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German pump maker Pfeiffer Vacuum announced Friday that supervisory board member Wolfgang Lust will step down, following pressure from shareholder Busch Group, which owns just over 30% of Pfeiffer's shares and has been seeking a board shakeup. Pfeiffer has been resisting efforts by its spurned suitor and rival Busch Group to increase its influence on strategy. Pfeiffer stated that Lust's resignation is effective from Oct. 25, the same date as Supervisory Board Chairman Michael Oltmanns, who announced his departure on Aug. 7. Family-owned Busch said on Friday it would immediately ask a court to appoint family member Ayla Busch, whom it wants named new supervisory board chairman, and former Pfeiffer CEO Wolfgang Dondorf to the supervisory board. "We are very pleased with the outcome, and I am now looking forward to committing myself as supervisory board chairman to develop Pfeiffer Vacuum further," Ayla Busch said.

Wall Street appears to be in favor of Nelson Peltz's push to spur growth at Procter & Gamble (PG). The stock had been languishing in the mid-$80s prior to Peltz's disclosure that Trian Partners had accumulated a $3.3 billion stake in the company, but after Peltz announced that he is seeking a seat on P&G's board, its shares jumped to $92. Wall Street analysts believe the stock is worth at least $100 a share. "While P&G has taken sensible steps to drive shareholder value, results have lagged," says Kevin Grundy, equity analyst at investment firm Jefferies. "We continue to believe his involvement raises the execution bar at P&G, which is supportive of a higher multiple." Grundy says Peltz is not looking to split up the company or replace CEO David Taylor, but his "expertise and long track record of working with management teams in the consumer sector will be a useful resource to help Procter overcome its challenges. Consumer companies with Mr. Peltz on the board have seen EPS growth outpace the S&P 500 by an average of 780 basis points annually."

The Canadian government has tabled a bill in the Senate that would make three key changes to how corporations are governed and regulated. One, it gives shareholders the ability to vote against corporate board members. Two, it changes how documents for shareholder meetings are to be sent to and accessed by shareholders. And, three, it requires certain corporations to report the diversity of their directors and senior management.  The biggest change that Bill C-25 would bring about is the first one, giving shareholders the ability to vote against directors. Shareholders currently can either vote for a director or withhold their vote. In instances where just one person is vying to fill a vacancy on the board of directors, a mere handful of "for" votes can get that person elected. If C-25 passes, a majority of "against" votes would result in that individual not getting elected.

In Ireland, Conroy Gold's largest shareholder plans a High Court challenge to the company's ruling that a vote appointing new directors to its board was invalid. At an extraordinary general meeting recently, Conroy Executive Chairman Richard Conroy ruled against motions to elect shareholder Patrick O'Sullivan and two others to its board. O'Sullivan has a 28% stake in the company. On Thursday, O'Sullivan's attorneys petitioned the High Court to be allowed to challenge the ruling that the three motions appointing him, Gervaise Heddle, and Paul Johnson as board members are invalid. The move came as it became apparent that the company was considering replacing a number of the six directors whom shareholders voted to remove from the board at the same general meeting. O'Sullivan, who ranks as Conroy's largest single shareholder, says he has concerns about corporate governance and directors' compensation.

Canadian retailer Hudson's Bay has appointed former J.C. Penney (JCP) executive Edward Record as its new CFO.  The move comes after U.S. investor Jonathan Litt increased pressure on Hudson's Bay last month by threatening to shake up the board unless serious steps were taken to monetize its assets.  Large retailers are struggling to reinvent themselves amid a sweeping upheaval, triggered in part by changing shopping trends that have seen consumers make more online purchases.  Litt, who heads Land and Buildings, had urged Hudson's Bay to consider going private and pushed for the company to sell its Saks Fifth Avenue brand, considering it more as a real estate investment than just a department store.  Record succeeds Paul Beesley, who announced his intention to resign in May.  During Record's time at J.C. Penney—which included more than three years as CFO—he helped strengthen the retailer's capital structure, lower its debt leverage, and boost its credit rating, Hudson's Bay said.

A shareholder group led by Ariadne Australia has lowered its demands for board representation at Dreamworld owner Ardent Leisure from four seats to two.  The investors, accounting for about 10% of the company's register, are still pushing for corporate doctor Gary Weiss and U.S.-based executive Brad Richmond to be appointed at a Sept. 4 meeting, but are no longer pressing the case for two other candidates.  "We believe that these changes will address any concerns that the board appointments we had been requesting are disproportionate or may result in unintended consequences," according to Ariadne.  It said that after "constructive" talks with Ardent investors and executives, the changes to its demands demonstrate its intent to work on revitalizing the company rather than taking control.  Ariadne outlined a plan this month that it said could potentially deliver up to $1 billion in additional value for Ardent shareholders, although the company countered that many of the ideas were not strategic and that it was working on rectifying problems already.  Ariadne argued that it had not been rejected by shareholders, saying it was "pleased" with the level of support it received.  However, it may lack the numbers to push for change even if it gets two directors elected.  The campaign could be on shaky ground as Ariadne appears unlikely to be able to impose its radical vision to strengthen the U.S. operations ahead of a future spinoff or trade sale.

Bain Capital and Cinven have taken control of Stada, the generic drug manufacturer, with an improved takeover bid.  The deal marks the biggest acquisition of a listed German company by buyout groups.  Investors tendered more shares by the Aug. 16 deadline than the 63% minimum the deal required, the buyout groups confirmed in a statement Aug. 18.  "It was very, very close," said a banker familiar with the process.  The specific tender rate will be published later on Aug. 18, according to the buyout groups.  They had reduced the minimum acceptance level from 67.5% after their first offer failed.  Last month, they improved their takeover offer by 25 cents per share, making the revised bid worth about €16 million more than the previous offer.  Both offers were backed by Stada management.  Shares in the drugmaker at one point rose more than 13% to €72.50, well above the offer price, reflecting speculation that minority shareholders may be able to obtain an even higher price from the buyout groups as they seek full control of the company.

BHP Billiton (BBL) will find out Aug. 23 whether it will face a challenge to its board, as Elliott Management has until then to nominate a director at the group's annual meetings.  Elliott recently disclosed that it has boosted its shareholding in the U.K. arm of the dual-listed BHP structure from about 4% to 5%, which amounts to about 2% of the company.  However, it is important to note that Elliott has made a point of touting BHP and incoming Chairman Ken MacKenzie, toning down its language as well as narrowing and reshaping its agenda with the company.  While Elliott claimed to have a role in BHP's "steps towards a smarter and more value-generating way of conducting business," observers say it actually has a much better understanding now of the way CEO Andrew Mackenzie, his team, and his board have changed the company over the past four years and of BHP itself.  Elliott had proposed transferring the company's incorporation and primary listing to the United Kingdom with a secondary listing in Australia and imposing a formula-driven requirement for regular buybacks, but it has since dropped those proposals and now wants to implement "a new responsible approach and philosophy regarding capital allocation."  According to Elliott, "Such an approach will ensure that the significant free cash flow that BHP is expected to have for the foreseeable future results in enhanced returns to shareholders over time, as additional dividend income and through the efficient use of buybacks."

Automatic Data Processing Inc. (ADP) shares fell 5.8% to $104.68 in New York Thursday after Bill Ackman made his case for change at the company in a conference call.  Ackman predicted ADP could more than double its value within four years if it can mend the "buy not build" strategy that he believes has led to inefficiencies.  He also suggested the firm will likely need a new CEO.  "The question is why has the market and why has the board not recognized the problem," Ackman said.  "The answer to the question is the company has done a pretty good job hiding the problem, and that relates to complex accounting and reductions in disclosure over time."  The investor argues ADP's shares could climb to $221-$255 by June 2021, returning as much as 132% to shareholders.  ADP countered those assertions, saying Ackman's presentation "betrays a fundamental lack of understanding" about the current state of the business and offered no new ideas that the company has not already analyzed.  ADP has said it has returned 202% to shareholders since Carlos Rodriguez took the helm as CEO in 2011.  Ackman stressed the dramatic margin expansion at CDK Global Inc. after it was spun out from ADP in 2014, and argued ADP's failure to address acquisition and efficiency issues has allowed rivals to gain market share from it.  He said the company should consider purchasing one of its smaller rivals to accelerate changes.  Pershing Square revealed an 8.3% stake in ADP on Aug. 7 and is seeking three board seats, including one for Ackman.  The two sides are expected to meet in early September after ADP vets the nominees.

