13D Monitor Real-time Activist Newsfeed


P&G Fires Back as Proxy Advisory Firm Endorses Peltz
" Cincinnati Business Courier (09/22/17) Brunsman, Barrett J."

Procter & Gamble Co. (PG) is questioning Glass Lewis & Co.'s analysis, following the proxy advisory firm's endorsement of Nelson Peltz's efforts to be elected to the consumer product company's board. Peltz's Trian Fund Management has a $3.5 billion stake in P&G. "Glass Lewis fails to recognize that P&G has delivered consistently strong operating results over the last five years, excluding the effects of currency, while executing its transformation of the company," P&G said. "P&G has delivered constant currency core earnings per share of 11% on average." Glass Lewis recommends that shareholders vote for Peltz, who has vowed to shake up the company if elected to the board. "In lieu of leveraging P&G's scale to aggressively pursue compelling growth opportunities and meaningfully streamlined architecture, investors have been offered a nearly perpetual series of half-step rebuilds," Glass Lewis stated in a press release issued early on Sept. 22 by Trian. "While P&G is quick to point to the company's existing restructuring effort, we consider there are relatively few decisively favorable metrics on which the board can hang its hat with confidence. In contrast, we find Trian more readily identifies a number of problematic trends—from (total shareholder return) to operational growth metrics to market share—that suggest P&G's existing trajectory is less than attractive." P&G says it has delivered total shareholder return of 28% since David Taylor became CEO in late 2015.

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Sale Fuels $3bn Rio Tinto Payday as Cashed-up Miner Shares the Wealth
" Herald Sun (Australia) (09/22/17) Dagge, John"

Rio Tinto has entered into its largest share buyback since the apex of the mining boom as it returns $3.1 billion to shareholders. The mining company said its third buyback of the year will be funded from the sale of its New South Wales coal business. The buyback follows resources companies coming under ongoing criticism from some of the world's largest investors for spending too much money on failed projects. Seperately, rating agency Fitch said BHP's decision to sell its U.S. shale division, as well as the engagement by Elliott Management, has weighed on BHP's credit rating. Fitch reaffirmed its A+ rating but maintained its negative outlook, noting that the sale of the company's U.S. shale division would remove "a material portion" of its expected future growth in petroleum.

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GE Nears Sale of Its Industrial Unit to ABB
" Reuters (09/22/17)"

General Electric Co. (GE) is reportedly nearing a deal to sell its industrial solutions unit to Swiss engineering company ABB Ltd. (ADR) in a deal valued at $2.5 billion to $3 billion. The companies are said to be likely to announce an agreement by next week. GE resumed negotiations to sell its industrial solutions business to ABB after John Flannery, who became CEO in August, decided to continue to divest the industrial conglomerate's non-core assets. GE has been reviewing its portfolio after divesting its finance, appliances and NBCUniversal units in recent years. The company has also been under pressure from Nelson Peltz's hedge fund Trian Fund Management LP to cut costs and focus on its core industrial businesses.

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Tiffany Names Roger Farah as Chairman in Latest Management Shakeup
" Reuters (09/21/17) Sampath, Uday"

Tiffany & Co. (TIF) on Sept. 21 named Roger Farah chairman, as part of an ongoing shakeup where outsiders have been hired to revitalize the jeweler.  Farah, who has previous experience in the luxury brand market, is one of three directors the iconic company agreed to add to its board following a campaign by Jana Partners in February.  Jana has a 4.47% stake and is Tiffany's third-largest shareholder, according to Thomson Reuters information.  In July, it named former Bulgari SpA executive Alessandro Bogliolo as CEO.  Farah will replace Michael Kowalski, who will stay on as a director.

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P&G Shareholders Should Vote Peltz to Board, Glass Lewis Says
" Reuters (09/22/17) Ganesan, Gayathree"

Glass Lewis & Co. LLC has advised Procter & Gamble (PG) shareholders to vote in favor of adding Trian Fund Management LP's Nelson Peltz to the board of directors, due to his experience in the packaged goods and consumer brands industries.  "We believe investors have been afforded ample cause to support Mr. Peltz's election at this time," Glass Lewis said in a statement issued by the hedge fund.  Trian revealed a $3.5 billion holding in P&G earlier in 2017.  Its engagement with P&G is the biggest proxy fight ever waged against the consumer products giant.  P&G on Friday expressed disappointment with Glass Lewis' conclusion.

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BHP's US Shale Exit, Investor Agitators Worry Fitch in Latest Credit Profile
" The West Australian (09/22/2017)"

Elliott Advisors has been pressing BHP Billiton (BBL) to boost shareholder value through a demerger of its petroleum business and an increase in stock repurchases, but Fitch believes these strategies will put BHP's credit profile at risk.  The ratings agency on Friday upheld its "negative" outlook on the Australian resources company, warning that the planned sale of its U.S. shale gas assets "would take away a material portion of the expected future growth in BHP's petroleum division."  Moreover, it expressed concern that agitation by Elliott could lead to more investor-friendly moves—including share buybacks and special dividends that could churn BHP's credit profile and cause a ratings downgrade.  Despite the warning, Fitch for now is maintaining its A+ rating on BHP, which posted better-than-expected numbers and cash flow generation for fiscal 2017.

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Tata Sons Said to Overcome Mistry in Vote on Going Private
" Bloomberg (09/21/17) Shrivastava, Bhuma; Philip, Siddharth Vikram"

On Sept. 21, sources say shareholders of Tata Sons Ltd. voted to convert the holding company to a private entity. The move—proposed by the board led by Tata Trusts, which controls 66% of the company—was opposed by ousted Chairman Cyrus Mistry, as it would restrict the Mistry family's ability to sell its 18% stake to shareholders outside the company. The vote extends a nearly year-long feud between Tata Group and one of India's richest families. The proposal required approval from at least 75% of stakeholders and will now seek the endorsement of a local company court. Sources say the move also was approved by directors for listed Tata companies such as Tata Steel Ltd., Tata Motors Ltd., Indian Hotels Co., and Tata Power Co., which own less than 10% in the holding company.

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ILG Is Said to Face Investor Pressure to Strike Merger
" Bloomberg (09/21/17) Deveau, Scott"

FrontFour Capital Group is expected to wage a proxy fight against Timeshare operator ILG Inc. if the company does not reach a deal to merge with Marriott Vacations Worldwide Corp. or one of its competitors, according to sources. FrontFour revealed a 2% stake in Miami-based ILG in May and pressured the company to merge its operations with Marriott Vacations at a significant premium. Sources said that FrontFour would likely propose a dissident slate of board nominees at ILG's annual general meeting early next year if a deal is not reached by then. ILG retained Moelis & Co. to advise it on a possible transaction after FrontFour unveiled its stake and proposal. An issue in reaching a deal is ILG CEO Craig Nash, who has been with the company and its predecessor Interval International since 1982. A potential merger is being delayed because Nash has high valuation expectations and wants to play a role at the combined company, the sources said.

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MacKenzie's Nine-Year Itch at the Big Australian
" Australian (09/22/17) Glasgow, Will; Lacy, Christine"

New BHP Billiton (BBL) Chairman Ken MacKenzie reportedly has indicated in private meetings with some investors that he will implement a nine-year limit on directorships. The concept has emerged from this week's meetings in Sydney and Melbourne between the company, Elliott Management, and other investors, though it remains uncertain whether it is official policy at the company, a more flexible guiding principle for the new chairman, or something closer to wish fulfilment from investors who want to move BHP out of the Jac Nasser-era. BHP recently said it would take a "robust process" to board renewal, and Elliott has made it a priority to bring fresh perspectives onto the board.

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Nestle May Cut About 70% of French R&D Jobs
" MarketWatch (09/21/17) Bernhard, Max"

On Sept. 21, Nestle SA said it may eliminate as many as 400 of the 550 jobs at its Galderma research and development center in southern France, stemming from a review of its global operations. The company announced in late August that it would cease operations of a skincare-product factory in Switzerland, resulting in the loss of 190 jobs. A company spokesman said about 300 of the 550 employees would be offered a voluntary leave package, and another 100 could be transferred to a new biologics and systemic-treatments center. Nestle has been engaged by Third Point, which took a $3.5 billion stake in the company in June and detailed a number of changes the company could make, including improving margins, innovating its core business, and selling noncore assets as well as its 23% stake in French cosmetics company L'Oreal SA.

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Jana Claims EQT-Rice Energy Deal Synergies 'Grossly Exaggerated'
" Reuters (09/20/17) Swamynathan, Yashaswini"

Jana Partners is stepping up its pressure on EQT Corp. (EQT) to ax its $6.7 billion acquisition of Rice Energy Inc. (RICE).  In a letter on Wednesday to EQT's board, Jana declared the oil and gas producer's expectation to save $2.50 billion after its acquisition of Rice Energy was "grossly exaggerated."  The hedge fund said its research indicates the merger with Rice Energy's assets would raise the average lateral length of a well by fewer than 1,000 feet, not the 4,000 feet estimated by EQT.  "Given the massive disparity between EQT's claims and what our analysis reveals, we are forced to question whether the Board conducted adequate diligence before approving this transaction," the hedge fund said.  Jana, which owns a 5.8% stake in EQT, instead wants EQT to spin off its midstream business.  Its letter comes just days after hedge fund D.E. Shaw & Co LP called on EQT to separate its production and midstream units once it closes the Rice Energy deal.  Meanwhile, an EQT spokeswoman said the company is "confident that the present value of synergies to be realized are in excess of $2.50 billion."

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BlackRock CEO Fink Says He Is Committed to Gender Diversity
" Reuters (09/20/17) Hunnicutt, Trevor; Kelly, Stephanie"

BlackRock Inc. (BLK) CEO Larry Fink on Sept. 20 said the company must reflect its customers in terms of gender.  "The reality is in the world more than 50% of household wealth is managed by women," he said, speaking at the Bloomberg Global Business Forum in New York.  "And so if I'm going to be a mirror of my clients, we are going to need more women in our firm."  Some 39% of its workers are women, with 43% of its total hires and 29% of those brought aboard in senior leadership positions last year being female; the company has four women on its board.  BlackRock has been pressured by activists to support shareholder-fronted propositions at the companies in which it invests and vote against boards to spark improved corporate citizenship.  For his part, Fink has urged executives to concentrate on boosting long-term value for shareholders, instead of merely meeting short-term profit targets.  Lack of diversity is a leading issue; but Fink noted that potential U.S. withdrawal from the Paris climate accord also has piqued investor interest in environmental, social, and corporate governance issues.

