Media Center

5/2/2042

ISS Says Unions and Pension Funds Should Back Ancora

CNBC (05/02/42) Goswami, Rohan

Norfolk Southern (NSC)-invested unions and pension funds should back Ancora’s full seven-director slate at the railroad’s shareholder meeting later this month, two different Institutional Shareholder Services proxy advisory services said. ISS’ Taft-Hartley Advisory Services and Social Advisory Services, which focus their recommendations on regulated unions and socially responsible investors, respectively said in their reports, that an Ancora majority would help address “negligence” by the current board and address its “serious concerns with accountability.” “The proxy contest is centered on a debate over which management team is best suited” to lead the company forward,” both reports said. “It is therefore important to provide the dissident with a voice that is loud enough to have its case for management change appropriately considered.” The recommendations also voiced their support for Ancora’s CEO pick Jim Barber as a “credible” director and chief executive, undercutting criticisms that his lack of railway experience was a liability. The former UPS executive appears “to be a capable candidate with experience and skills that should be transferable to the railroad industry,” the reports said. ISS’ main advisory arm and Glass Lewis, the two proxy giants, had already said that shareholders should support most of Ancora’s nominees at Norfolk Southern’s May 9 meeting. Glass Lewis endorsed six of Ancora’s director picks, including Barber. ISS earlier endorsed five of Ancora’s nominees, withholding support for Ancora’s proposed CEO Barber, but noting that he would likely be a capable executive as well. Thursday’s news “represents an important message to union retirement plans and firms prioritizing both socially responsible investments and enhanced value,” a statement from Ancora said. The statement added that Ancora’s three-year precision-scheduled railroading strategy “differs greatly from Norfolk Southern’s resilience railroading model and has worked well at the other four publicly traded Class I railroads." ISS’ two more tailored recommendations carry particular weight in light of the derailment in Ohio, which caused more than 100,000 gallons of toxic chemicals to be released into the environment. The recommendations also carry heft because of the outsize influence that unions have in the railroad industry. Union support has been divided between management and Ancora. Two different Teamsters unions are backing Ancora, around 42% of NSC’s unionized workforce. Another coalition of unions is backing management.

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5/3/2024

HSBC’s Green Credentials Come Under Fresh Scrutiny

Wall Street Journal (05/03/24) Ochoa, Fabiana Negrin

HSBC’s (HSBC) green credentials are under fresh scrutiny, with activist shareholders pressing the Asia-focused bank to clarify plans to spend up to $1 trillion on sustainable finance in the coming years. The investor group, which has $892 billion in assets under management, said Friday that it intends to ask the bank at its annual general meeting to explain how it will spend its green funds. It also wants the bank to set a funding target for renewable energy. ShareAction, a nonprofit focused on responsible investing that is coordinating the group, described HSBC’s target of spending between $750 billion and $1 trillion on sustainable finance by 2030 as too broad and vague. “It gives the impression the bank is scaling up its efforts on green finance without demonstrating the difference it will make, or whether it is financing the green activities that are most needed,” Jeanne Martin, head of the banking program at ShareAction, said in a statement. The shareholder coalition also includes U.K. nonprofits Epworth Investment Management and the Ethos Foundation, as well as investment company Royal London Asset Management, Paris-based hedge-fund manager Axiom Alternative Investments and asset manager La Francaise Asset Management, among others. HSBC said it will answer all of the group’s questions at its AGM. “We thank ShareAction for its engagement over a number of years on a range of topics relating to our climate strategy, and for recognizing the good progress that we have made,” it said in an emailed statement. HSBC said that since it set its sustainable finance target in 2020, it has reported on its progress yearly, giving a “detailed breakdown across green, sustainable (which combine green and social) and social products.” In 2021, a group of 15 institutional investors—coordinated by ShareAction—filed a climate-change resolution at HSBC alongside 117 individual shareholders urging the bank to set targets to cut exposure to fossil fuels. HSBC later that year committed to phasing out coal financing, and in 2022 pledged to stop financing new oil-and-gas fields. A ShareAction analysis of Europe’s largest 20 banks last year flagged what it said was a widespread lack of transparency around green finance and the related risk of “greenwashing.” The report said 35% of the banks measure the “real” impact of their financing, such as how much renewable-energy capacity their funding generates. Most targets set by lenders specify a sum of money but don’t provide crucial details, making it hard to determine if lenders are pulling their weight, ShareAction’s report said. HSBC said in its 2023 ESG report that it was tracking progress in its plan to allocate up to $1 trillion to sustainable finance and investment by 2030, and has taken steps to align financed emissions to net zero by 2050. HSBC doesn’t currently disclose a target for capital deployment. It said in the ESG report that since 2015, it has issued more than $2 billion in green bonds for renewable energy, clean transport and other projects.