Elliott Management Corp. has joined with Corvex Management LP in urging Energen Corp. (EGN) to sell itself. Elliott owns a 4% to 5% stake in the Alabama-based natural-gas company, and Corvex increased its position to more than 10% this week. The move by Corvex allows it to call a special meeting under state law and add as many as six directors to the nine who already sit on the company's board. Both firms believe the land Energen owns in the Permian basin would be attractive to oil-and-gas producers looking to expand in the area and needing a beachhead to enter it. However, Energen said in June that it has completed a strategic review and was not interested in selling. "We considered every alternative," Energen Chairman and CEO James McManus said at the time. "And at the end of the day...we concluded that the best thing at this particular time was to continue to execute on the plan."

In an Aug. 17 conference call, William Ackman of Pershing Square Capital Management laid out his goals for Automatic Data Processing Inc. (ADP), in which the hedge fund owns an 8% stake. Ackman, whose fund has nominated three directors to serve on the company's board, said ADP needs to streamline its business and invest in technology upgrades. He noted that the company has not properly integrated its acquisitions and various human resources services and that "ADP's margins are vastly below what they should be." According to Ackman, the company's stock price could more than double in five years to $221 per share without a change in the company's dividend, capital structure, or credit rating. He also argued that ADP is losing share to smaller, more nimble competitors with more technologically advanced products.

ADP (ADP) has issued a statement in response to Pershing Square Capital Management's investor presentation on ADP. ADP says it "is committed to engaging constructively with shareholders on important issues facing the company. However, we strongly disagree with many of the assertions made by Mr. Ackman in today's presentation, which betrays a fundamental lack of understanding of the current state of ADP's business and strategy. He presented nothing that has not previously been analyzed by the Board and management." The statement went on to say that "ADP is not resting on its laurels. Our Board and management team are thoughtfully transforming our organization and culture to compete effectively and drive global growth in the evolving Human Capital Management market. We are confident that we have the right plan underway to ensure ADP's future success. We are accelerating investments in R&D to provide best-in-class cloud-based HCM solutions, migrating numerous customers to our strategic platforms, streamlining operations, rationalizing our footprint, and taking actions to improve client satisfaction and retention—all while continuing to outperform for shareholders. ADP shares have outperformed the S&P 500 for many years, and the company has generated total shareholder returns in excess of 200% since Carlos Rodriguez became CEO nearly six years ago. ADP has also consistently delivered on its commitment to return capital to shareholders—demonstrated by $11.3 billion in share buybacks and dividends over the past five fiscal years and annual dividend increases for the last 42 years."

There is a conflict of interest in Pershing Square's shake up of ADP (ADP) as the company considers the board nominees from the hedge fund run by Bill Ackman. In particular, there are concerns about board director R. Glenn Hubbard, dean of Columbia Business School, to which Ackman's fund donates. It is unclear what Hubbard intends to do, but corporate governance experts say he should recuse himself from board decisions involving Pershing Square. As chairman of ADP's nominating and governance committee, Hubbard helps determine the slate of nominees for election to the board and identify and recommend candidates. "The problem is the relationship [Hubbard] has with the hedge fund as the dean of Columbia [Business School], which jeopardizes his independence. This is a very basic case," says Simone M. Sepe, a professor of law and finance at the University of Arizona. "One of the measures to assess the success of a dean of a business school is the amount of donations a dean is able to obtain. Because the hedge fund is contributing to the business school, that's a subtle form of conflict of interest and the market should be aware of that." Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, adds, "It puts him in a funny position. It doesn't happen that infrequently. The finance community is not a big world...The busier the street you happen to live on, the more likely you'll have a conflict with folks that you're connected with."

Bill Ackman, head of Pershing Square Capital Management, will present his plans for improving the performance of Automatic Data Processing Inc. (ADP) during a webcast Thursday morning.  The investor has disclosed few details of his intentions for ADP, which he argues is losing ground to smaller rivals.  All he has said so far is that ADP needs to improve its software and service offerings, slash costs, and boost its efficiency.  That has spawned some confusion because the company has returned 202% to shareholders since CEO Carlos Rodriguez took over in 2011.  ADP's profitability is, however, much lower than its smaller competitor, Paychex Inc. (PAYX)—although some argue that the comparison is uneven because its business mix differs from ADP's.  Meanwhile, there is some evidence that ADP may not be wringing maximum value out of its various businesses.  CDK Global Inc., which was spun out from ADP in 2014, saw major improvement to its margins after it became an independent company, for example.  Ackman will need to win over investors if he wants to get his three candidates, including himself, elected to the board.  ADP has so far rebuffed Pershing Square's demands, which it said initially included a request for five seats and the removal of Rodriguez.  ADP said last week that it would review Ackman's revised slate and their potential to add value to the board.

BHP Billiton Ltd. (BBL), under pressure from Elliott Advisors to boost shareholder returns, announced Thursday it was spending $2.46 billion to extend the life of the Spence copper mine in northern Chile by more than 50 years.  The move is intended to create up to 5,000 jobs and bring new output online from 2021.  BHP head Andrew Mackenzie said the project supports the strategy of delivering near-term, valuable copper production.  "Execution of the Spence Growth Option will create long-term value for shareholders in one of our preferred commodities," the CEO said.  Copper prices are at their highest since late 2014 amid growing expectations of strong demand and tighter supply following a decline in spending linked to the commodity price crash of 2015-2016.  BHP, the world's largest miner, and competitor Rio Tinto (RIO) rely heavily on iron ore for profits; but both are shifting emphasis as global commodity needs change and as an anticipated rise in electric vehicle demand increases consumption of minerals such as copper and nickel.  Rio Tinto has launched a massive underground extension of its copper operations at Oyu Tolgoi in Mongolia, expected to come online near the end of this decade; while BHP also declare earlier this month it was increasing investment in nickel, used in batteries.

Carl Icahn has brought in two new directors to sit on the board of Cheniere Energy Inc. (LNG).  Andrew Langham and John "Jack" Lipinski have been appointed by the board to replace Jonathan Christodoro and Samuel Merksamer, who stepped down on Aug. 14.  Langham was appointed to the Governance and Nominating Committee and Lipinski was appointed to the Audit and Compensation Committees, according to a Cheniere filing with the Securities and Exchange Commission.  Langham is the general counsel for Icahn Enterprises LP, and Lipinski is president and CEO of CVR Energy Inc. (CVI).

Nelson Peltz's Trian Fund Management says Procter & Gamble (PG) is spending $100 million of its shareholders' money to keep Peltz off the board. In an Aug. 16 letter to shareholders, Trian said, "Imagine what all that money could do if it were invested in regaining lost market share—instead of paying for four investment banks, at least two law firms, two proxy solicitors, and a PR firm, that P&G has hired to keep one highly qualified shareholder out of the P&G boardroom." Trian also took aim at an Aug. 14 letter from P&G to shareholders that accused Peltz of seeking a board seat to "satisfy his own agency" rather than truly help the company. According to Trian, "Nelson's own agenda is to improve P&G's long-term performance."

As the number of listed companies declines, Nasdaq supports multiple share classes as a path to going public. According to Nelson Griggs, head of global listings at the Nasdaq Stock Market, it supports companies seeking to go public with a dual-class share structure, so long as investors are aware. The issue was pushed to the forefront when Snap (SNAP) went public in March without giving all shareholders voting rights. Companies tend to use multiple share classes, each with different voting rights, to help founders and CEOs maintain control or as a tool to fend off activists. Griggs said, "In the U.S., if companies disclose that they have multiple share classes, then investors can make a decision on whether they want to be a financial owner. We think it's in the best interest of companies to have that option." The exchange is calling for several reforms to make it more attractive to be a public company, including fighting back against some activists aiming only to boost a stock's price in the short term, he said. Griggs noted that the number of companies listed on the Nasdaq with A and B shares has jumped to 10% from 2% over the past decade. "If companies have the ability to set that up, they have more control over their long-term approach," he added.

Akzo Nobel NV has ended its longstanding feud with Elliott Management Corp., with a promise to add three new directors.  The deal follows a months-long battle over Elliott's attempt to force the Dutch chemicals company into talks with U.S. rival PPG Industries Inc. (PPG) over its $28 billion takeover bid.  The two sides announced Wednesday that they reached an agreement on Akzo's strategy to fully separate its specialty-chemicals business, following a disagreement on whether it should be sold or listed.  The deal would "normalize the relationship" between Akzo and its shareholders and suspend all litigation for a minimum of three months.  Akzo also announced two new nominations to its supervisory board, supported by Elliott, and intends to nominate a third supervisory board member, in agreement with major shareholders including Elliott.  The hedge fund will back the appointment of new Akzo CEO Thierry Vanlancker to the board.  Elliott's campaign revolved around its desire for Akzo to participate in sale talks with PPG.  Akzo had rebuffed the offer, preferring its plan to boost dividend payouts and spin off its specialty-chemicals business, but the Elliott-led group argued Akzo could not make that decision until it first engaged with PPG.  Elliott had also sought the removal of Akzo Chairman Antony Burgmans as part of its plan to push for sale talks.  Last week, it lost a legal challenge to remove the executive at a shareholder meeting taking place in September, but the court left the door open for the hedge fund to pursue that goal in the future.