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'Pissed Off' P&G Shareholders Barraged With Robocalls, Mailings Amid Campaign-Style Fight
" Cincinnati Enquirer (09/20/17) Tucker, Randy"

Nelson Peltz's proxy fight against Procter & Gamble (PG) resembles a political campaign, with both sides lobbying shareholders for their support via social media, robocalls, and mass mailings.  Former P&G employee Stan Shadwell already voted his shares for P&G's 11 director nominees, but that has not stopped the outreach.  "We've been bombarded," Shadwell said.  "We've had at least six or seven pseudo-proxies mailed to us with just Peltz's name on them.  And we received another set from Procter, encouraging us to vote for the blue proxy."  In addition, Shadwell said, he and his wife have received several robocalls in recent weeks from Peltz and P&G operatives.  "It's pissing people off,' Shadwell said, noting that many of his fellow shareholders also feel harassed.  The level of activity in the proxy fight is somewhat surprising even to a veteran of corporate wars—Daniel Karson of Kroll Associates Inc., which offers advice in such proxy contests.  "I had not heard of robocalls other than in political campaigns, but if they are being made now, I'm not that surprised because, I think, the activist investors are feeling a little more wind at their backs."  He said proxy contests have evolved from when most of the attention of activist investors was directed at institutional shareholders.  Today, Karson noted, proxy fights are much more "granular" public relations contests for institutional and individual shareholder support.

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It's Not Oppression of Minority Shareholders: SES
" Economic Times (India) (09/21/17)"

Proxy advisory firm Stakeholders Empowerment Services (SES) is siding with Tata Sons ahead of Thursday's annual meeting, stating that the company's proposal to convert from a public limited company into a private limited one is not oppression of minority shareholders as alleged by its former chairman.  Cyrus Mistry, whose family owns an 18.4% equity stake in Tata Sons, has argued the move will restrict his family's rights to transfer or sell shares.  "SES analysis concludes that the proposal does not change anything adversely for shareholders.  It does not find anything wrong with the proposal from the governance point of view and the proposal cannot be said to be an oppression of minority," said JN Gupta of SES.  Under the 2013 Companies Act, shares of a public limited company are freely transferable—unlike shares of private companies, which require board approval.  However, SES argued that as Tata Sons' Articles of Association already limits the free transfer of shares, it overrides the requirements of the Companies Act.  "The shares were neither freely transferable before, nor will they be now … Therefore, with Tata Sons becoming private company, there is no variation in the rights of any member, as far as transfer of shares is concerned," said SES.  "All shareholders have lived with these restrictions for a century, why protest now? ... SES feels that in such a situation the majority has every right to take action to protect its character, provided it does not trample on rights of minority, which it is not doing."

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Ackman Asks ADP's Retail Investors to Back Him in New Video
" Reuters (09/20/17) Herbst-Bayliss, Svea"

On Sept. 20, William Ackman released a short video asking Main Street stockholders to help him win a proxy battle at Automatic Data Processing Inc. (ADP). With a meeting only weeks away on Nov. 7, Ackman is scrambling to find support for his three proposed board directors. He told the less affluent but highly influential group of shareholders that "your vote will decide this election." ADP's retail stockholders own 28% of the company. Ackman's Pershing Square Capital Management has disclosed an 8.3% stake in ADP but currently holds only about 2% of its common stock.

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New Chairman of BHP Billiton Promises 'Fresh' Look at Business
" Financial Times (09/20/17) Hume, Neil; White, Edward"

BHP Billiton's (BBL) new chairman, Ken MacKenzie, promised "to bring a fresh perspective to the existing review process" for the Anglo-Australian company's portfolio of mines and assets. Last month, the company bowed to pressure from investors in putting its U.S. shale oil business up for sale and delaying a move into potash. Elliott Advisors, which holds a 5% stake in the company, called MacKenzie's appointment a "constructive step." Elliott has been pressuring BHP to deliver better returns. Among other things, MacKenzie said that during a recent "listening tour" investors brought up the topic of "board refreshment." He noted that the company is reviewing the metrics it uses to pick non-executive directors in light of "technological and other changes." MacKenzie added, "As incoming chairman, I spent much of the past three months engaging with shareholders and other stakeholders around the world in order to better understand their perspective. I plan to engage with investors on a regular basis."

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Clariant Short-Sellers Squeezed as Corvex Doubles-Down
" Reuters (09/20/17) Jessop, Simon; Keidan, Maiya; Miller, John"

As Corvex puts more pressure on Clariant to abandon a $20 billion M&A deal with Huntsman (HUN), hedge funds have trimmed bets on a fall in shares of the Swiss chemicals company, indicating that some may have been squeezed by a rise in Clariant shares. However, the move also could indicate scepticism that Corvex will succeed in derailing the deal. Corvex boosted its stake in Clariant to 15.1% this week in an effort to prevent the deal from moving forward, and it sent a letter to the board reiterating its claim that the merger would destroy shareholder value. Data from Astec Analytics reveals that with Clariant's shares up nearly three Swiss francs since early June, many funds have closed out around a fifth of open positions. Furthermore, a relatively wide spread between the companies' stock prices suggests an 80% chance of the deal going through.

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ValueAct's Morfit Leaving Microsoft's board
" Seattle Times (09/19/17) Day, Matt"

Microsoft (MSFT) announced Tuesday that G. Mason Morfit, president of ValueAct Capital, is leaving its board of directors after three years.  His departure caps a reign of success and improved market value since the hedge fund first called for changes five years ago.  When ValueAct announced in April 2013 that it had acquired a roughly 1% stake in the company, Microsoft stock was trading below $30 a share.  On Tuesday, it was worth $75.44 a share.  ValueAct has recently reduced its holdings to about 9 million shares, having sold 7 million shares this summer in a more than $500 million sale.  Morfit, who in May took on more responsibility at ValueAct as chief investment officer, will not seek re-election to Microsoft's board when his term expires in November, the company said.  It has appointed Pepsi (PEP) CFO Hugh Johnston to its board, effective immediately.  When ValueAct first invested in Microsoft, the company was struggling, as misses in smartphones and Internet applications saw it lose clout to competitors like Apple and Google.  Its stock price lagged for more than a decade after the dot-com bust.  Four months after announcing its stake in Microsoft, ValueAct secured a deal with the company for board representation.  Morfit joined the company's governing council in March 2014, a month after Satya Nadella succeeded Steve Ballmer as CEO.  Some speculated that ValueAct may have accelerated Ballmer's exit, although Ballmer has disputed that claim.

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Huntsman Responds to False and Misleading Comments From White Tale on Proposed Merger With Clariant
" PR Newswire (09/19/17)"

Huntsman Corporation (HUN) issued a statement Tuesday in response to a letter from White Tale Holdings—the investment vehicle controlled by hedge funds 40 North and Corvex, which now owns a more than 15% stake in Clariant.  In the statement, Huntsman President and CEO Peter Huntsman dubbed White Tale's strategy "destructive," describing its "false attacks" on the company's performance and portfolio as a "self-serving attempt to derail" the merger with Clariant.  "Since March 2016, we have delivered more than we promised: free cash flow in excess of our peers and more than $2 billion of deleveraging, the separation of our Pigments and Additives business, and significant growth in our downstream specialty and differentiated businesses.  Our total shareholder return over that time has been above 150%, which is far more than Corvex has delivered to its investors," the statement reads.  Huntsman also notes that the company has "delivered long-term and sustainable value to its stockholders" and has a strong operational track record—most recently demonstrated by the company's acquisition and transformation of the Rockwood businesses.  "I have not met with White Tale and have no intention to do so," Huntsman added.  "Their activism is all about the short-term, break-up value of Clariant and is not about Huntsman."

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U.S. Hedge Fund Aristeia Capital Is Seeking Seats on the Board of China's Sina Corp
" Fortune (09/19/17)"

Aristeia Capital LLC has proposed adding two directors to the board of Sina Corp., to advocate corporate governance change and potential divestiture to boost the share price of the Chinese social media company.  The Connecticut-based hedge fund owns 3.19% of Sina. It describes Sina's five-member board as "entrenched" and launched a proxy fight with a call to expand it with its two nominees.  Sina has called Aristeia's proposal "a self-serving campaign" with a short-term view.  The dispute emerged as Chinese companies listed in the United States and Hong Kong face a raft of complaints from activist shareholders about poor returns and weak corporate governance.

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Mistrys Warn Listed Tata Companies on Tata Sons' Move to Go Private
" Times of India (09/19/17) Zachariah, Reeba"

Cyrus Investments, owned by the Mistry family, has penned a letter to the boards of six listed Tata companies urging them not to support Tata Sons' move to become a private limited company.  Cyrus Investments warned that subsequent stake-sale restrictions curbs will be "contrary to the interests of public shareholders" and that the Tata companies will struggle to divest their shareholding in Tata Sons if it moves from a public to a private limited company.  The six companies together own an 8.8% stake in Tata Sons, which is estimated to be worth at least $4.3 billion, and the Mistrys own 18.4%.  The letter comes ahead of Tata Sons' annual general meeting on Thursday, during which shareholders will vote on amendment to its Articles of Association and Memorandum of Association to become a private limited company.  The resolutions, if passed, would have an "adverse and detrimental impact" on companies holding Tata Sons shares, the letter stated.  The change in Tata Sons' legal structure requires 75% shareholder approval.  Tata Sons' move will also result in "dilution" of governance standards, declared Cyrus Investments, and will not necessarily ensure minority protection.

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White Tale Urges Clariant to Reconsider Huntsman Merger
" CNNMoney (09/19/17) Thompson, Mark"

White Tale Holdings confirms that it has built up a 15% stake in Swiss chemicals group Clariant and has vowed to fight its planned $20 billion merger with Huntsman (HUN).  White Tale Holdings is an investment partnership created by hedge funds Corvex and 40 North.  It has written to Clariant's board of directors, urging them to rethink the deal.  The letter read: "It both significantly destroys existing Clariant shareholder value and prevents Clariant from pursuing multiple alternative and immediate opportunities to unlock value for its shareholders.  The proposed transaction has no strategic merit and is a complete reversal of your own publicly-stated strategy of becoming a pure-play specialty chemicals company."  White Tale Holdings became Clariant's largest shareholder with a stake of just over 50 million shares.