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5/3/2024

‘Your Fund Is Under Attack’: BlackRock Fights Boaz Weinstein

Bloomberg (05/03/24) Shen, Yiqin; Brush, Silla

BlackRock Inc. (BLK) a few days ago sent an unusual message to thousands of clients. "Your fund is under attack,” the headline screamed in bold print. The attacker: Boaz Weinstein, the Wall Street money manager who says price distortions in funds run by BlackRock and others are cheating investors out of billions of dollars, and they need to be eliminated. This has turned into something of a crusade for Weinstein. Last month, his hedge fund, Saba Capital Management, launched a frenetic bid to have investors remove BlackRock as manager of six funds overseeing about $10 billion in assets. Which is what triggered the note BlackRock sent to clients. “If Saba were to succeed, it may seek to appoint itself as investment advisor” and fundamentally disrupt the funds’ objectives and strategies, “all to enrich itself.” The ongoing feud has turned the $250 billion closed-end fund industry into the scene of one of the most dramatic power struggles in finance, one that’s coming to a head at shareholder meetings next month. Weinstein says BlackRock is not only trapping shareholders in underperforming products, but also failing to meet basic governance standards by stymieing his efforts to elect new directors. BlackRock points to Weinstein’s own track record, where he took over a closed-end fund that had previously invested in floating-rate loans and put some of its money into crypto exposure and SPACs. Weinstein’s move is the latest escalation in a multiyear campaign targeting closed-end funds trading well below the value of their underlying assets. The 50-year-old hedge fund boss currently has about $6 billion invested in the products, using his stakes in dozens of funds to press money managers to buy back shares near their full market value (known as a tender) or turn their funds into open-ended vehicles, which would produce a similar result. In recent years he’s taken on the likes of Eaton Vance, Franklin Templeton (BEN), and Voya Financial (VOYA), convincing managers to tender, winning board seats and even prompting them to resign from their role as fund adviser. Weinstein notes that if Saba were to win the proxy battles, it wouldn’t necessarily mean the hedge fund would assume management of the funds. That would be up to the boards, but Saba has said it would “stand ready” to assist and may offer to do the job. BlackRock is warning investors that Saba could radically alter the composition of the funds should it win control, exposing shareholders to greater risk. Last year, Weinstein launched three proxy campaigns for board seats against the money-management giant, failing to win a single one. Instead of backing down, Weinstein is pushing even harder this year. In addition to efforts to terminate BlackRock’s fund management agreements, he’s also trying to shake up the boards of 10 BlackRock funds. Saba has nominated a slate of directors. Weinstein says he’s redoubling his efforts in part because the asset-management giant, he alleges, has undermined the ability of shareholders to get a fair shake at annual meetings. Last year he won a lawsuit against BlackRock — and other fund managers — for adopting so-called control share provisions that can deter proxy attacks. BlackRock is appealing that ruling and now finds itself defending against another lawsuit from Saba. In March, Weinstein’s firm sued BlackRock in federal court in New York, arguing that an “entrenchment bylaw” in ECAT “strips away any realistic prospect” for a shareholder to elect trustees other than the incumbents. Lawyers for BlackRock said in court filings that “every share of ECAT has exactly the same right to vote.” “BlackRock has behaved leaps and bounds worse than all the other managers, and so a tender for shares is not enough,” Weinstein said. “They put themselves in a spot where they need a strong response — to remedy the performance but also as a signal to the industry, that shareholders are not going to stand for this anymore.” Stephen Minar, managing director focused on closed-end funds at BlackRock, said that “Saba uses the veil of governance to disrupt the investment objectives and strategies of closed-end funds by forcing changes that enrich itself at the expense of long-term shareholders.” BlackRock notes that in recent years, it has sought to increase shareholder profits and lower costs. It’s repurchased $1.3 billion of shares in its closed-end funds since 2016, including about $180 million of BIGZ shares, and it has started new funds without load fees that were typically charged in the past. As voting gets started ahead of June shareholder meetings, both BlackRock and Saba are actively seeking to corral investors to their cause. BlackRock is sending out white proxy cards to individuals and paying about $1.7 million to advisory firm Georgeson to help solicit votes for the six funds, according to regulatory filings. Saba is sending out gold proxy cards. The hedge fund has launched a website to keep shareholders updated on its campaigns. Splashed across the top is “Fink about it,” a reference to BlackRock Chief Executive Officer Larry Fink. Saba said it will be hosting a webinar on May 20 to discuss its plans “to hold BlackRock accountable.” “I’m not only fighting for these funds, I’m fighting so that the next 30 funds don’t emulate these shady tactics,” Weinstein said. “I don’t need Larry Fink to apologize to shareholders for what BlackRock did, though they should be embarrassed.”