Elliott has elevated its stake in BHP Billiton's (BBL) London stock to 5%, empowering it to call a general meeting of British shareholders at any time.  Although the hedge fund continues to run its "Think Smart" campaign against BHP, it has displayed a more conciliatory attitude toward the resources giant of late, expressing "confidence" that Chairman-elect Ken MacKenzie is listening to shareholders.  Elliott acknowledged in a statement Wednesday that BHP appears to have taken good steps and indicated that it supports the continued progress.  "With new leadership, shareholders fully expect the true value of their company to be unlocked—something which we are confident BHP's chairman-elect has firmly in mind as he takes the reins," Elliott said.  "At the same time, our increased shareholding leaves us well placed to monitor BHP's progress and hold it accountable for delivering results."  The investor continues to push for BHP to sell its interests in the U.S. shale sector, review its larger petroleum business, improve capital returns through increased buybacks and dividends, and scrap its dual-listed company structure.  Although some expected Elliott to propose directors ahead of BHP's annual meeting later this year, that prospect may be fading.  Insiders said Elliott, which would need to nominate directors by Aug. 23, had not decided whether it would propose new candidates; and the fund was prepared to give MacKenzie time to renew the board.  Elliott's new ability to call a general meeting also reduces its need to propose directors as soon as next week.

Sabra Health Care REIT's (SBRA) proposed merger with another skilled nursing company, Care Capital Properties Inc. (CCP), won shareholder approval on Tuesday, receiving more than two-thirds of the votes.  The result is a blow for some Sabra shareholders—specifically hedge funds Eminence Capital LLC and Hudson Bay Capital Management LP—that had attempted to thwart the deal.  The investors, which own 3.9% and 3.4% of the real-estate investment trust, respectively, published open letters in July questioning the merger.  They warned that a major tenant of Care Capital—Signature Healthcare—is suffering financially and could file for bankruptcy protection.  Hudson Bay has also declared that Sabra CEO Richard Matros' incentives are not aligned with shareholders' interests, and that the proposed deal could inflate his compensation by an estimated 37%.  "We believe that Mr. Matros's annual bonus compensation structure is set up in a manner to potentially perversely incentivize him to do transactions like this one, which are focused on maximizing his annual bonus rather than maximizing shareholder value," Hudson Bay wrote to Sabra shareholders in July.  Proxy advisory firm Institutional Shareholder Services Inc. urged shareholders to vote against the deal, while Egan-Jones Proxy Services and Glass Lewis & Co. recommended voting for it.

EQT Corp. (EQT) reaffirmed its commitment to its proposed acquisition of Rice Energy (RICE) in response to a letter to the board of directors from Jana Partners LLC managing partner Barry Rosenstein calling for the deal to be rejected and criticizing the company's compensation structure. EQT called the $6.7 billion deal "an outstanding strategic and operational fit" in the best interests of shareholders. The deal could close in the fourth quarter. Rosenstein argued that the acquisition would allow EQT to make production-growth targets that it said was below previous projections. However, EQT said, "This compensation structure incentivizes management to act in a manner that will increase total shareholder return. At EQT's 2017 shareholder meeting, more than 98% of shareholders who voted approved the company's executive compensation program." Furthermore, Rosenstein questioned the independence of the EQT board, noting that one director had 20 years and another had 10 years.

Corvex Management has amassed a stake worth roughly $400 million in French yogurt maker Danone, which it reportedly considers to be greatly undervalued.  Corvex believes the stock—which is down about 5% over the last year—can recover if management strengthens operations and positions the business to benefit from the health and wellness trend, according to sources.  The fund currently has no plans to campaign for management changes or initiate a proxy fight, they said, although that could change.  Corvex's purchase would be its second high-profile European investment in as many months, after the investor boosted its stake in Clariant AG last month as part of an effort to derail its $6.7 billion takeover of Huntsman Corp. (HUN).  Danone previously came under pressure in 2012 from Nelson Peltz, who purchased a stake and lobbied for tighter cost control.  Meanwhile, activist investors are increasingly engaging European companies.  The longtime belief that Danone is immune from a take-out is no longer certain amid the shift in the French political landscape, according to Exane BNP Paribas analysts.  Third Point's announcement in June that it had bought a $3.5 billion stake in Nestle SA has shown that not even the region's biggest company is insulated.

The Tokyo Stock Exchange will intensify its role in Japan's push for better corporate governance by raising pressure on companies to admit how badly their boardrooms are haunted by corporate "ghosts." The move will call on companies to lay out what happens to their ranks of retiring top executives—a tier of management that very often stays on in an unofficial advisory capacity and can wield massive influence over corporate decision making. Analysts say that while these ghost directors can exert a positive influence on boards, the potentially adverse consequences through influencing business strategy or CEO succession planning—typically without any responsibility to shareholders—are substantial.

In an Aug. 14 filing with the Securities and Exchange Commission, William Ackman of Pershing Square Capital Management questioned whether Automatic Data Processing Inc. (ADP) CEO Carlos Rodriguez accurately portrayed their conversations to the company's board and shareholders, given a misfired email Rodriguez meant to send to his own legal team but delivered to Ackman instead. According to Ackman, whose firm owns an 8% stake in ADP, Rodriguez's email said he disregarded Ackman's statements about being open to working with current management because he did not find them credible. Last week, Pershing Square nominated three directors to ADP's board, including Ackman. In the filing, Pershing Square said it had been willing to work with Rodriguez, but Ackman is concerned that the CEO did not accurately convey his requests to the board before the directors rejected his request for time to negotiate. The sides have since scheduled a meeting for September.

Barry Rosenstein, founder and managing partner at Jana Partners, has come out against EQT's (EQT) proposed $6.7 billion acquisition of Rice Energy (RICE), accusing EQT of putting executive compensation ahead of shareholder value. The deal would create the nation's largest natural gas producer. Earlier this year, Rosenstein said it would cost more than the savings EQT would achieve by combining its exploration and production and pipelines businesses with Rice's operations. In an Aug. 14 letter to EQT's board filed with the Securities and Exchange Commission, Rosenstein alleged that EQT may be pursuing the "value-destructive acquisition" in order to enrich its executives. He wrote, "EQT's perverse compensation structure in fact incentivizes management to pursue this suboptimal, dilutive acquisition, no matter the cost to EQT shareholders." He claims the proposed deal would help EQT executives achieve the type of production growth they need to deliver in order to receive their maximum annual payout. Rosenstein, whose firm owns a 5.8% stake in EQT, believes that a spinoff of EQT's midstream business would better benefit shareholders but that management is opposed to this option because it would remove a "large, stable, and growing" driver of cash bonuses paid out to management for hitting annual earnings targets.

Corvex Management has threatened a proxy battle if Energen Corp. (EGN) did not agree to add the hedge fund's nominees to its board. Corvex was already the oil and gas producer's biggest shareholder when it boosted its stake to 10.1% and asked the company to expand its board from nine to 15 members and fill the new vacancies with the hedge fund's nominees. In case it could not reach an agreement with Energen, Corvex said it would seek a special shareholder meeting to approve the board expansion. The hedge fund first engaged Energen on May 31, calling for a potential sale of the company given the recent wave of acquisitions in the Permian Basin that have made its assets more valuable.

M&G Investment Management Ltd. on Monday pressed Canada's Gibson Energy to initiate a strategic review process to slash costs and improve returns. London-based M&G, Gibson Energy's top shareholder with a 19.4% stake, released an open letter outlining its views of the company and the steps it could take to maximize value, including being sold. The oil and gas infrastructure company has been suffering due to the extended slump in global crude prices. Its share price has fallen more than 55% since late 2014. M&G's letter said the fund had been trying to apply "significant pressure" on Gibson's management for over two years to drive change but it was disappointed by the pace of progress. "It is clear to us when we communicate with industry analysts, the company's competitive peer group, and other investors that there is confusion around the long-term strategy for the company," M&G Global Dividend Fund manager Stuart Rhodes wrote. The letter urged Gibson Energy to focus on its terminals in the Alberta storage hubs of Edmonton and Hardisty, and sell off its 19,000-barrel-per-day Moose Jaw, Saskatchewan, refinery, and all parts of its trucking business not associated with core assets. M&G said it also wants Gibson Energy to make progress in reducing its cost structure before beginning a strategic review process with the help of an independent investment bank.