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Elliott Says Has Strategic Goals for Stada
" Reuters (09/19/17) Schuetze, Arno"

Paul Singer's Elliott has strategic goals for Stada but will not press for boardroom changes, the German generic drugmaker said in a regulatory filing published on Sept. 19. According to Stada, Elliott said, "The prevalent aim of the investment is implementing strategic objectives where the sale of the shares shall not be excluded." Elliott will not seek changes to Stada's capital structure after acquiring more than 10% of its shares, but it plans to acquire further voting rights over the next 12 months.

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Sina Hits Back as Aristeia Urges Reforms
" Financial Times (09/19/17) Feng, Emily"

One of China's oldest internet companies, Sina (SINA), is defending itself against Aristeia Capital, the Connecticut-based hedge fund that has launched a proxy fight against the company. Sina questioned Aristeia's intentions in a statement on Tuesday, declaring it does not believe that the hedge fund "is truly interested in governance," and rather in "implementing a short-term and self-serving agenda." The fund is pressuring Sina to boost shareholder value by enacting a series of corporate governance reforms, including either a sale or merger of Sina or its microblogging platform Weibo, a reverse merger in which Weibo acquires Sina, or a repurchase of Sina shares. Aristeia—which holds a 3.5% stake in the company, making it the fourth-largest shareholder—has nominated two candidates to Sina's five-member board, arguing that the existing board exercises undue influence over finances and operations and has resulted in a significant undervaluation of the company. Currently, Sina itself is valued at less than its 46% holding in Weibo. According to Aristeia, "Sina is in fact not being governed for the benefit of all of its owners, but rather for the personal advancement or desires of a select few insiders." This marks the first proxy battle launched against a Chinese company by a foreign shareholder.

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Progress Software Rejects Praesidium's Demands
" Reuters (09/19/17) Panchadar, Arjun"

Progress Software Corp. on Sept. 19 rejected Praesidium Investment Management's calls to alter its acquisition strategy and replace Chairman Jack Egan. Progress said Egan has the board of directors' support and that Praesidium's proposed strategy is not in the "best interests" of shareholders.

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Reckitt Benckiser Replaces Long-Serving Chairman Adrian Bellamy
" Financial Times (09/19/17) Daneshkhu, Scheherazade"

Reckitt Benckiser announced Tuesday that it is replacing two longtime directors, including its chairman, following shareholder pressure. Adrian Bellamy had chaired the company for 14 years, and Judy Sprieser headed the remuneration committee for 13 years. Both will be replaced with other directors. For years, shareholders have criticized the length of tenures of both individuals—specifically with Sprieser managing the committee that determines the pay of Rakesh Kapoor, one of the best-paid CEOs in the U.K. Shareholders were most adamant at Reckitt's annual meeting last year. ShareSoc, an association of individual investors, said at that meeting that Kapoor's 2015 pay packet of £23 million was "indefensibly high," and the Railways Pension Scheme voiced "significant concerns about the quality of board governance." Samuel Johar, chairman of London-based headhunters Buchanan Harvey, said on Tuesday: "The move was overdue—six to nine years as chairman is more in line with best practice for a company of this size."

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Teva Should Ditch Generics, Focus on Branded Drugs, Investor Says
" Times of Israel (09/19/17) Solomon, Shoshanna"

Teva Pharmaceutical Industries Ltd. (TEVA) shareholder and tech entrepreneur Benny Landa is calling on the drug manufacturer to sell its generics business and instead focus on developing specialty medications, or split the company in two. "For the long-term health of the company, in my opinion, Teva has to carve out generics and remove it from the focus of Teva's business," said Landa in an interview with The Times of Israel. Landa declined to disclose the size of his stake, but said he holds "enough shares in Teva to have a voice, and get the board's attention." He is reported to own tens of millions of dollars' worth of Teva shares. Landa, who led a proxy fight in 2014 in an effort to shake up Teva's board, said new CEO Kåre Schultz will have to prioritize setting out a strategy for the company. To "wean itself from generics," Landa said, Teva's only options are to sell its generics business or split the company into two, with each branch specializing in either branded drugs or generics medications. If the new CEO is to succeed, Landa said, the chairman of the board will need to pave the way by "getting rid of the old guard directors," lest they undermine Schultz. "Teva's board is an old boys club that needs refreshing," Landa added, with too many directors having served for too many years.

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Aristeia Capital Launches Proxy Fight Against China's Sina
" Wall Street Journal (09/19/17) Steinberg, Julie"

Aristeia Capital LLC is waging a proxy fight against Sina Corp. (SINA), proposing that the Chinese Internet company explore a potential sale of itself or its stake in popular microblog service Weibo Corp. (WB).  The fund is seeking changes to narrow the valuation gap between Sina and Weibo, the Twitter-like company in which Sina owns a roughly 46% stake.  Aristeia—Sina's No. 4 shareholder, with just over a 4% holding in the company—said it launched the campaign after attempting to hold private talks with Sina's executives, including Chairman and CEO Charles Chao, regarding its suggestions.  Aristeia finally met with Chao and other Sina board members in Hong Kong last month after submitting two nominees for election as independent directors, a source said.  They left frustrated with what they considered to be management's dismissive treatment of their views.  The hedge fund has proposed various strategies to maximize value, including a possible sale or merger of Sina; a reverse merger in which Weibo would absorb Sina; a spinoff of Weibo shares to Sina shareholders; a sale of Sina's Weibo stake and distribution of proceeds; or a buyback of Sina's shares.  Aristeia is also critical of the company's governance, with Chao holding a permanent seat and the four other board members—of which only one comes up for re-election each year—having longstanding ties to the company.  In addition, Aristeia argues the company has made unnecessary stock issuances to related parties, including Chao, and excess cash from the issuances still sits on its balance sheet.

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Investor Lifts Stake in Clariant to 15% in Bid to Scuttle Huntsman Deal
" Financial Times (09/19/17) Samson, Adam"

Clariant's largest shareholder has upped its stake in the company to 15.1% as it seeks to avert a $20 billion merger with U.S.-based Huntsman Corporation (HUN).  White Tale Holdings—which is made up of Keith Meister's Corvex hedge fund plus a fund called 40 North—warned in a note Tuesday that the proposed tie-up will "destroy" shareholder value.  The shareholder group has elevated its stake in Clariant from 7.2% since July.  "As you know, we have attempted to work constructively with you and your advisors over the past two months, out of the public spotlight, to better understand the board's questionable logic in pursuing Clariant's proposed merger with [Huntsman]," the letter to Clariant's board stated.  "Unfortunately, we remain convinced, and increasingly so, that the proposed merger is detrimental to Clariant shareholders."  White Tale declared the Huntsman deal would represent a change in strategy from becoming a pure-play specialty chemicals company to an "unfocused and commodity-oriented business with increased volatility and a lower market multiple."  It also argued that Clariant's board had not seriously considered alternative deals before agreeing to merge with Huntsman.

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Elliott Bumps Up Stake in Hitachi Kokusai
" Financial Times (09/19/17) Terazono, Emiko"

Elliott Management on Tuesday disclosed a 6% stake in Hitachi Kokusai Electric, a subsidiary of the Japanese conglomerate, according to a Japanese regulatory filing.  The move comes a week after Elliott reported that it had purchased a more than 5% holding in the semiconductor-making equipment unit.  Hitachi Kokusai's shares increased 2% from the previous close, rising more than 7% from the level before Elliott's earlier purchase was revealed.  The investor's involvement comes as Hitachi earlier this year stalled a proposed sale of the subsidiary to the U.S. private equity group Kohlberg Kravis Roberts (KKR).  Hitachi Kokusai's shares rose above KKR's offer price on better-than-expected results, causing a third-party committee to declare in August that it could not support the buyout group's original tender.  Meanwhile, Hitachi is also engaged in a separate legal battle with Elliott over the proposed takeover of Ansaldo STS, an Italian rail signaling equipment firm.

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Hedge Fund Shareholders at Pacific Insight Up the Pressure as Vote on Takeover Looms
" Financial Post (09/18/17) Critchley, Barry"

A week before the special shareholders meeting of Pacific Insight Electronics to approve a takeover by American-based Methode Electronics Inc., the Canadian company's stock traded above $18.50 a share—the price Methode has agreed to pay in an all-cash offer.  Meanwhile, China-based Shenzhen Kaizhong Precision Technology Co. Ltd. submitted a written proposal to pay $24.35 a share.  Although the recent high was about $20 last week—following news of the potential Chinese bid—one financial adviser says the trading pattern reflects the market's lack of support for the offer.  "If the market believed the $24.35 was real, why isn't the stock trading near that level?" he mused.  "Instead it's trading just above the $18.50 Methode has offered."  Meanwhile hedge funds Crystalline Management and MM Asset Management have revealed substantial stakes in Pacific Insight and do not intend to back the Methode offer.  Crystalline, which has a 7% stake, said it "encourages Pacific Insight's board of directors and management to consider all options available to maximize shareholder value."  MM Asset Management, which has a 9.1% interest, expressed a similar sentiment when it revealed it would be voting against the Methode offer.  Crystalline said in an interview that, "there is potential for another bid given that the expression of interest from the Chinese is materially higher.  And that higher offer should be explored."  Crystalline added that the Chinese plan "warrants some investigation."

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P&G Executive Compensation Criticized by Investor
" Cincinnati Business Courier (09/18/17) Brunsman, Barrett J."

Nelson Peltz, who is waging a proxy battle to win election to Procter & Gamble's (P&G) board of directors, suggested on Monday that P&G's senior management team is paid too much.  The Trian Fund Management CEO wrote in a letter to shareholders: "P&G's five most highly paid executives...have been awarded over $220 million in total compensation during the last five years alone.  This is despite P&G's weak operating results and the fact that P&G's total shareholder returns trailed every one of its peers during the last five- and 10-year periods."  In the letter, Peltz noted that it is the board's responsibility to establish a compensation structure that rewards executives for strong performance, "thereby creating value for shareholders."  He called out the current board's attempts to tie pay to performance as having had "the opposite effect."