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5/3/2024

Rubis Investor Seeks Strategy and Governance Change

Bloomberg (05/03/24) De Beaupuy. Francois

A minority shareholder of French hydrocarbon distributor Rubis SCA (RBSFY) has asked for a change in the company’s governance and strategy after its shares almost halved over the past six years. Ronald Sämann, who holds 5% in the firm, criticized its legal status in a letter to Rubis’s general partners Gilles Gobin, Jacques Riou and Clarisse Gobin-Swiecznik, arguing the current structure gives them too much sway over the company. Rubis shares have rebounded in recent weeks as Sämann, French billionaire Vincent Bollore and another group of investors all disclosed 5% stakes in the distributor of oil and gas products, raising speculation about a potential shake up. The company’s current status as a partnership limited by shares — known in French as “société en commandite par actions” — needs to be replaced by a corporate form that restores the power of shareholders in the composition of the company’s management body, Sämann wrote in the letter dated May 1. The inability of supervisory board members or shareholders to sanction management deprives Rubis of “best in class” personnel to implement its strategy, the Canadian businessman added. Sämann also said the lack of accountability led to Rubis’s acquisition of French solar farm developer Photosol at an “excessive valuation.” In order to raise sufficient funds to deploy the company’s strategy in new energies, it would need to gain the confidence of new investors, Sämann wrote. If interest rates stay at current levels or increase, the planned strategy and level of expenditure may have “a very detrimental effect on the health of the company,” he concluded, while asking for a meeting with Rubis’s leaders.

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5/2/2024

Sumitomo Unveils Plans for Shareholder Return After Engagement with Elliott

Bloomberg (05/02/24) Oda, Shoko

Japanese trading firm Sumitomo Corp. (SSUMY) said it will buy back its stock and adopt a progressive dividend policy, bringing it in line with the other four major peers in an effort to boost shareholder returns. The company will allocate ¥700 billion ($4.5 billion) of returns over the next three years, with a goal of total shareholder return ratio of 40%, the company said Thursday in a filing. The announcement comes after Elliott Management Corp. was said to have built a “large” stake in Sumitomo and shared with the company its views on ways to create shareholder value. The stock rose 4.4% at the close, extending a record high. Sumitomo is also aiming a return on equity of at least 12% for the fiscal year ending March 2027, and will buy back up to ¥50 billion worth of shares. “This looks like a good commitment to deliver strong returns over several years step-by-step rather than a big bang announcement with all the good news out at once,” said Mio Kato of LightStream Research. The new plan should give investors time to digest and understand the company’s potential, “and the outlook feels quite positive without a sense of massive over-promising.” Japanese companies have been facing pressure from the stock exchange and activists to announce plans to improve capital efficiency. Real estate firm Mitsui Fudosan Co. (MTSFY) released a plan in April to sell assets and increase buybacks, two months after news of Elliott’s stake in the firm. Sumitomo President Shingo Ueno declined to comment on Elliott’s reported stake, but added that the company has a fair disclosure policy and is “in talks with a wide range of investors and shareholders.” “We will continue to reflect those voices from stakeholders in our management,” said Ueno. The company is still in talks with Warren Buffett's Berkshire Hathaway (BRK.B), but there aren’t business opportunities that have materialized between the two firms yet, he said. Buffett said in his February letter to investors that the Japanese trading houses he invests in, including Sumitomo, follow shareholder-friendly policies that are “superior” to those practiced in the United States.