Just 34% of shareholders in German pharmaceutical company Stada had accepted a takeover bid by Bain and Cinven as of Friday, far below the 63% needed by Wednesday to push the €4.1 billion deal through. The private equity firms narrowly missed the required acceptance threshold for an earlier offer, gathering support from 65.52% of investors, just below the 67.5% needed to seal the deal, which was a reduction from an earlier 75% threshold. A company spokesman said that the tender rate among retail investors—which own about a fourth of the company's shares—"is much lower than we expected," adding "it is now up to the hedge funds to make sure that the offer goes through." The extended process has been difficult for Stada, with the recent departures of senior executives including CEO Matthias Wiedenfels and CFO Helmut Kraft. The company was pressured into a shake-up by investors who have argued that Stada has underperformed compared to its peers and needs to develop a new culture in order to succeed on the international stage. The board is now worried it may face further disruption if shareholders decide not to accept the deal before the Aug. 16 deadline. Labor union IG BCE reportedly has said it will oppose any further takeover attempts if the current one fails.

John Menzies has canceled a proposed deal to sell its distribution branch to DX Group, marking a win for Gatemore Capital Management.  The investor has acquired a 20.3% stake in DX and has lobbied against the deal.  The announcement comes after a recent profit warning from DX made the proposed cash and share offer look less attractive.  "While the respective boards believed that the proposed combination had strong strategic logic for all stakeholders, the DX Board has been unable to agree suitable terms.  As a result, it believes it to be in the best interests of DX shareholders to proceed with business transformation on a standalone basis," DX said.  The company confirmed it is in advanced talks with various potential new appointments, including a proposed chairman-designate and three new non-executive directors.  The four prospective new board members were nominated by Gatemore.  "We are excited about the prospects for DX as a stand-alone company, especially under the leadership of the new board," said Gatemore CIO Liad Meidar.

Procter & Gamble (PG) is calling on its shareholders to vote in favor of all of the directors nominated to its board at its annual meeting and to reject an attempt by Trian Fund Management's Nelson Peltz to win a board seat.  P&G said in a letter to shareholders that Peltz launched the proxy fight to "satisfy his own agenda."  "You are being asked to choose between a Board and management team that are successfully executing a proven plan to build a better and more valuable company and Mr. Peltz, who has not offered any new, actionable ideas to deliver value beyond the plan that we already have in place," the letter stated.  "Mr. Peltz does not bring any new or needed skills to our Board.  We believe that adding him to the Board would derail the very significant value creation progress we are making."

Elliott Advisors has launched a counter-campaign against BHP Billiton (BBL) on billboards across Sydney, Melbourne, Brisbane, and Perth.  In a play on BHP's new "Think Big" advertising slogan, the investor has broadcast the words "Think Smart," and "Tell BHP it's time for CHANGE."  The move is Elliott's latest salvo in its attempt to get the world's largest mining company to switch its strategy.  Craig Evans of Sydney-based investment firm Tribeca backs Elliott's plan to engage retail investors with its billboards—one of which sits on a main road in Melbourne, in full view of BHP executives commuting to work.  "There's definitely an acknowledgement from investors that they're frustrated and would like to see something change," he says.  Elliott has met with fellow investors in Australia and won some public support from institutions that traditionally have aired concerns behind closed doors.  But Elliott's tactics have evolved, demonstrated by its shift from courting institutions to the Australian "armchair" investor.  BHP has roughly 600,000 retail shareholders in the country, some of whom are passionate defenders of their mining champion, and wary of what some have portrayed as a "vulture" fund.  Speculation is growing that Elliott—which owns 4.1% of BHP's London shares—will seek board representation, but it is unknown whether it can convince other shareholders that its interests align with theirs.  Elliott must decide by Aug. 23—the day after BHP reveals full-year results—whether to push for a nomination to the board.  It will need the support of 51% of investors to win a seat.

Ardent Leisure has added a new director to its board as it prepares for a proxy fight from minority shareholder Ariadne for four board seats.  The theme park and entertainment operator appointed Randy Garfield—formerly an executive at The Walt Disney Company (DIS)—as an independent non-executive director, effective Monday.  Ardent also appears ready to appoint a second U.S.-based director, saying the board was in advanced talks with another proposed appointment.  The moves come after Ardent CEO Simon Kelly told shareholders not to underestimate the potential of the company's U.S. business and defended the performance of Dreamworld, where four visitors died in an accident last year.  Ardent Chairman George Venardos said the appointment would add vital experience in global marketing, tourism, leisure, and sales operations.  He noted that Garfield's addition is "the first stage of our board renewal process and ensures a balanced board composition which appropriately reflects the geographic earnings of the business."  Dissident shareholders led by Ariadne are seeking four seats on the Ardent board at a Sept. 4 meeting.

Ardent Leisure said it is on the road to recovery, reporting that core earnings for the last financial year hit $76.1 million, above guidance of $73 million to $75 million. The theme park and entertainment operator took aim at a group of dissident shareholders led by Ariadne, with CEO Simon Kelly indicating that many of Ariadne's suggestions were more tactical than strategic and that he was focused on creating long-term value for investors. Regarding a plan from Ariadne that would expand Ardent's U.S. holdings before eventually spinning them off or selling them, Kelly said, "I'd be very concerned if they're giving up longer-term potential and value creation." Tensions between Ariadne and Ardent's board are heating up prior to a Sept. 4 meeting, at which Ariadne is seeking four board seats.

Sources say there are at least seven companies looking to buy renewable energy assets from NRG Energy Inc. (NRG): NextEra Energy Inc. (NEE), Global Infrastructure Partners, Blackstone Group LP (BX), GIC Pte, Borealis Infrastructure Management, John Hancock Life Insurance Co., and KKR & Co (KKR). NRG is under pressure from Paul Singer's Elliot Management Corp. to streamline. In response to calls from Elliott and Bluescape Energy Partners to sell assets, reduce debt, and cut costs, NRG is looking to divest as much as $4 billion of assets, including its stake in solar and wind farm owner NRG Yield Inc. However, the sources say a transaction may still be months away.

In an unprecedented move, Unifi Capital, a significant minority shareholder in Alembic Ltd., moved to appoint Murali Rajagopalachari to the board as a "small shareholders' director." However, in a filing to the Bombay Stock Exchange late Friday, the Alembic board rejected Unifi's application, citing "nexus and direct conflict" between Rajagopalachari—an employee of Unifi—its group companies, and 914 small shareholder applicants who together hold 3.75 lakh shares in Alembic. This warrants a closer examination of the nuances of this special minority right in the context of this Indian corporation with concentrated shareholdings. Alembic's complaints include allegations of conflict of interest. The board also questioned the genuineness of 320 out of the 914 small shareholders since these shareholders had only been "created" in the last five days before the application. Alembic accused Unifi of having misused Section 151 of the Companies Act, 2013 by manufacturing small shareholders to support the application. However, this requirement to establish genuineness goes beyond the mandate of Section 151 since unlike directors, who are shackled by fiduciary duties to the company, shareholders owe no duty to their fellow shareholders or the company. Finally, Alembic felt there is "no justification to appoint a small shareholders' independent director." While the jury is still out on the implications of Alembic's rejection, it remains to be seen whether Unifi will fire a legal salvo and challenge Alembic's decision. If litigated, the courts will have the unique opportunity to interpret Section 151, which will not only fill in some of the legislative gaps but also perhaps serve as guidance for activist investors.

Sources say the two-part sale of The Advisory Board Company (ABCO) could be announced as soon as next week, with a deal expected no later than the end of August.  Under the terms, Vista Equity would purchase The Advisory Board's education business for up to $1.5 billion and UnitedHealth (UNH) would acquire the healthcare division.  The total transaction is expected to be worth as much as $60 per share in cash to shareholders.  Negotiations are in the final stages, but a deal has not been finalized and talks could still break down.  In February, The Advisory Board declared it would explore strategic alternatives amid pressure from Elliott Management.  The company's second-quarter results showed strength in education but weakness in healthcare, prompting concern that UnitedHealth could balk, although there are no signs of that.  The complex structure of the deal was said to be causing the delay.  The Advisory Board Company said its strategic review continues but would not comment on the timing or potential price of a deal.