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Major Companies Set Carbon-Slashing Goals
" Scientific American (09/18/17) Hulac, Benjamin"

Several major apparel and digital technology companies announced they have agreed to set goals to reduce their greenhouse emissions based on climate science. They include clothing firms Nike Inc. (NKE), Gap Inc. (GPS), Guess (GES), and Levi Strauss & Co., and technology companies Adobe Systems (ADBE) and Nokia Corp. (NOK). They are setting the goals as part of a partnership launched by the United Nations and various leading environmental groups. Dubbed Science Based Targets, the initiative prods companies to establish plans to cut heat-trapping gases from their operations in an effort to help stave off global warming. More than 300 businesses have committed to the program to date, including 50 U.S. companies. After joining, a company has two years to develop its targets, which Science Based Targets experts review and subsequently approve.

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Peltz Urges Shareholders to Vote Him on to the P&G Board
" Financial Times (09/18/17) Daneshkhu, Scheherazade"

Trian Fund Management's Nelson Peltz has penned a letter to shareholders of Proctor & Gamble (PG) recommending they vote him onto the board at the Oct. 10 annual meeting. In the letter, Peltz blasts the company's "chronic underperformance" and the pay of senior executives, stating the P&G board "not only accepts underperformance but rewards management for it." The letter also declares that long-term performance targets were "very low," thus enabling senior managers to be "paid their full bonuses even if they continue to lose market share." Peltz's letter follows Trian's 94-page presentation last week, which criticized the company's performance and advised it to separate into three independent units. Peltz said his hedge fund—which owns 1.5% of the company—has been taking into consideration the views of other P&G shareholders.

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Team Inc. CEO Steps Down After Calls for His Ouster
" Houston Chronicle (09/18/17) Blum, Jordan"

Team Industrial Services (TISI) CEO Ted Owen agreed to step down on Monday, following pressure from Engine Capital Management. The company will install board member and retired Chevron executive Gary Yesavage as its interim CEO while a search begins. The move follows a letter last week from Engine Capital that essentially blamed Owen for Team's declining stock value and called for his ouster. "Besides the fact that Mr. Owen has overseen massive value destruction through poor management and poor capital allocation, he is not the right leader for an operational turnaround," the letter said. "The best chance for a successful turnaround at Team lies with having a strong operator at the helm, not a CEO with a financial background like Mr. Owen." Owen was Team's CFO for years before taking the helm in 2014. He will continue to serve as a special adviser at the company before officially retiring at the end of this year. Owen supervised Team's growth through acquisitions of Houston companies Furmanite and QualSpec; however, Engine argued that Team overpaid for both and failed to efficiently integrate the companies. Team's stock has been especially lackluster since late last year: shares have fallen from $39.25 at the beginning of December down $13.50 at the end of last week.

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Blue Harbour Builds Up 6.2% Stake in Auto Supplier Adient
" Wall Street Journal (09/15/17) Benoit, David"

Blue Harbour Group LP has become Adient PLC's (ADNT) third-largest shareholder with a roughly 6.2% stake, marking its biggest investment ever at about $410 million.  Blue Harbour's bet is based on a belief that Adient can radically improve its margins, increase share buybacks, and adjust its network of joint ventures in China, Blue Harbour partner Peter Carlin said in an interview.  He believes management is on that track and supports the work it is doing but still thinks the market is missing value in the company.  Blue Harbour's holding in Adient comes less than a year after the automotive-seat supplier was spun out of Johnson Controls International PLC (JCI) into a stand-alone company.  The strategy mirrors one Blue Harbour demonstrated last year with a hugely successful investment in BWX Technologies Inc. (BWXT), another company that had just undergone a breakup.  The investment was Blue Harbour's most profitable ever, and the fund attributes its profits almost entirely to gains made after that split.  Adient has already been working to improve its profit margins, and Blue Harbour predicts that even more increases are coming, Carlin said.  Meanwhile, the stock trades at lower multiples than competitors, so Blue Harbour is urging management to redouble its share repurchases.  Blue Harbour also said the complexity of Adient's Chinese business, which is based on 17 joint ventures with car manufacturers there, has damaged its stock value.  It believes Adient should consolidate the joint ventures or better show investors how it makes money there.

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Trian Issues Letter to Procter & Gamble Shareholders Addressing Key Questions
" Reuters (09/18/17)"

Trian Fund Management has delivered a letter to Proctor & Gamble (PG) shareholders addressing important investor questions.  In it, the hedge fund clarifies it is not suggesting that P&G relocate from Cincinnati; nor is it seeking to slash costs beyond P&G's current $12-$13 billion plan.  Trian also urges shareholders to install an investor on the board by voting for Nelson Peltz.

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Investor Praesidium Asks Progress Software Chairman to Step Down
" Reuters (09/15/17) Chatterjee, Laharee; Venugopal, Aishwarya"

On Sept. 15, Praesidium Investment Management called on Progress Software Corp. (PRGS) Chairman Jack Egan to resign, and questioned the software maker's acquisition strategy. In a letter to the board, the investor also pressured the company to abandon its acquisition strategy under CEO Yogesh Gupta and expressed disappointment over the company's rejection of an acquisition opportunity it proposed earlier this week. Praesidium, the company's second-largest shareholder, demanded that Progress Software's board add five members, including a Praesidium representative and a member identified by the investment management firm.

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Clariant May Join Swiss Blue-Chip Index if Disputed Merger Succeeds
" Reuters (09/15/17) Miller, John"

Clariant's proposed $20 billion merger with U.S.-based Huntsman (HUN) could push the combined company into Switzerland's blue-chip Swiss Market Index (SMI). However, the deal must first survive a challenge from U.S.-based funds Corvex and 40 North, whose White Tale has taken a roughly 10% stake in the Swiss specialty chemicals maker in an effort to convince shareholders to reject the transaction. Two-thirds of Clariant shareholders must support the deal for it to proceed, and a vote is expected by January. If the deal succeeds, HunstmanClariant, with a market capitalization of around $15 billion, could challenge other firms on the cusp of SMI membership and potentially eject an existing member. "Joining Switzerland's leading index would make Clariant much more relevant for Swiss funds," said Kepler Cheuvreux analyst Christian Faitz. However, Corvex's Keith Meister and 40 North's David Winter and David Millstone say Clariant's specialty chemicals businesses are a poor fit with Huntsman's commodity operation, but without publicly offering a specific alternative, analysts say prospects of the transaction succeeding are favorable. "Right now, the only thing that could really change this merger story is for White Tale to find a group of investors, somebody to buy Clariant completely," Baader Helvea analyst Markus Mayer said.

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Sandpiper Takes Agellan Stake, Seeks Change at REIT
" Bloomberg (09/15/17) Fournier, Elizabeth; Deveau, Scott"

Sandpiper Group has acquired a 10% stake in Agellan Commercial Real Estate Investment Trust and is holding ongoing talks with the company about its strategy and board composition. "We believe Agellan trades at a material discount to the value of its underlying asset base," said Sandpiper CEO Samir Manji in a statement Thursday. "We look forward to representing the interests of our fellow unitholders while working constructively with the board and management team to execute on our action plan." If the discussions are unsuccessful, Sandpiper intends to take further action, including possibly calling a shareholder meeting to push for changes to Agellan's board. Sandpiper has the backing of "several significant unitholders" including ELAD Canada Inc., according to the statement. ELAD Canada owns approximately 19% of Agellan. Agellan is the second company Manji has engaged since he founded Sandpiper. Canada's biggest industrial landlord, Granite Real Estate Investment Trust, agreed in June to add three directors nominated by FrontFour Capital Group and Sandpiper to its board.

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Tata Sons' Plan to Go Private Seen as a Blow to Mistry
" (India) (09/15/17) Mohile, Shally Seth"

Tata Sons Ltd. has proposed to convert itself from a public limited company into a private limited one—a move that will effectively restrict the Mistry family's ability to sell its stake in the Tata group holding company to external entities. It could also potentially escalate a feud between the company and its largest minority shareholder which was triggered by the October 2016 firing of Cyrus Mistry as Tata Sons' chairman. In a letter to the board of Tata Sons, Cyrus Investments Pvt. Ltd, an investment firm of the Mistry family, blasted the proposal as "yet another weapon" to oppress minority shareholders. Tata Sons' shareholders will vote on this proposal at the annual general meeting (AGM) on Sept. 21. The Mistry family firms—Cyrus Investments and Sterling Investments Pvt. Ltd—together own 18.4% of Tata Sons. The proposal would need the approval of at least 75% of shareholders to pass. "The true effect of converting the status of Tata Sons into a private company is to introduce/reintroduce restrictions on transferability of shares which otherwise today are void and unenforceable under law and norm applicable to public companies," said the letter from Cyrus Investments. "We urge you to withdraw the AGM notice and the proposal."

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D.E. Shaw & Jana Campaign for EQT
" ValueWalk (09/15/17)"

D.E. Shaw has sent a public letter to EQT (EQT) indicating that it would support the natural gas producer's bid for Rice Energy (RICE) only if it commits to certain actions that the hedge fund says could unlock an extra $8 billion in value. The hedge fund, which holds a 4% stake in EQT, wants the company to immediately appoint midstream specialists to the board; commit to splitting itself in two after the transaction, separating the combined company's production and upstream assets from its midstream assets; and moving forward with a merger of two separately listed partnerships, EQT Midstream Partners and Rice Management Partners, which EQT Midstream would control. D.E. Shaw suggests that EQT Midstream itself would be a potential takeover target. Jana Partners, a 6% shareholder in EQT, recently launched a solicitation to vote down the deal, and some observers think D.E. Shaw could end up boosting Jana's campaign. Jana, the hedge fund led by Barry Rosenstein, wants to split the company on broadly the same lines as D.E. Shaw and could benefit from the support of D.E. Shaw's portfolio manager, Quentin Koffey, who is leading his fund's campaign.

