discuss risk management with portfolio companies, we work to assess how well the board of directors understands the company’s strategy and how effectively it is involved in identifying and governing material risks,” Vanguard’s voting bulletin reads.
“We look for directors to be well-informed on competitive dynamics and seek outside opinions to better challenge management’s assumptions. Ultimately, boards should work to prevent risks from becoming governance failures and/or long-term underperformance,” the fund manager concluded.