Christen Ager-Hanssen, who runs private equity firm Custos, purchased more than 5% of the debt-heavy publisher Johnston Press on Wednesday.  The move sent shares up 13% Thursday.  The Norwegian investor is dangling a lifeline to Johnston Press, planning to use its online audiences to kick-start new digital startups.  In an interview, Ager-Hanssen said he intends to increase his stake.  He also plans to refinance the £220 million bond debt casting a shadow over the future of the publisher, which is behind numerous local newspapers. Ager-Hanssen added that he plans to "take the initiative" ahead of U.S. hedge funds that have bought up Johnston Press' bonds at a discount.  Lenders led by GoldenTree Asset Management have been angling to take control of the publisher following an ongoing restructuring.  Credit ratings agencies say it will not be able to refinance its debts when they are due for repayment in 2019.  Ager-Hanssen said Johnston Press cash generation is "strong enough" to refinance the debt at an interest rate of only 3%, compared to the current rate of 8.6%.  He said he had investors prepared to take on the debt and that shareholders can maintain control of the company.  Ager-Hanssen declined to identify the would-be lenders or say whether he was working with Crystal Amber—Johnston Press's largest shareholder, with a 21% stake.

On Aug. 10, a Dutch court ruled that Akzo Nobel does not have to let shareholders vote on whether to dismiss its chairman. This marks a victory for the paint company in a battle with Elliott Advisors, its largest shareholder with a 9.5% stake. Elliott is seeking the dismissal of Akzo Chairman Antony Burgmans, holding him responsible for the company's rejection of a 26 billion euro ($30.5 billion) takeover proposal from U.S. rival PPG Industries (PPG) earlier this year. Elliott, along with York Capital Management, which holds a 0.6% stake in Akzo, petitioned the court to force the company to convene an extraordinary shareholders' meeting on Burgmans' dismissal. The Amsterdam district court said the request was premature, because Akzo already has an extraordinary shareholders' meeting scheduled for Sept. 8, which was called to better explain its reasons for rejecting the PPG bid and repair relations with disgruntled shareholders. "After that meeting it is up to shareholders to draw conclusions and possibly take further action," the court said.

In an Aug. 10 interview with CNBC, Automatic Data Processing Inc. (ADP) CEO Carlos Rodriguez took aim at investor William Ackman of Pershing Square Management, calling him a "spoiled brat" and deeming their interactions "baffling and surreal." Ackman built Pershing Square's 8% stake in ADP largely through derivatives, rather than common stock. The tensions between ADP and Ackman escalated when the investor asked the company to extend its director nomination deadline, which the board refused. Rodriguez said Ackman—whose hedge fund nominated three directors, including Ackman, to serve on the company's board—asked several times for extensions ranging from one week to 45 days. "It kind of reminds me a little bit of a spoiled brat in school asking a teacher for an extension on their homework," said Rodriguez. However, he indicated that he was "willing to listen" to Ackman and is in the process of scheduling a meeting with him for early September. Even so, Rodriguez contends that Ackman has yet to offer ideas to boost shareholder value and has relied on shoddy research.

Bain Capital and Cinven's second attempt to take over Stada Arzneimittel AG could fall apart unless investors shake off their complacency and tender more shares ahead of a make-or-break deadline next week. According to the bidders' proxy adviser, Georgeson, "There are a significant number of rumors and Chinese whispers circulating [about the volume of shares that need to be submitted]. A reduced number of acceptances this time round (given the summer holidays), the high number of passive holders that will do little or nothing and the excessive levels of borrow for your fancy back-end shenanigans leaves little room for error." Bain and Cinven said on Aug. 10 that their second attempt to buy the German drugmaker has been accepted by investors representing 31% of the shares. They need 63% of shares by midnight Frankfurt time on Aug. 16 for the deal to be successful. They missed the initial threshold by just 2% in June during their first offer. Stada shareholders have been offered 66.25 euros a share, or about 5.4 billion euros ($6.3 billion), for the company, up from the previous offer of 66 euros a share and representing a premium of nearly 50% from Stada's share price in December before talk of a takeover emerged. The first time around, about 16% of retail investors refused to sell their shares, but Bain and Cinven hope to rally shareholders this time through online ads targeting retail investors. Meanwhile, Elliott Management Corp. has built a stake in Stada, having bought up shares as the initial tender offer started to unravel.

Regulatory delays have caused hedge fund manager Crispin Odey to rethink his support for Twenty-First Century Fox's (FOXA) attempt to take over Sky, saying the £11.7 billion ($15.20 billion) offer undervalues the British pay TV broadcaster.  Odey's change of heart comes as Rupert Murdoch's attempt to take full control of Sky faces more delay, after the British government said Tuesday it had asked communications regulator Ofcom to re-examine the deal.  "The truth is, the longer this goes on the more that I would be quite happy if it failed," Odey told Reuters, adding that Fox is "getting it at what now looks like quite a cheap price."  Odey, whose 1% interest makes him Sky's 15th-largest shareholder, originally said he would back Fox's bid for the 61% of Sky it does not already own.  His view of the deal is changing, however, because he believed Sky's prospects were improving.  Sky shares dropped Tuesday following the announcement that Ofcom had been asked to do more analysis on the deal, closing Wednesday at the lowest level since news of the deal broke in December. A source close to Sky said that at the current share price, Fox's offer remained competitive, but also acknowledged that the longer the deal takes the higher the risk that shareholders may change their views on the valuation.

A shareholder's bid to roll the board at Conroy Gold could end in a stalemate.  Patrick O'Sullivan, who owns a 28% stake in the business, has successfully unseated six of the company's directors.  However, he was thwarted in his attempt to have himself and two other nominees elected in their stead, in a move that is still steeped in controversy.  The motions for their election were put to a vote at last week's extraordinary general meeting, only for founder and Chairman Richard Conroy to rule, on legal advice, that they were of no effect.  This action has yet to be explained and may be taken up in the courts.  O'Sullivan is now seeking the removal of Conroy himself and his managing director, Maureen Jones.  His argument throughout has been that the current board is unable to advance the best interest of the company and needs greater expertise to raise the funds necessary for further exploration at its sites in Northern Ireland and Finland.  But he may be in danger of moving so dramatically that he undermines what he hopes to achieve.  Conroy is the founder of the company and it is arguable that much of the support from shareholders and other funders is due in large part to him.  Ousting him from the board could prove a pyrrhic victory for O'Sullivan.  Despite his significant stake, targeting Conroy could actually help the embattled chairman secure support from other investors.

BHP Billiton Ltd. (BBL) has launched a new TV advertisement in the latest part of its "Think Big" advertising campaign, with the goal of directly targeting millions of superannuation investors. The star of the TV spot is a BHP worker who says: "If you have money in a super fund, chances are you have money in BHP." As the camera later pans over suburban households, text on the screen says "over one in three Australians have BHP shares in their super fund." The BHP worker then says: "So while you're planning where you want to be in 10, 20, 30 years from now, so are we." The latest advertisement in the $10 million "Think Big" campaign comes amid the contest for the loyalties of BHP shareholders, as the company attempts to ward off Elliott Management, which is campaigning for an overhaul of BHP and has actively courted retail investors. Elliott wants BHP to end the dual-listed company structure; a "unified BHP—incorporated, headquartered, and listed in Australia;" and improved dividend returns. The Think Big advertising campaign has been described by company leaders as BHP's first significant advertising campaign in about 30 years. The latest BHP advertising theme will also emerge in newspaper and digital advertisements next week. BHP closed 11¢ higher on Wednesday, at $26.21, continuing its upward trajectory of the past seven weeks.

On June 6, shareholders of General Motors (GM) voted overwhelmingly against hedge fund billionaire David Einhorn's push for a dual-class common stock structure, with 91% of the votes cast against the proposal. The shares cast by Einhorn's Greenlight Capital were just about the only votes in favor of the proposal, as 96% of non-Greenlight votes cast rejected it. Einhorn's efforts to get three directors on GM's board also were unsuccessful, with shareholders electing all 11 of GM's board nominees, who received between 84% and 99% of the votes cast. "We are disappointed that shareholders have elected to maintain the status quo," Einhorn said in a statement. "We congratulate GM's management on their win today."

On June 6, shareholders of General Motors (GM) voted overwhelmingly against hedge fund billionaire David Einhorn's push for a dual-class common stock structure, with 91% of the votes cast against the proposal. The shares cast by Einhorn's Greenlight Capital were just about the only votes in favor of the proposal, as 96% of non-Greenlight votes cast rejected it. Einhorn's efforts to get three directors on GM's board also were unsuccessful, with shareholders electing all 11 of GM's board nominees, who received between 84% and 99% of the votes cast. "We are disappointed that shareholders have elected to maintain the status quo," Einhorn said in a statement. "We congratulate GM's management on their win today."