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EQT Says It Is Exploring Options Amid Pressure to Split
" Wall Street Journal (09/14/17) Hufford, Austen"

EQT Corp. (EQT) announced it would explore its options amid growing shareholder pressure to split up the energy company, which plans to purchase Rice Energy Inc. (RICE) for $6.7 billion. The announcement came after D.E. Shaw Group called for EQT to separate its pipeline business from its exploration and production operations. Jana Partners LLC in July called for a similar breakup. The company said late Wednesday it had hastened its effort to address worries that its share price undervalues the combined pipeline and exploration businesses. The company said it would propose a plan in the first quarter of 2018, before its next annual meeting. It had previously vowed to come up with a plan by the end of 2018. D.E. Shaw, which owns 4% of EQT, sent a letter to the energy company early Thursday detailing its concerns. The subject had been under discussion for a while, according to sources. On Wednesday morning, before D.E. Shaw Group's position was disclosed, EQT's board had approved the creation of a special committee to consider alternatives for parts of the company after its deal with Rice closes, some sources said—a move the board had been considering for some time. Another source said D.E. Shaw had been engaging with the company before its public comments. Jana Partners, which owns a roughly 5% stake in EQT, wants the company to cancel the Rice purchase, while D.E. Shaw said in its letter that EQT should continue with the deal and then split the businesses. Both hedge funds say they want EQT to fully list its pipelines, which already trade publicly.

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Yacktman Asset Management Backs Nelson Peltz in P&G Proxy Fight
" Wall Street Journal (09/14/17) Minaya, Ezequiel"

Yacktman Asset Management on Sept. 14 stated that it supports Nelson Peltz's addition to the board of Procter & Gamble Co. (PG). Yacktman Asset Management, which has a stake in the consumer-goods company valued at more than $1.3 billion, said in an open letter to the board that it intends to vote in favor of Peltz at a shareholder meeting scheduled for Oct. 10. "Yacktman believes that, after years of business and share-price underperformance, P&G shareholders deserve a highly engaged, shareholder-focused voice in the boardroom," the letter stated, adding that Peltz is the right choice to ask "the tough questions" at P&G and demand "strong execution from management." P&G has rejected Peltz's attempt to get a board seat, and said in a statement Sept. 14 that its 2017 results show that the plan it has in place is working. "While we did not ask for this proxy contest, we are taking the necessary steps to ensure that our shareholders understand the facts," the company said. "P&G is focused on creating value for the short-, mid-, and long-term and we are committed to preventing anything from derailing the progress we are making." Peltz's Trian Fund Management owns a 1.48% stake in P&G valued at $3.5 billion.

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EQT Gets Pressure From Second Investor on Proposed Rice Acquisition
" Wall Street Journal (09/13/17) Hufford, Austen"

D.E. Shaw Group reportedly is rolling out a campaign against EQT Corp. (EQT), adding to pressure against the energy company after Jana Partners LLC launched its own shakeup attempt in July.  D.E. Shaw is seeking a breakup of the company after it completes a $6.7 billion acquisition of Rice Energy Inc.  The hedge fund, which owns 4% of EQT through in stock and options, will send a letter to EQT Thursday outlining its concerns, a source said.  Jana Partners' earlier campaign against EQT called for the Rice purchase to be canceled and EQT to split its pipeline operations from the exploration-and-production business.  Jana owns a roughly 5% stake in EQT.  D.E. Shaw, meanwhile, wants EQT to move forward with the Rice purchase before separating the pipeline and exploration-and-production operations.  Both investors say they want EQT to fully list its pipelines, which already trade publicly.  D.E. Shaw then wants Rice's publicly traded midstream assets to be merged with EQT's pipelines business.  It also wants EQT to appoint board members with experience running a midstream business or corporate-restructuring efforts.  D.E. Shaw's campaign against a publicly traded company could foreshadow future activity: the letter is signed by Quentin Koffey, a D.E. Shaw portfolio manager who recently came over from Elliott Management Corp., where he helped run several campaigns.

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Tenet Healthcare Is Exploring Options Including a Possible Sale of the Company
" Wall Street Journal (09/13/17) Mattioli, Dana; Cimilluca, Dana"

As it faces pressure from Glenview Capital Management, Tenet Healthcare Corp.'s (THC) biggest institutional shareholder, sources report that the hospital company is exploring such strategic options as a possible sale.  Tenet is working with two investment banks—Lazard and PLC—on an array of options and has reportedly begun to arrange meetings with possible buyers.  One of the nation's biggest for-profit hospital chains, Tenet currently has a market value of $1.6 billion and more than $15 billion in debt.  This gives it a so-called enterprise value of nearly $20 billion.  It recorded $19.6 billion in 2016 revenue, with a payroll of nearly 130,000 employees. In August, Tenet announced that it would replace longtime CEO Trevor Fetter and members of its board of directors in response to pressure from Glenview to shake up the company's management.  Glenview has been advocating a sale or new leadership.

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Marcato Names Nominees to Replace Deckers Entire Board
" Reuters (09/13/17) Sampath, Uday"

Marcato Capital Management LP, which owns a roughly 6.1% stake in Deckers Outdoor Corp. (DECK), on Wednesday unveiled a slate of 10 directors that it wants to replace the footwear maker's entire board.  The hedge fund had threatened in June to overhaul the board if Deckers' review of strategic alternatives did not culminate in a sale.  Deckers confirmed that it had received the nominations and said it would review them.  It also said management had held talks with Marcato over the past eight months and was reviewing strategic options to enrich stockholder value.  The company's annual shareholder meeting is slated for Dec. 14.  Marcato's nominees include its partner Matthew Hepler; former Ralph Lauren Corp. (RL) executive Mitchell Kosh; Anne Waterman, who worked at Michael Kors (KORS) for 15 years; and Kirsten Feldman, a former Morgan Stanley (MS) advisory director.  Deckers' shares, which closed up 1.8% at $64.64 on Wednesday, have increased almost 30% since Marcato revealed its stake on early February.

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P&G Investor Yacktman Says to Vote for Adding Peltz to Board
" Reuters (09/14/17) Ganesan, Gayathree"

Trian Fund Management LP's campaign for a board seat at Procter & Gamble Co. (PG) has won the backing of a major investor.  Investment advisory firm Yacktman Asset Management voiced its support for adding Trian's Nelson Peltz to the board and criticized the company for engaging in "a costly and distracting proxy fight" with the investor.  Yacktman said it owns $1.3 billion worth of P&G shares.  Trian, P&G's fifth-largest shareholder, has been battling with the consumer products conglomerate for months, raising investor hopes of a breakup of the company.

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SeaWorld Calls Time on Chairman After Shareholder Revolt
" Financial Times (09/13/17) Yuk, Pan Kwan"

SeaWorld (SEAS) has found a replacement for Chairman David D'Alessandro, whom shareholders voted to oust at the company's annual general meeting in June.  Yoshikazu Maruyama has been tapped to assume his duties, effective Oct. 9.  Shareholders who opposed D'Alessandro's re-election were upset about the level of executive pay under his watch, even as the company struggled with declining attendance and revenues following the disastrous public relations fallout from a 2013 documentary criticizing the park's treatment of its marine animals.  D'Alessandro was the only board member not to receive a majority of votes to stay on.  At the time, it was uncertain whether he would actually leave the company: although he was required to tender his resignation within 90 days as a result of the vote, the board could have declined to accept it.  However, the embattled theme park operator confirmed Wednesday that D'Alessandro will leave the board and also announced the appointment of a new lead independent director.

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ADP Sends Letter to Stockholders
" Marketwired (09/14/17)"

ADP's (ADP) board of directors sent a letter to stockholders on Thursday urging them to vote in favor of the company's 10 director nominees by the Nov. 7 annual meeting.  "Over the last five years," the correspondence notes, "ADP has delivered a Total Shareholder Return (TSR) that has significantly outpaced the S&P 500, while driving strong revenue, margin, and EPS growth."  It adds that since Carlos Rodriguez became CEO nearly six years ago, ADP has generated TSR of 203%, compared with 128% for the S&P 500 and 153% for peers in the human capital management space.  The board has also returned $11.3 billion in share buybacks and dividends since FY 2011 and raised the annual dividend for the past 42 consecutive years.  ADP acknowledges that Pershing Square Capital Management has nominated three candidates for election to the board but considers the hedge fund's plan "vague and risky."  ADP says the board recently met with Pershing Square and conducted a thorough review of each of its nominees but determined that none "would bring additive skills or experience"to the board.  Pershing Square's claim that ADP can boost operating margins by 1,600 basis points or 16% from its already strong margins "presents major business risks for ADP," the letter states, and could cause "serious harm to our client relationships, disrupt mission-critical technologies, and put ADP's client retention—and by extension the ADP business model—at significant risk."  It adds: "Furthermore, Pershing Square has provided no clear roadmap on how it intends to accomplish the returns that it has targeted."

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Pershing Square Responds to ADP Presentation
" Business Wire (09/13/17)"

Pershing Square Capital Management has responded to ADP's (ADP) Sept. 12 presentation to investors. According the Pershing Square, "ADP's 'Focused Transformation Strategy' demonstrates a lack of recognition for the enormous value-creation opportunity that exists at ADP. Despite various operational initiatives highlighted throughout the presentation, the Company's projected results in the presentation suggest that these initiatives will not drive any meaningful margin expansion...On Aug. 17, Pershing Square presented a detailed presentation highlighting ADP's significant underperformance and opportunities for improvement. Four weeks later, the Company has yet to respond to the substance of our arguments and the magnitude of the opportunity...Pershing Square is seeking to replace the three longest-tenured members of the Board who presided over ADP as it has underachieved its potential for years. The directors we seek to replace do not have technology or industry expertise, a criticism ADP has leveled at our Nominees, and include a business school dean, and two former industrial sector CEOs. Pershing Square's Nominees for ADP's Transformation bring a shareholder orientation along with a major ownership stake, fresh perspectives, and relevant expertise in business transformation, corporate restructuring, and cost efficiency execution to accelerate the necessary changes required for ADP to achieve its full potential."