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5/2/2024

Third Proxy Advisory Firm Urges Norfolk Southern Investors to Elect Ancora Directors

Reuters (05/02/24) Parmar, Abhinav; Herbst-Bayliss, Svea

Proxy advisory firm Egan-Jones on Thursday recommended Norfolk Southern (NSC) shareholders elect all seven of hedge fund Ancora Holdings' proposed director candidates to the railway's 13-member board and replace its chief executive officer at next week's election. Egan-Jones is the third proxy advisory firm to support Ancora director candidates after Institutional Shareholder Services supported five of Ancora's seven nominees and Glass-Lewis backed six of the hedge fund's director candidates. Egan-Jones said the Atlanta-based railway's board has failed its "oversight responsibilities by allowing a non-optimum approach to operational transformation" at Norfolk Southern. Ancora has argued that Alan Shaw, CEO since 2022, should be ousted, criticizing him for failing to reach operational targets at the same time the company has faced regulatory and legal questions after a derailment last year in Ohio. "We support Ancora's plan to replace Norfolk Southern's current CEO Alan Shaw, whom we believe has failed to exercise a creditable leadership during his tenure," Egan-Jones wrote. "A non-operational CEO has been at the helm long enough to show his inability to put the pieces in place."

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5/2/2024

Blackwells Files Definitive Proxy Statement for Ashford Hospitality’s 2024 Annual Meeting

Lodging Magazine (05/02/24)

Blackwells Capital LLC and Blackwells Onshore I LLC, which collectively own 1,000 shares of Ashford Hospitality Trust, Inc. (AHT), have filed a definitive proxy statement with the U.S. Securities and Exchange Commission in connection with its campaign urging stockholders to vote “AGAINST” the election of Monty J. Bennett, Amish Gupta, J. Robison Hays, III, Kamal Jafarnia, David W. Johnson, Frederick J. Kleisner, Sheri L. Pantermuehl, Davinder “Sonny” Sra, and Alan L. Tallis to the company’s Board of Directors at the Company’s 2024 annual meeting of stockholders, which is scheduled to be held on May 14. Jason Aintabi, chief investment officer of Blackwells Capital LLC, said, “It is clear to us that Ashford stockholders have suffered from a disastrous stock price performance, abysmal corporate governance and what appears to be a self-dealing external advisory agreement that makes Montgomery Bennett rich at the expense of stockholders. The Board must be held to account for its failure to act as independent fiduciaries. In our opinion, the Board, at best, lacks the necessary skills and acumen and, at worst, could face personal liability for rubber-stamping Mr. Bennett’s unchecked parade on Ashford’s coffers. Stockholders have an opportunity to send a clear and resounding message to the Board by voting “AGAINST” the election of the incumbent directors at the 2024 Annual Meeting.” Institutional Shareholder Services recommended that Ashford stockholders vote “AGAINST” all incumbent director nominees at the 2024 Annual Meeting.

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5/2/2024

Glass Lewis Recommends That Shareholders Vote For All of Whitestone REIT’s Board Nominees on the WHITE Proxy Card

GlobeNewswire (05/02/24)