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The Battle Between Elliott and Arconic Reveals a Hidden Corporate Governance Risk
" Forbes (08/18/17) Shah, Alap"

The battle earlier this year between Elliott Management and Arconic (ARNC) revealed a corporate governance risk involving a hidden pension liability that takes effect upon a change in control. In April, Arconic filed an 8K, which include an "Amendment and Restatement of the Trust Agreement Between Mellon Bank N.A. and Alcoa Inc." dated Sept. 24, 2007. This document showed that Arconic would take on a massive pension liability that would lower its value in the event of a "change in control." Such a change in control could have been triggered by Elliott's attempt to influence the company and nominate new independent directors, hurting shareholder value to the tune of $500 million. The move was considered a poison put because it would bring forward an outstanding liability and add significant cost to the company. Rather than sell its shares, Elliott filed a DFAN14A (a non-management proxy solicitation) indicating that Arconic breached its fiduciary duty "by concealing [the trust agreement] from shareholders until it was triggered," likely in violation of federal securities laws. Other public companies could have similar skeletons in their closets of which shareholders, proxy advisory firms, and corporate governance watchdogs are unaware, presenting a potential risk for all investors.

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More Investors Are Saying 'No' to Exorbitant Executive Pay Plans
" Bloomberg (08/17/17) Melin, Anders; Zhao, Jenn"

U.S. investors are becoming more likely to vote against executive compensation plans.  In the most recent fiscal year, seven S&P 500 companies won less than 50% of the votes for their executive-pay plans, up from six in 2015 and four in 2014, according to data compiled by Bloomberg.  Many of the biggest institutional investors have become more vocal about corporate governance in recent years and taken stronger stances on excessive pay plans.  BlackRock Inc., the world's largest asset manager, made the unusual move in June of publicly criticizing drugmaker Mylan (MYL) for failing to address investors' repeated complaints about executive compensation.  "If the vote is lost, it means the company has not made that phone call to investors, and if it did, it didn't listen to what they said," said Anne Simpson, head of corporate governance at California Public Employees' Retirement System.  Low say-on-pay votes typically prompt boards to reach out to shareholders about their concerns in order to deflect potential activist campaigns or negative publicity.  Mylan received less than 17% support, the lowest vote tally in S&P 500 for the past three years, after it awarded Chairman Robert Coury a $97.6 million reported pay package.  About four of every five companies in the S&P 500 received at least 90% support for the most recent fiscal year, according to Bloomberg.  Among publicly traded companies whose executives appear on the Bloomberg Pay Index, which ranks the 200 highest-paid managers, seven failed to land majority backing for their compensation plans.

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Corporate Gender Equality: Why Boards Need More Women to Make More Money
" Australian Broadcasting Corp. News (08/17/17) Taylor, David"

Australia is getting closer to corporate gender equality, but it is not quite there yet. Women on average represent 25% of all board positions, and experts say that once 30% of board representation is reached, gender equality on ASX boards will only be a matter of time. There is still a glass ceiling in corporate Australia despite research showing the benefit of having female appointees. For example, companies with the largest market capitalizations have the highest proportion of female board members, according to a gender diversity progress report by the Australian Institute of Company Directors. In addition, a recent study by international accounting firm PwC shows that women bring skills to a board that an all-male slate will likely lack. For example, the study notes that among Australia's biggest companies, "there are more female board members with sales and marketing and consulting experience than male board members" with those skills. Since research shows that women add significant value to companies at the board level, it can be concluded that the more diversity achieved the better for the economy as a whole.

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Canadian Shareholder Proposals Help Lead Governance Innovations
" Globe and Mail (08/16/17) Cook, Jackie; Thomas, Kevin"

The idea of proxy access—and shareholder democracy as a whole—is growing in Canada, but not so much in Alberta, write two members of the Shareholder Association for Research and Education (SHARE), a Canadian leader in responsible investment services, research, and education. 2017's most notable shareholder proposals asked Toronto-Dominion Bank and Royal Bank of Canada to voluntarily adopt a proxy access bylaw that would enable shareholders to nominate candidates for the board. Those proposals received a 52.2% and 47% vote in favor, respectively. Yet in Alberta, current regulations prevent shareholders who hold less than 5% of a company's shares from filing a proposal. That is a very high threshold, the authors write. A shareholder would have to own more than $2 billion worth of shares to file a proposal at Canadian Natural Resources Ltd., for example, solely because it is incorporated in Alberta. Everywhere else in North America, they would only need to own $2,000 worth of shares. At least 69 shareholder proposals were filed at Canadian companies this year. Two-thirds raised governance concerns, while a third brought forward environmental and social concerns. Both types received strong support. The shareholder proposal process is a key part of good corporate governance in Canada, and is helping to drive important changes in the rest of North America. "If companies incorporated in Alberta want to keep up, the regulatory barriers to filing shareholder proposals in Alberta must come down," the authors write.

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The Morning Risk Report: Proxy Access to Remain Topical in Coming Years
" Wall Street Journal (08/17/17) Lemos Stein, Mara"

Proxy access will remain relevant in coming years as shareholders continue to push for the right to nominate directors, governance specialists say.  Proxy access has been a top governance issue at U.S. companies' annual general meetings for several years, gaining momentum in late 2014 when the New York City Comptroller and other investors filed proposals at 75 companies simultaneously.  By mid-2017, more than 60% of S&P 500 companies had implemented proxy access—which typically enables shareholders owning at least 3% of the stock for at least three years, in a group of 20 holders at most, to nominate two directors or 20% of the board seats.  In a June report, Marc Gerber of Skadden Arps Slate Meagher & Flom LLP predicted that more than 75% of companies will have adopted proxy access by early 2018.  Many companies have received approval from the Securities and Exchange Commission to exclude proposals seeking to increase the aggregation limit, with the regulator deeming the companies to have "substantially implemented" the proposals. The watchdog recently denied a request, however, for exclusion of a proposal seeking an unlimited cap on the number of shareholders forming the group with a 3% stake.  Governance experts to see more such proposals.  And as shareholders win the right to nominate directors, they are yet to exercise it.  "The circumstances that will trigger investors to utilize proxy access, and the potential for success of such a contest, remain questions for future proxy seasons," according to Gerber.

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Elliott Makes Its $33 Billion Presence Felt in Europe
" Bloomberg (08/16/17) Baigorri, Manuel; Kumar, Nishant"

Paul Singer's Elliott Management Corp. is making its presence felt in Europe. This week, the hedge fund has increased its holding in the London-traded shares of BHP Billiton Ltd. (BBL) from 4.1% in April to 5%; agreed to end its legal fight with Akzo Nobel NV after months of disagreement over strategic direction; and could serve as the key to whether a takeover offer for Stada Arzneimittel AG, in which it holds an 8.7% stake, is successful. According to Musst Investments LLP founder Saleem Siddiqi, "Paul Singer is old school—a smart, value-based, hard-nosed investor who has staying power. This allows him to tackle complex situations others may not." Activist Insight reports that the number of European companies engaged by activist investors more than doubled from 2013 to 2016, and companies with a market value of more than $10 billion account for 27%. "Stars are continuing to align in Europe [for activists]," said Jim McNally, a partner at law firm Schulte Roth & Zabel LLP. "Having seen some of their brethren do well in Europe, U.S. investors are now starting to think and look a bit closer." Christopher Sullivan, a partner and M&A specialist at law firm Clifford Chance, added, "Elliott is the standard bearer for activism in Europe importing the tactics we have seen from the U.S. We expect that others will seek to replicate the approach and boards must be prepared."

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Icahn and Starboard's Auto-Parts Retailer Bets Are Taking a Hit Thanks to Amazon
" Bloomberg (08/16/17) Coppola, Gabrielle; Deveau, Scott"

Starboard Value LP and Carl Icahn's investments in auto-parts retailers are taking hits, a situation compounded by Inc. (AMZN). When Starboard revealed a stake in Advance Auto Parts Inc. (AAP) in 2015, it said the stock, then at $171, could more than double. The retailer's shares have instead nearly halved since then, after warning weak sales will continue. Advance Auto's peers, O'Reilly Automotive Inc. (ORLY) and AutoZone Inc. (AZO), have also plummeted this year amid disappointing demand. Perhaps the biggest thing weighing on the shares is Amazon, which shocked the retail industry in June with its $13.7 billion acquisition of Whole Foods Market Inc. (WFM). The company has also been making progress with autos, launching a car-research site and a parts marketplace last year. While car-part distributors are more insulated from e-commerce than other retailers, they are not invincible. "We fear an increased level of price transparency—these companies either more aggressively price or promote their products to drive the same level of sales growth," Seth Basham, an analyst at Wedbush Securities, said of the auto-parts retailers. "I don't think it's a primary driver of what's been hurting same-store sales in the industry this year, but that doesn't mean there can't be a bigger impact going forward." Meanwhile, Starboard's view is that Amazon is a mild headwind—at most—to the industry, a source said. The hedge fund is pleased with Advance Auto's efforts to reduce costs and strengthen its online presence and sees earnings improving early next year, said the source.