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Billionaire Hedge Fund Manager David Einhorn Overwhelmingly Loses GM Shareholder Vote
" Forbes (06/06/17) Vardi, Nathan"

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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Billionaire Hedge Fund Manager David Einhorn Overwhelmingly Loses GM Shareholder Vote
"Associated Press (06/06/17) Gordon, Marcy"

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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Tata Sons Going Private Is Bad for Governance; NCLAT's Order May Offer Little Relief for Cyrus Mistry Now
" (09/22/17) Kumar, Manoj"

Shareholders of Tata Sons recently ratified major resolutions, including one for changing the corporate structure of Tata Sons from a public limited company to a private limited company. The move would result in more opaque governance standards, and Tata Sons Private Ltd. would be absolved from various legal and regulatory aspects which they had to adhere to as a public limited company. However, the approval of the National Company Law Tribunal (NCLT) will be needed to implement this change. Attempts to reinstatement Tata Sons as a private limited company stem from a 2016 board dispute between Ratan Tata and Cyrus Mistry, who took over the chairmanship of the group in 2012 but was ousted in 2016. Mistry was also removed as director from the board of Tata Sons as well as other group companies. In December 2016, the Mistry firms—Cyrus Investment Private Ltd. and Sterling Investment Private Ltd.—filed a case at the NCLT to waive the eligibility criteria to take on Tata Sons and Ratan Tata for oppression of minority shareholders and mismanagement, but this request was denied. Meanwhile, Tata Sons opted to give voting rights to preferential shareholders, with Ratan Tata having 10.5 lakh (1.05 million) shares, Narotam Sekhsaria 5.7 lakh (570,000) shares, and N.A. Soonawala 2.6 lakh (260,000) shares. The Mistry family holds an 18.4% stake in Tata Sons and owns just 20,000 preference shares. It remains to be seen how much this change inspires confidence and impacts the ability of top management across various Tata companies in the ability to deliver shareholder value.

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The Unusual Way KB Home Punished Its CEO for Screaming Profanities at Kathy Griffin
" Washington Post (09/22/17) McGregor, Jena"

KB Home (KBH) CEO Jeffrey Mezger will see his annual bonus reduced by 25% after unleashing a vulgar tirade at comedian Kathy Griffin, his Los Angeles neighbor. Mezger's slurs became public after a recording was released by HuffPost. In a regulatory filing, KB Home vowed to fire him if there was ever another similar incident. For the home builder, the risk is that Mezger's verbal attack could hurt its upscale brand. Corporate governance experts say the move is unusual but could become more common. The move also raises interesting questions about how CEOs should be punished after embarrassing themselves in public, particularly given their large pay packages. "If you're willing to accept that kind of money, you're giving something up, and it's the separation of your private life and your public life," argues corporate governance expert Charles Elson. "They've become quasi-public figures, and the standard by which they're judged is higher."

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Companies Amend Bylaws in Response to 'Placeholder Slate' Tactic
" JDSupra (09/21/17) Clark, David; Cohn, Rachel; Grossman, Richard J."

In the past year, more than 50 publicly traded companies have amended their bylaws to address the potential for a so-called "placeholder slate" of directors. The bylaw amendments began to appear in response to a tactic used in 2016 to end-run typical advance notice bylaws for director nominations. Corvex Management LP announced last year its intent to oust all 10 members of the board of The Williams Cos. Inc. (WMB). The move was part of a two-year battle for influence over Williams, during which Corvex's founder, Keith Meister, and five other Williams directors resigned over strategic disputes with management, which culminated in a failed $33 billion merger that would have created the nation's largest natural gas transporter. In an effort to avoid a notice deadline for director nominations, Corvex nominated 10 of its employees for election to the Williams board at an annual meeting. These employees would serve as placeholders until Corvex could identify more suitable directors, which it would disclose to Williams' stockholders in advance of the election. Once elected and seated, the placeholder directors would immediately appoint Corvex's actual nominees to the board and then resign. Although no investor has attempted such a tactic since, at least not publicly, companies took notice, with many drafting amendments designed to prevent such a maneuver. In the past year, 54 publicly traded companies amended their bylaws in the wake of the threatened Corvex-Williams proxy fight, including Williams itself as well as 19 on the Standard & Poor's 500 index.

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Looking Ahead to the 2018 Proxy Season: Preparing for CEO Pay Ratio Rules Disclosure Requirements
" JDSupra (09/20/17) Berger, Katrine; Hart, Colleen; Lee, Charles"

The Securities and Exchange Commission (SEC) adopted final pay ratio rules in August 2015, released additional interpretive guidance in October 2016, and solicited additional comments for consideration in February 2017. All public companies except smaller reporting companies, foreign private issuers, U.S.-Canadian Multijurisdictional Disclosure System filers, emerging growth companies, and registered investment companies will be subject to the pay ratio rules. The rules are effective for fiscal years beginning on or after Jan. 1, 2017. As a result, most public companies will need to comply with the rules beginning with the 2018 proxy season unless Congress repeals the rules or the SEC delays them. Much of the difficulty of preparing for the disclosure is the need for companies to identify their median employees. In performing this analysis, a company generally is required to consider all individuals employed by the company or any of its consolidated subsidiaries, including its full-time, part-time, seasonal, and temporary workers. However, independent contractors whose compensation is determined by an unaffiliated third party are not required to be included in the overall analysis. In addition, employees acquired through a business combination or acquisition may be omitted for the fiscal year in which the transaction becomes effective, but the approximate number of employees omitted must be disclosed and those employees must be considered in the following year when determining the median employee. In determining the median employee, companies can also make a cost of living adjustment for employees who do not reside in the same jurisdiction as the principal executive officer. If a company opts to apply a cost of living adjustment, it must separately determine the median employee without applying a cost of living adjustment. The ratio without the adjustment must still be disclosed and each jurisdiction in which an adjustment was applied must be disclosed, including the methodology of the adjustment.

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Bettencourt Death Stirs Speculation About L'Oréal Ownership
" Reuters (09/22/17) Kar-Gupta, Sudip"

With the passing of the founding family's matriarch, future ownership at L'Oréal hangs in the balance.  The Bettencourts own 33% of the French cosmetics company, while Nestlé has an estimated 23% interest.  Both had agreed not to increase their holdings as long as Liliane Bettencourt was alive and for at least six months after she died.  Analysts at Jeffries said her death this week, however, opens the door for a shift in control.  After unveiling a position in Nestlé this June, Third Point proposed a plan for the Swiss firm to sell down the L'Oréal stake.  By giving investors L'Oréal shares in exchange for their Nestlé shares, it predicted Nestlé could advance its return on equity and, eventually, elevate its stock price as earnings improve over a lower share count.  Alternatively, L'Oréal could buy back Nestlé's interest—which, according to Investec analysts, could lift its earnings by 10% per share.

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Invest With the Corporate Activists
" MoneyWeek (U.K.) (09/21/17) Partridge, Matthew"

Increased pressure from the government and their clients has prompted traditional asset managers to get more involved with the companies they own, even working with activist hedge funds. "If companies refuse to take fund managers' suggestions on board, many are prepared to take their disputes public and go to the media," which is behavior that was "much rarer even 10 years ago," according to Nelson Seraci of Institutional Shareholder Services (ISS). Surveys by ISS reveal that the percentage of institutional shareholders not at all involved in the companies they owned plunged to 19% from 40% in 2011. While phone calls accounted for much of the engagement, 40% involved face-to-face meetings, and about 25% ended with managers willing to at least consider proposing motions at the annual general meeting. In terms of holding managers accountable, Professor Julian Franks of London Business School says ordinary funds will always be limited in what they can achieve alone, mainly due to diversification. However, an activist hedge fund that owns only a handful of companies has the ability to focus more closely on its holdings, and one successful intervention could significantly boost its portfolio. He believes shareholder activism can "play a key role in reversing the 'death of the public company,' which has seen the number of firms listed decline in both Britain and America."

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Dutch Directors' Association Calls for Trust-Based Governance
" Board Agenda (09/20/17) Davis, Emma Portier"

The Dutch Association of Directors this week urged the Dutch government to consider a new approach to corporate governance that is based on trust to help enable "chance and change." In a letter to Gerrit Zalm, who is tasked with forming a new Dutch coalition government after elections earlier in the year, the association wrote: "Today, extremes are the reason for further monitoring. Misunderstanding prevails, control predominates. Minimizing risk is more important that seizing opportunities.  A development that is at odds with the goodwill and the willingness to take responsibility for the important decisions taken daily by companies, big and small."  The Dutch government, which approved a revised corporate governance code in 2016, passed it into law earlier this month.  This new code essentially puts long-term value instead of short-term gain, as well as the development of corporate culture that promotes good governance.

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Analyst: Macy's Investor Was Right
" Cincinnati Business Courier (09/20/17) Brownfield, Andy"

Although Starboard Value no longer holds a stake in Macy's Inc. (M), one analyst says its thesis about the embattled company was spot on.  Starboard Value had pressed Macy's to monetize its real estate, which it estimates is worth about $21 billion, compared to the retailer's market value of roughly $6 billion.  The investor urged Macy's to spin off its property into a real estate investment trust (REIT); but the department store operator instead chose to sell some of its assets and redevelop others, including its flagship locations.  Bill Zettler, writing in Seeking Alpha, says Macy's should not be grouped with other retailers but rather viewed like a REIT and compared more to other real estate investment stocks like Simon Property Group (SPG).  Macy's has about half the square footage of retail property as Simon, but its market value of $6 billion is less than 10% of Simon's $56 billion.  Zettler says Macy's is much more valuable than the market believes.  He believes Starboard valued Macy's real estate conservatively at $21 billion.  Its credit card business is worth another $8 billion, and Macy's also owns Bluemercury, which Zettler estimates is worth $1 billion.  He also values Macy's retail business itself at $4 billion. Altogether, that means Macy's has assets of $34 billion.  "The conclusion is if Macy's management does not turn the retail business around, someone from the outside will come in and monetize their enormous real estate portfolio," Zettler warns.

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Thyssenkrupp: A Success Story for European Activism
" Wall Street Journal (09/20/17) Wilmot, Stephen"

On Sept. 20, a merger was announced between German industrial giant Thyssenkrupp AG's European steel operations and those of Tata Steel Ltd., a Mumbai-listed entity controlled by India's Tata family, into a joint venture. The deal has been in the works for years, but management changes at Tata Sons—the holding company of the Tata family—among other factors, held it back. Observers say Cevian Capital, which owns 15% of Thyssenkrupp, likely will welcome the deal. The merger is expected to initially save the companies €400 million to €600 million a year in overhead and production costs. Observers believe this 50% stake in an unlisted steel operation is not Thyssenkrupp's endgame, and with Cevian—which has a board seat—known for disliking conglomerates, they say it is possible that the company will be split up. However, such a move would be politically tricky, and given the length of time it took for the Tata merger, they say investors should not underestimate how long this restructuring could take.