Whitestone REIT (WSR) on Thursday announced that Glass Lewis has recommended that shareholders vote FOR ALL of Whitestone's board nominees on the WHITE proxy card at its 2024 Annual Meeting of Shareholders scheduled to be held on May 14. In arriving at its recommendation, Glass Lewis stated that “the board's case proves more persuasive at this time, due in no small part to observable trends in Whitestone's operating performance, financial condition and corporate governance which suggest the Company is credibly executing on its promulgated tack following the ouster of former CEO James Mastandrea.” Furthermore, Glass Lewis recognized our transparency with shareholders by writing that “Whitestone has responded to speculative transaction commentary by expressing a willingness to consider available alternatives” and acknowledged our significant corporate governance improvements by adding that “the Company has, across the last five years, replaced two-thirds of the sitting board and reshaped the executive team.” With respect to Erez Asset Management, Glass Lewis wrote that “the Dissident’s governance case is largely a miss for a variety of reasons” and added that the “Dissident appears more interested in engaging with a broader analytical framework predating significant changes to management and the board.” In evaluating Erez’s nominees, Glass Lewis concluded that “other than highlighting the professional background of nominees Bruce Schanzer and Catherine Clark, we identify no specific or general plans or strategies Mr. Schanzer or Ms. Clark would pursue, if elected.” Glass Lewis ultimately questions the motivations of Erez, stating that “Erez’s sole substantive plan submitted to the board was for an “orderly and well-managed corporate unwind scenario” underpinned by a process “similar” to what Mr. Schanzer pursued at Cedar Realty. We see no indication Erez pitched alternate strategic of financial avenues for the Company,” while concluding that “Whitestone has generally offered suitably reasoned and adequately transparent rebuttals to substantially all of Erez’s claims.” Furthermore, in reviewing Bruce Schanzer’s track record at Cedar, Glass Lewis highlighted the historical disconnect between pay and performance, and further added that their historical “F” grades on Cedar “raise additional doubt as to Mr. Schanzer's willingness to acknowledge and timely respond to investor feedback, while also materially undermining the notion that Mr. Schanzer is likely to represent a credible change agent.” Separately, ISS also acknowledged that Whitestone is “in the midst of a turnaround, with promising results since Holeman took over as CEO,” further noting that “The Company’s outperformance against its peers and the broader market since the appointment of a new CEO indicates the market’s positive view on Holeman’s execution since January 2022.” ISS also put the spotlight on Erez and its nominees’ fixation with a sale process by stating that “The board's concern that the dissident is primarily focused on a potential sale transaction may have a reasonable basis, given the context of Schanzer's initial approach and his apparent pursuit of financing sources and outreach to the company’s former CEO.” Commenting on the Glass Lewis recommendation, the Whitestone Board of Trustees stated, "The recommendation from Glass Lewis to support all of Whitestone’s Board nominees is a validation of the ongoing successful turnaround strategy executed by our new management team and overseen by our existing Board since we reset the Company on January 18, 2022. Whitestone’s turnaround and outperformance since 2022 – independently corroborated by both Glass Lewis and ISS – validate the Board’s decisive action to terminate the former CEO for cause and comprehensively refresh the Board and management team. ... We are not opposed to selling the Company or exploring strategic alternatives if they lead to maximizing shareholder value. But we also do not want to shortchange shareholders by running a hasty sale process at the wrong time, as the Dissident seems to be recommending. We urge shareholders to protect the value of their investment and NOT to vote for ANY Erez nominees, but to follow the Glass Lewis’ recommendation by voting for all the Company’s board nominees using the WHITE proxy card today."

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5/2/2024

South Korea Unveils Voluntary Guidelines to Unlock Shareholder Value

Reuters (05/02/24) Lee, Jihoon; Moon, Youn Ah

South Korea on Thursday unveiled guidelines for companies participating in a government program aimed at enhancing shareholder value. The financial regulator's announcement is a follow-up to the "Corporate Value-up Program" first proposed in February that is intended to help tackle the comparatively low valuations seen in the domestic stock market. This "Korea discount" refers to a tendency for local companies to have lower valuations compared with global peers due to factors such as low dividend payouts and the dominance of opaque conglomerates known as chaebols. The guidelines would help companies "select key indicators that are seen as important for enhancing corporate value based on the characteristics of each firm," Kim So-young, vice chairman of the Financial Services Commission (FSC), said. These included setting mid- to long-term objectives, and devising plans for investment, shareholder return, and business portfolio reorganization. The guidelines provide principles and examples so companies can set their own plans to improve shareholder value and to communicate this with investors, said the announcement. Companies are urged to submit filings on their plans each year, but participation is voluntary. Since the government first proposed the program, market watchers have argued that stronger measures, such as tax cuts as incentives or penalties for companies that do not join, were needed to ensure change. However, a landslide victory by the opposition in legislative elections last month has weakened the prospect of tax cuts, namely on inheritance and corporate income seen as benefiting the wealthy, analysts say. The guidelines will be finalized by the end of the month so that companies can start submitting filings, the FSC said. The benchmark KOSPI index (.KS11) had initially rallied to a 22-month high on investor hopes for the scheme, but has fallen back since details started emerging in late February.

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