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Ex-Nomura Man Exiled in Chicago Goes Hostile at Tiny Japan Firms
" Bloomberg (08/15/17) Redmond, Tom; Sano, Nao"

Former Nomura Holdings Inc. salesman Masakazu Hosomizu is bringing activist investing to Japan's smaller listed firms, believing that the country's corporate governance revamp is trickling down to less-covered parts of the market.  Hosomizu, who is based in Chicago and employed by RMB Capital Management, works to convince small and microcap stocks with large cash holdings to improve how they use capital and operate their businesses.  If they ignore his prescriptions, he initiates hostile moves.  His success over the last two years has been mixed.  Although his brand of activism is not unique, it is unusual for a large U.S. money manager to concentrate on Japanese stocks that are so tiny that they are rarely attract the attention of analysts.  That is partly due to Hosomizu's unusual past but also is another sign of how Japan's rewritten rules for companies and investors have encouraged shareholders to collaborate more closely with executives.  "We are very bullish on the corporate governance changes," Hosomizu says.  "We think it's different this time."  In June, shareholders of both Faith Inc. and Nippon Columbia Co. approved Faith's offer to purchase the remainder of Nippon Columbia through a share exchange.  That took effect Aug. 1, after a months-long public fight with Hosomizu.  RMB Capital, which was one of the biggest equity holders in both Faith and Nippon Columbia, started publicly opposing the acquisition terms in April, citing a low valuation.  Institutional Shareholder Services Inc. also opposed the takeover.  Hosomizu's efforts were unsuccessful, but he says he is not done with the investments.

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Contagious Shareholder Dissent Over Executive Pay Is Spreading From FTSE 100 Companies to Smaller Peers
" City A.M. (08/16/16) White, Lucy"

Shareholder dissent regarding executive compensation is increasingly becoming an issue at smaller U.K. companies, according to the Investment Association, an investment manager trade body.  The group's research reveals a 100% increase over the past year in the number of FTSE 250 companies that received 20% or more of votes against their remuneration resolutions.  Meanwhile, the FTSE 350 reflects a similar pattern, as companies overall saw a 400% surge in votes against the re-election of a director.  "It's good to see that shareholders have noticed these issues," says Sarah Wilson, CEO of shareholder governance and sustainability research group Manifest.  "We have been saying that if small cap companies get engagement right, it will be a good thing as they grow."  However, Wilson notes that the notion that executive pay issues have been addressed in FTSE 100 companies may be an illusion.  Manifest data reveals that a record number of resolutions were withdrawn this year before being put to the vote—meaning that shareholders may never have had the chance to voice any opposition.  For their part, some institutional investors argue that boards have taken the "bare minimum" of action to avoid negative votes, according to Stefan Stern at The High Pay Centre, a think tank.  "It would be unwise to take one year's show of belated and modest restraint as a sign that the system on top pay is working.  It clearly isn't," Stern notes.  "There has to be continued pressure from both shareholders and government to improve the situation where top pay still soars above that of everybody else, where tiny or non-existent pay rises are the norm."

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Why Forward-Thinking Companies Put Marketers on Their Boards
" (08/15/17) Hatch, Alicia"

More and more corporate directors are recognizing that to compete in a customer-driven world, marketers will have to play a more strategic role in the boardroom to help steer organizations through the "shift to customer-centricity." There are three key reasons why companies need to bring more marketing perspectives to their board.  One, customer-centric companies are proven winners, and marketing is the center of customer intelligence.  Two, including marketing in the boardroom improves diversity of perspective—from competency to gender to race.  Finally, companies with marketing representation on boards generally perform better.  As marketing has become more data-driven, and the rate of change so fast, marketers are showing they can generate the critical insights needed to help a company turn itself around, see new opportunities, and execute strategically in a way that customers will respond to.

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Blog: CII Updates Its Best Practices for Proxy Access
" JDSupra (08/15/17) Posner, Cydney"

The Council of Institutional Investors (CII) has updated its best practices guide from 2015. The latest update addresses practices that CII views as impairing the ability of shareholders to use proxy access. CII's basic policy on proxy access advocates a 3% ownership threshold and minimum two-year holding period for eligibility and the right to elect up to but less than a majority of the board, and it has expanded this policy to mandate equal space and treatment in proxy materials for proxy access nominees and adherence by nominating shareholders "to the same [Securities and Exchange Commission] rules governing disclosure requirements and prohibitions on false and misleading statements that currently apply to proxy contests for board seats." Among other things, CII acknowledges that three years is now the market standard, though its policy supports a two-year holding period; does not support caps on aggregation to meet the ownership threshold but recognizes that a 20-shareholder cap is the market standard; indicates that directors who were previously elected through proxy access should not count against the limitation on proxy access nominees even if they are still on the board "unless proxy access nominees from the current and previous two annual meetings would constitute a majority of the board"; and opposes automatic suspension of proxy access in the event of a proxy contest, except that a shareholder group may be barred from waging a proxy contest and, at the same time, using proxy access.

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Communist Party Gets More Involved in Hong Kong Corporate Governance
" Wall Street Journal (08/14/17) Hunter, Gregor Stuart; Russolillo, Steven"

A push to establish the Communist Party in Chinese state enterprises is rolling through Hong Kong, raising corporate-governance concerns in one of the year's best-performing stock markets. Since 2016, at least 32 Chinese state-owned companies or units listed in Hong Kong have proposed changes to their corporate structures to install Communist Party committees that advise their boards of directors. The moves are prompting questions from market participants about who holds power at these companies, and whether they will be run for the benefit of investors. The changes follow directives from Beijing, which has been pushing to establish the Communist Party's role in corporate charters on the mainland.

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Focus: Proxy Disputes Alive and Well in Canada
" Law Times (08/14/2017) McKiernan, Michael"

DLA Piper Toronto office partner Derek Bell is skeptical about the effectiveness of proxy access bylaws for shareholders seeking to exert more influence over a company. The first Canadian shareholder proposals for the adoption of proxy access bylaws were seen at the annual general meetings of Toronto-Dominion Bank and the Royal Bank of Canada this spring. The proxy access bylaws would enable shareholder-nominated candidates to appear in a company's proxy circular alongside the management slate for election to the board of directors. "Even in the U.S., where these proposals have been all the rage and adopted in many cases, they don't tend to be very robust, and, generally, attempts to make them stronger have not been successful," Bell says. Under the proposed bylaws, those wishing to take advantage of them would need the support of at least 5% of shareholders to get their nominees listed for election, and for the Canadian banks, that threshold could be met only by a group of shareholders with a holding of around $4 billion. "If you've got that kind of interest in a company, and you want to make a meaningful change to the board, you're not going to limp in with some proposal buried in a management information circular. Proxy disputes are alive and well in Canada. I'm just not sure proxy access will ever by the chosen path for anyone to get on the board," Bell says. Patricia Olasker of Davies Ward Phillips & Vineberg LLP adds, "For activist or engaged professional investors, there are other, more effective ways to change the board."

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Asset Managers Support Shareholder Proposals for Board Diversity—Will It Make a Difference?
" Cooley PubCo (08/08/17) Posner, Cydney"

Some of the biggest asset managers are making board diversity a priority. BlackRock (BLK), for example, in the second quarter supported eight out of nine shareholder proposals that called for the adoption of a policy on board diversity or disclosure around efforts to boost board diversity; BlackRock has been particularly focused on gender diversity. Most of the companies in question did not have any women on their boards. BlackRock was told by one company that the company was finding it difficult to come up with a diverse slate; another company appeared to make efforts to address the issue, but would not commit to a firm timeline. BlackRock voted against the nominating committee members at five of the companies "for failure to address investor concerns on board diversity." According to data reviewed by 2020 Women on Boards, gender diversity is a particular concern at companies conducting initial public offerings (IPOs). Between 2014 and 2016, 75% of companies with the biggest IPOs went public with one or no women on their boards. Although some of the companies addressed the issue following their IPO, two years after going public, two-thirds of the companies still had only one or no women on their boards. BlackRock says board gender diversity "is important from a sustainable investment perspective given that diverse groups have been demonstrated to make better decisions. In the board context, this appears to be because they are better able to consider, where appropriate, alternatives to current strategies—a proposition that can ultimately lead to sustained value creation over the long term." Meanwhile, Bloomberg has stated that "[c]ompanies with at least one female director had better returns for six straight years … . [T]here's a pile of research showing that boards and other leadership panels with 50% women think more critically, which may explain the better results. Group dynamics change for the better when both sexes are present. Diverse groups solve problems better than homogeneous ones do, possibly because the men and women monitor each other's performance more closely."