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P&G Employees, Retirees, Alumni Courted by Investor
" Cincinnati Business Courier (09/20/17) Brunsman, Barrett J."

Nelson Peltz on Sept. 20 made the case for why Procter & Gamble (PG) workers, retirees, and alumni should vote for his election to the board so he can turn around the company. He said he knows best how to increase the value of stock in the consumer products company, which Peltz stated in a letter would be in the best interest of the people who work for or have been employed by P&G. "The company chose to fund many of your retirement plans with P&G stock, but many employees and retirees are suffering because P&G's shares have underperformed for so long," Peltz pointed out. He has purchased $3.5 billion worth of P&G stock since November as CEO of Trian Fund Management.

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Five Questions With Morrow Sodali's Charlie Koons
" IR Magazine (09/19/17) Roach, Garnet"

Charles Koons, formerly of MacKenzie Partners, recently joined Morrow Sodali as managing director of its activism and contested situations advisory group. In an interview with IR Magazine, Koons discusses the latest trends in activism and contested situations. Companies that were previously considered immune to activism are now frequently targeted, the largest index funds have increased their focus and voice on corporate governance, and activists have quickly evolved their tactics to reach retail shareholders, says Koons. He notes that most shareholder activism is focused on improving shareholder value, but the activist landscape continues to be altered by the powerful voices of the large index funds regarding governance standards. The top three things a company should be thinking about in terms of preparedness for shareholder activism are staying informed on the differing perspectives and priorities of their various shareholders, having an honest and objective sense of how the company is performing in relation to its stated objectives and peers, and having outside advisers that know the organization intimately help with year-round engagement and the evaluation process. Koons says the most common mistakes companies are making when handling an activist or contested situation are taking shareholder support for granted, having an executive or board member speak "off the reservation," and taking the low road. His advice to IROs facing a contested situation for the first time is to quickly gather all relevant participants—management, board, advisers—and establish clear lines of communication for a coordinated effort. "You do not want to find yourself on your heels each time the activist communicates with your investors either through the media or in proxy filings," says Koons.

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Japan Is Counting on Shareholder Activism to Improve Its Economy
" Harvard Business Review (09/20/17) de Swaan, JC"

Shareholder activism is considered a U.S. form of investing, but the case for it is perhaps best seen in Japan, where several factors combine to help protect managers from outside influence—including cross-holdings, insulated boards, and a court system historically biased against investment funds. Remarkably, Prime Minister Shinzo Abe has embraced shareholder activism, in an effort to encourage the adoption of his corporate governance reforms. The Abe administration's corporate governance reforms have explicitly encouraged more shareholder-friendly governance by companies and greater engagement from institutional investors, as well as implicitly supported shareholder activism as a forcing mechanism. Abe has even met with prominent U.S. investor Dan Loeb, suggesting he sees value in foreign involvement in Japanese markets. The improved perception of activists in Japan marks a dramatic change from the 2000s, when funds typically adopted confrontational approaches. By and large, they failed. Today they are seen as part of the solution, in part because they have changed tactics. A new wave of "constructive," or friendly, activists has since tackled the same corporate governance issues, but with a low-key, humbler approach. Rather than criticizing management publicly, these funds have led quiet discussions behind closed doors. They earn senior managers' trust by demonstrating their patience and sharing well-researched analysis, and often refrain from asking for board seats or challenging them in proxy fights. Even traditionally confrontational investors such as Third Point have shifted their strategy in Japan to adopt a more constructive approach. Optimists point to progress, including the percentage of companies listed on the Tokyo Stock Exchange level 1 with at least two independent board directors, which has increased from 17% in 2012 to 88% in 2016. Listed companies have returned record levels of cash to shareholders through dividends and share buybacks, and companies are also increasingly tuned into the Corporate Governance Code.

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Investors Who Opposed DowDuPont Breakup Plan Flip-Flop on Support
" Wilmington News Journal (DE) (09/19/17) Mordock, Jeff"

Some of the investors who opposed DowDuPont's (DWDP) plan to separate into three independent businesses within two years of completing their merger have changed their minds. Four investors—Trian Fund Management, Jana Partners, Glenview Capital, and Third Point—proposed joining forces to pressure the company to split into six publicly traded, independent companies, indicating that leaner, more focused companies would hit the market with higher stock evaluations and create more value for shareholders. The idea was rejected by DowDuPont, which instead plans three spinoffs: Delaware-based Specialty Products, Michigan-based Material Sciences, and a Delaware-based combination of Dow and DuPont's agriculture programs. As part of the plan, seven business units totaling more than $8 billion in revenue will be transferred to the Specialty Products spinoff—a move supported by Glenview Capital, Trian, and Third Point. According to Jim Butkiewicz, chairman of the Economics Department at the University of Delaware, gaining the investors' support will enable DowDuPont's management to focus on other critical decisions related to the spinoffs. "In this day and age, activist investors can have a big effect on a company and their plans going forward," he said. "When these investors support the plan, that can be helpful to DowDuPont's management because it reduces pressure. That will be good for the DowDuPont spinoffs here in Delaware."

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Boards Try Buddy System to Get Newcomers Up to Speed
" Wall Street Journal (09/18/17) Lublin, Joann S."

More boards are pairing new members with seasoned mentors to help newcomers figure out the boardroom's cultural norms and even the right place to sit. Mentors make sure "you don't come in as a bull in a china shop," states Steven Walker, managing director of the board services group at the National Association of Corporate Directors (NACD). A 2016 NACD study found that 33 of 296 American firms with orientation programs for corporate directors picked an experienced board member to guide their latest member. Among the companies with formal mentoring efforts are Foot Locker Inc. (FL) and Nasdaq Inc. Rusty O'Kelly, head of the board consulting and effectiveness practice at Russell Reynolds Associates Inc., forecasts, "We could see at least 50 Fortune 500 companies with new director mentor programs by 2020." Boards that integrate new members sooner are able to "make better decisions and produce better results for shareholders," he adds.

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Canada: Defamation Lawsuits As a Defence to Shareholder Activism
" Mondaq (09/19/17) Viner, Michael"

Activist investors waging proxy fights typically mount aggressive public relations campaigns—which the companies on the other side of that fight often combat with legal action.  The decision to lodge a complaint with securities regulators or sue for defamation, for example, must not be made hastily; in many cases the potential risks associated with litigation may far outweigh any benefit.  Yet legal action may nonetheless be worthwhile for a company: not only does it increase the financial burden for the activist investor, it also provides management with another opportunity to tell their side of the story.  For management bringing a claim for defamation, careful consideration must be given to factors including the likelihood of success in court, the reputational consequences of bringing legal action, and the possibility of embarrassing revelations being made public.  For activist investors seeking to protect themselves from this type of legal action, the most important precaution to take is to carefully vet all communications before public release.  One key point for activists to keep in mind is that intent is irrelevant.  The courts may find a statement to be defamatory even without malice.  Activists should also be aware of the most common defense to a claim for defamation, namely the truth of the statement.  Wherever an utterer can show a statement of fact to be substantially true, the plaintiff's claim fails.  Finally, activists should be careful to frame any comments as opinion based in fact and not as statements of fact.

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Now It's Personal: P&G Takes Aim at Nelson Peltz, Who Is Trying to Disrupt Its Business
" CNBC (09/19/17) Picker, Leslie"

When asked why Procter & Gamble (PG) refuses to add Trian Partners' Nelson Peltz to its board, CEO David Taylor says, "We did our homework [on Peltz, and the] positive recommendations were not forthcoming." The latest development in the increasingly contentious proxy battle between Peltz and P&G is a report by the company with a section focusing on Peltz. According to a copy reviewed by CNBC, P&G found that when Peltz invests in a company or sits on its board, he destroys instead of adding long-term value, citing examples where Peltz says one thing during his proxy campaigns and does another once on the board. Observers say this unprecedented defense tactic could become more common as shareholder dissidents engage with bigger and bigger companies with the power to fight back. P&G's report examined three different consumer-oriented companies in which Trian held stakes before—Mondelez (MDLZ), Heinz (KHC), and Wendy's (WEN)—noting that prices were increased and sales volumes declined at Mondelez after Peltz was given a seat on the board. The same occurred at Heinz, but while margins expanded at Mondelez during his tenure, they remained flat at Heinz. The report also details the 2008 merger between Wendy's and Arby's parent company Triarc, which was orchestrated by Peltz, noting that Arby's was sold for $1 billion less just three years later. Peltz, whose fund has a $3.5 billion stake in P&G, has received the backing of Yacktman Asset Management, which holds about 15 million shares of P&G and issued a letter stating that P&G shareholders "deserve a highly engaged, shareholder-focused voice in the boardroom."

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BHP Billiton Signals Support for Clean Energy
" The Australian (09/19/17) Chambers, Matt"

BHP Billiton (BBL) is officially taking a different position than the Minerals Council of Australia's climate change position, with the miner renewing calls for a Clean Energy Target and underlining the stance that emissions-reduction is crucial to any solution to Australia's power crisis. The renewed call for a focus on clean energy comes as Australian Prime Minister Malcolm Turnbull considers softening the focus on carbon emissions in any proposed energy target to usher it through a tense Coalition party room. BHP recently committed to publishing a list of material differences in climate and energy policy between it and the industry associations it belongs to, after pressure from a small group of shareholders. BHP said it is not aligned with the Minerals Council's stance that new cleaner coal-fired plants should be built without carbon capture and storage and that the focus of the power system should be mainly on affordability and energy security.