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Japan's Corporate Governance Stymies Sustainable Investing
" Financial Times (08/13/17) Benes, Nicholas"

Japan's investing institutions are in an initial fad stage of integrating environmental, social, and governance (ESG) factors into their investment analysis. However, all the excitement may end up as little more than "greenwashing" that does not increase sustainability and profits because Japan has begun its ESG road trip but the corporate governance driver is still largely asleep at the wheel. Japan's massive national pension fund, the GPIF, is doing its part. In its recently announced stewardship principles, it mentioned "the corporate governance codes of different countries" for the first time, and asked its asset managers to vote shares in line with the principles of those codes. The problem is in the private sector. Although hundreds of institutions (mainly fund managers) have signed the voluntary stewardship code, the signatory list includes only one non-financial corporate pension plan. Such "asset owner" investors are among the biggest customers of fund managers and, as such, can most influence their analysis, engagement, and proxy voting practices by switching funds to the managers who are most dedicated.

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Vanguard Seeks Corporate Disclosure on Risks From Climate Change
" Reuters (08/14/17) Kerber, Ross"

Vanguard Group announced Monday it has asked companies to disclose how climate change could affect their business and asset valuations. Under pressure from shareholders, Vanguard and other fund companies have pushed to pass several high-profile shareholder resolutions on climate risk at major energy firms like Exxon Mobil Corp. (XOM) and Occidental Petroleum Corp. (OXY) during the spring proxy season. Vanguard, the biggest U.S. mutual fund firm by assets, is often the top shareholder in big U.S. companies through its massive index funds—giving it an important voice in setting corporate agendas. Vanguard had not backed climate activists on similar measures. But Glenn Booraem, Vanguard's investment stewardship officer, said in an interview Monday that the issue as well as shareholder proposals have evolved. "Our support for these proposals is not a matter of ideology, it's a matter of economics," he said. "To the extent there are significant risks to a company's long-term value proposition, we want to make sure there is long-term disclosure of those risks to the market." Vanguard earlier this year adjusted its proxy voting policies to give more leeway to support resolutions related to climate risk, but until now it has given few details about its thinking unlike competitors State Street Corp. (STT) or BlackRock Inc. (BLK). Vanguard also plans to disclose more details about its discussions with companies on issues such as gender diversity on corporate boards. Booraem warned that Vanguard's overall voting would not change much from the past. The firm did not back any climate resolutions last year and backed only a few this year. Funds run by State Street backed climate resolutions about half the time last year, according to Proxy Insight.

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Akzo and Elliott are Trapped in a Lose-Lose Battle
" Reuters (08/11/17) Storbeck, Olaf"

A battle between Akzo Nobel and Elliott Advisors, its largest shareholder with a 9.5% stake, has reached a point where neither side can win. Yet the fight risks dragging on beyond a shareholder meeting next month and could wreak unnecessary damage on the company and shareholders alike. So far, the company appears to be winning. A Dutch court on Thursday ruled that Elliott's request for an extraordinary shareholder meeting to vote on the issue was premature. One reason was that the company will hold an EGM anyway on Sept. 8. But that meeting—called to seek support for new CEO Thierry Vanlancker—was timed so that shareholders were unable to table a vote on ousting the chairman. Frustrated investors could humiliate Chairman Antony Burgmans by voting against Vanlancker. But the tactic could backfire by undermining Akzo's leadership at a time when strong leadership is needed to carve out its specialty chemicals division and meet ambitious 2020 margin targets. Or shareholders might request a separate EGM on Burgmans' future right after the Sept. 8 meeting. If Akzo were to reject such a call, Elliott could return to the courts. The problem is that a legal decision may not be made much before April 2018—around the time Burgmans' term runs out anyway. Both sides have an interest to end this lose-lose battle. An easy concession would be to publish classified reports by Lazard and HSBC which assessed the consequences of a potential merger with PPG Industries Inc. (PPG). Vanlancker could also push the board to name a credible successor for Burgmans in the coming weeks, and then convince the 70-year-old to resign by the end of this year—making peace with Elliott while helping Burgmans avoid the humiliation of being fired at the end of his career.

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Will Shareholders Vote 'Yes' on the Proposed EQT-Rice Merger?
" Seeking Alpha (08/10/17) Zeits, Richard"

A month ago, JANA Partners' campaign to thwart EQT Corporation's (EQT) acquisition of Rice Energy (RICE) was looking like a fail, according to Seeking Alpha writers.  "We noted that the initial reaction by the arbitrage community to JANA's 13D activist filing, which led to a six-fold widening in the 'deal spread,' was exaggerated and created a differential return opportunity," they write. Although the "deal spread" has closed significantly in recent weeks, it still appears unusually wide, given the circumstances.  EQT and Rice announced their merger plans June 19; and on July 3, JANA revealed a 5.8% stake in EQT and urged the company to instead pursue a rapid separation of its upstream and midstream businesses.  In response to the 13D filing, the merger arbitrage spread skyrocketed from about $0.35 per Rice share to as much as $1.93.  The Seeking Alpha writers say that in their opinion, JANA was highly unlikely to rally EQT shareholders against the deal.  Thus, the unusually wide merger arbitrage spread appeared to represent a knee-jerk panic and was set to shrink significantly once the market had a chance to better examine the situation.  "So far, our expectation has been on target," they write.  "The merger arbitrage spread has contracted from almost $2 per RICE share immediately following the initial 13D filing to about $1 per RICE share currently."  EQT's institutional investors deciding whether to vote for or against the merger are likely to take a conservative approach: if the stock is outperforming by a wide margin after the announcement of the merger, why take the risk of voting "no?"  At the same time, many EQT shareholders likely welcome JANA's initiatives and may even be counting on the fund's continued efforts as a source of the stock's differential performance.

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With 'Zombie' Directors, It's the Board of the Living Dead
" Bloomberg (08/10/17) Green, Jeff; Ritcey, Alicia"

From 2012 to 2016 there were a total of 225 instances where directors of public companies got less than half the shareholder votes cast in elections, but only 20% left within the next election cycle, according to a Bloomberg analysis of data from ISS Corporate Solutions Inc. The directors who stayed included 30 who were rejected by shareholders more than once. Nell Minow, an expert on corporate governance, calls these board members "zombie directors." Too many companies "pretend there is this right to replace the board when they don't represent the interest of the shareholders" but do not follow through, says Minow, vice chair at ValueEdge Advisors. As recently as 2011, a majority of directors were elected with a standard known as plurality—meaning they needed more votes than any other candidate. Since board members often run unopposed, just one positive vote could be enough. In response to investor and activist complaints, companies have been agreeing to new standards under which directors who do not receive a majority of votes have to submit a letter of resignation. Currently, 54% of companies require a director to do so. However, the board usually is not required to accept those resignations and can reinstate the unelected director. Since 2012, that has happened five times for John Yearwood, the lead director at oil and gas driller Nabors Industries Ltd. (NBR), and four times for his fellow board member Michael Linn. The directors reviewed the voting results and chose not to accept the resignations, citing their colleagues' value to the company, according to regulatory filings.

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Hedge Funds Target Bigger and Bigger US Companies in Year of the 'Super Campaign'
" CNBC News (08/09/17) Moyer, Liz"

Through the first and second quarters of this year, there was a 66% spike in the number of activist campaigns engaging companies with market values of $10 billion or more, according to research firm Acuris. Among the companies caught up in the activism so far this year are General Motors (GM), Procter & Gamble (PG), and Whole Foods (WFM), along with funds run by some of Wall Street's most prominent investors like Nelson Peltz of Trian Partners. The number of campaigns started at firms with market values greater than $5 billion also soared 70%. "The biggest grievance—reflected in 36% of the activist demands—was related to a company's board composition," Acuris said. Other popular demands included changes to a company's corporate governance (22.6% ) and cost cutting (14.5%).

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Say-on-Pay Votes Changed to Annually From Triennially at 146 Companies
" Pensions & Investments (08/09/17) Kozlowski, Rob"

After shareholders voted to change the frequency of executive compensation votes to once every year from once every three years, 146 companies in the Russell 3000 adopted the change, according to investment consulting firm Segal Marco Advisors, which coordinated a say-on-pay investor working group promoting more frequent votes.  The investor group had found that 319 Russell 3000 firms conducted say-on-pay votes on only a triennial basis. This prompted the group's members to urge those companies' boards of directors to endorse executive compensation votes on a yearly basis during 2017, when most companies hold shareholder votes on how frequently they wish to vote on say on pay.  Of the 319 firms contacted, 146 switched to a yearly frequency, 127 remained triennial, and the remaining 46 companies did not have a say-on-pay frequency vote.

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