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The Morning Risk Report: Over-Committed Directors Good for Young Firms
" Wall Street Journal (09/19/17) Stein, Mara Lemos"

Busy corporate boards are a global phenomenon, according to a paper published last month as part of the Georgia Tech Scheller College of Business research series. Approximately 70 percent of firms have busy boards, or over-committed directors, according to the research, which looked at board composition at companies in more than 50 countries. Investors' concerns and academic studies about the risks of over-committed directors being less efficient abound. Institutional Shareholder Services, for instance, recommends that directors should not hold more than five appointments at public U.S. companies. But advocating for streamlining directorships in the United States can be misguided when it comes to young companies, said the paper's authors: Stephen Ferris of the University of Missouri, Narayanan Jayaraman of Georgia Tech, and Min-Yu Stella Liao of Illinois State University. "The advising and networking advantages associated with widely boarded directors is most useful for younger firms," the researchers wrote. "But as firms mature, it is likely that director monitoring of managers becomes even more important for the creation of profitability and shareholder value," they said, and that oversight may be compromised when directors are overburdened by multiple seats. The number of directorships held in the United States has declined sharply to an average of three in 2012 from five in 1999, according to the paper.

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Hubbard's Ties to Ackman May Pose Conflict in ADP Proxy Battle
" Bloomberg (09/19/17) Weiss, Miles"

The history between a director at Automatic Data Processing Inc. (ADP) and Bill Ackman, who is waging a proxy battle at the payroll outsourcing company, is under scrutiny.  Glenn Hubbard—dean of Columbia Business School—chairs the nominating and governance committee at ADP, meaning the investor will have to go through him to win the three board seats he wants.  Hubbard has also served as an expert witness for Ackman's Pershing Square Capital Management, pulling down $1,500 an hour this year to help the hedge fund beat back an ongoing shareholder lawsuit, according to regulatory filings and court records.  Governance experts, asked about the possible conflict of interest, are at odds, with two insisting Hubbard should have recused himself and another arguing that his disclosure of the relationship with Ackman to ADP was enough.  In mid-August, Hubbard's panel interviewed Ackman and his two other nominees, ultimately rejecting their request to expand the board by adding them, according to a Pershing filing.  In response, Pershing disclosed in early September that it was seeking to replace Hubbard—the longest-serving director, with more than 13 years of service—along with Chairman John Jones and another longtime director.  Pershing's law firm, Kramer Levin Naftalis & Frankel, hired Hubbard in February to rebut the $2 billion in damages that Allergan Plc (AGN) shareholders are seeking from Valeant Pharmaceuticals International Inc. (VRX) and Pershing Square, according to court documents.  Hubbard could also be called to testify if the case goes to trial.  ADP says it was "fully informed" of the prior transactions between Hubbard and Pershing Square and does not consider the fees a conflict of interest.

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Will Tata's Latest Gambit Stick Mistry in Legal Gridlock or Strengthen His Case?
" Bloomberg (09/17/17) Doshi, Menaka"

Tata Sons can force estranged shareholder Cyrus Mistry to sell his shares. However, the company also can impose further restrictions on his ability to sell shares if it succeeds in converting to a private limited company. As a private company, Tata Sons—the principal holding company for the Tata Group, which has more than 100 companies with a combined revenue of more than $100 billion as of the 2016-17 financial year—would be subject to fewer legal and governance provisions, and the board considers the move to be in the company's best interests. Observers say the company has had the chance to convert to private limited for 17 years and has only considered doing so now because of Ratan Tata's battle against Mistry, whose family owns 18.4% of the company and has been a shareholder since 1965. Cyrus Investments—the company through which Mistry holds shares in Tata Sons—said in a letter to the board that "the true effect of converting the status of Tata Sons into a private company is to introduce/re-introduce restrictions on transferability of shares which otherwise today are void and unenforceable under law and norms applicable to public companies; and which ought to never have been included in the Articles of Association of a public company in the first place." The result could be legal gridlock.

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How Balanced Is Your Board?
" Lexology (09/18/17) Maclean, Neil; Russell, Katie; Crichton, Elouisa"

Females account for just 23% of listed European Union board directors and 24% of listed U.K. board directors. In Scotland, the figure is 42% despite having fewer public boards. In the United Kingdom, the Davies Report set forth a target for 25% of FTSE 100 board positions to be held by women by 2015, which was achieved. However, growth has slowed since then, with fewer than 10% of the three most senior positions at FTSE 100 firms held by women in 2016. The Davies Review extended its target of 25% female board representation to all FTSE 350 companies by 2020. Furthermore, the Hampton-Alexander Review set a further combined target for 33% of FTSE 100 executive committees and their direct reports to be women by 2020, and a target of 33% of board positions in FTSE 350 companies. In Scotland, the Davies and Hampton-Alexander Reviews apply to companies in the FTSE 100/350, and the Scottish government has proposed an ambitious target of 50% representation of each sex by 2020, applying only to Scottish public authorities without mixed/reserved functions and to appointed non-executive directors. Meanwhile, the European Union's proposed directive calls for listed companies to have members of the under-represented sex hold at least 40% of non-executive director positions, or 33% of all director positions, by the end of 2022, with small and medium-sized enterprises exempt. If the proposal is not passed by the time Brexit occurs, the Scottish and U.K. Parliaments will have to decide on their own how they will continue to improve gender equality on boards.

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A $15 Billion Merger at Risk From Shareholders Who Don't Vote
" Wall Street Journal (09/18/17) Davies, Paul J."

A merger between Huntsman (HUN) and Clariant could hinge on turnout at a Swiss shareholder vote later this year, as two investors seek to halt the transaction.  Meanwhile, the gap between the U.S. and Swiss chemicals companies' stock prices remains wide open, suggesting the deal could fall apart.  Huntsman stock has traded at about a 9% discount to its value under the merger's terms from the start of August until early September, while Clariant's stock is up 12% since the announcement.  One of Clariant's investors opposing the deal is the family behind Standard Industries, a major U.S. building materials and chemicals company; and the other is Corvex, an investment fund run by Keith Meister.  They collectively own at least 10% of Clariant.  For the deal to close, it must pass shareholder votes at both companies later this year—and the dissident investors' best hope is to gather enough support to block the Clariant vote.  For Clariant, a difficulty is ensuring that enough shareholders show up.  Passive index funds that do not vote could make it easier for hedge funds to build a blocking stake.  Clariant requires two-thirds of votes cast to support its merger.  If turnout reaches the typical Swiss average of 60%, the dissidents only need 20% of all investors on their side, including themselves.

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Snow Park Capital Partners Eyes Dillard's Real Estate
" Arkansas Business (09/18/17) Friedman, Mark"

According to Snow Park Capital Partners managing director Jeff Pierce, Dillard's Inc. (DDS) could use its real estate to increase its stock price amid eight consecutive quarters of declining same-store sales.  He reported that the company generated about $5 per square foot in net income for its 44.1 million square feet of retail space for the fiscal year that ended in January.  "It's not to say that Dillard's retailer is not always the optimal user of its real estate, but in many cases on its face it's demonstrable that it's not," said Pierce, whose firm owns about 2% of Dillard's Class A shares.  He estimated in July that the Little Rock, Ark.-based retail chain's stock could be worth more than $200 per share if the company could unlock the value of its real estate assets.  "Our estimated rental value to more productive retail tenants exceeds the company's entire current income as a retailer," he said at the time.  According to Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm in New York, "Every single department store, including Dillard's, is under fire one way or another to monetize their real estate.  It's easier said than done, and it takes longer than everybody thinks."  However, Pierce said, "It's a great opportunity for a real estate rich company like Dillard's to create a lot of value through stock repurchases and ultimately highlighting the large disconnect between perception and reality to the market."

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U.K. Firms Ever More Vulnerable to Investors With Energy Firms First in the Crosshairs
" Telegraph (09/18/17) Withers, Iain"

Alvarez & Marsal's latest activist alert report has identified 54 U.K. firms vulnerable to pressure from activist investors, up from 52 three months ago.  The model has a 58% success rate in identifying companies likely to be engaged by activists.  The consulting firm also said there were "early indications" that boosting the number of female directors could minimize a company's threat from shareholder activism.  Furthermore, the report found that firms in the energy sector—which is in upheaval due to historically low oil prices and a shift toward renewable energy—are more than twice as likely as firms in other sectors to come under pressure by activists.  The time frame between underperformance and public activism has shortened to 1.9 years from two years, according to the study, which also found that German companies were the least likely to be engaged by activists.  "Activists are becoming increasingly impatient with boards and perceived sub-optimal performance," said Malcolm McKenzie, managing director and head of European corporate transformation services at Alvarez & Marsal.  "Boards need to ensure meaningful change is delivered, with positive results being shown clearly, without delay.  Any transformation program that takes longer than 18 months to produce tangible results will be too little, too late."

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BlackRock Breaks Ranks to Disclose Workforce's Ethnic Diversity
" Financial Times (09/18/17) Ram, Aliya"

BlackRock (BLK) is one of three investment firms to disclose statistics on the proportion of its staff who come from black, Asian, and minority ethnic backgrounds in response to an FTfm survey. The move comes as the asset management industry faces criticism for not doing more to tackle the chronic underrepresentation of minority groups in top jobs. BlackRock's data indicates 35% of its U.S. employees are from black, Asian, and minority ethnic backgrounds. Companies have typically declined to share demographic data about their employees for fear of being singled out for criticism, but public pressure has changed some attitudes in recent years. In the United Kingdom, gender pay imbalances will have to be publicly disclosed starting next April, while a review commissioned by the government this year asked FTSE 100 companies to disclose the mean and median pay data of ethnic groups.

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BHP Billiton Makes Progress on Gender Balance
" Financial Times (09/17/17) Hume, Neil"

BHP Billiton's (BBL) effort to bring the mining industry into the modern world has reached a milestone, with new figures showing women now comprise a fifth of its 26,000-strong workforce. Last year the Anglo-Australian miner etablished an "aspirational goal" of achieving a 50/50 gender balance by 2025 across all of the company—from truck drivers in Chile to its boardroom in Melbourne. Mining is one of the industries where women are the least represented, with men occupying most positions globally. While BHP narrowly missed its target of increasing female representation across the company by 3 percentage points in the year to June, women now comprise 20.5% of its workforce, up from 17.6% in 2016.

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Why P&G Investors Should Want Nelson Peltz on the Board
" Wall Street Journal (09/15/17) Wilmot, Stephen"

Some observers say fellow Procter & Gamble (PG) shareholders should support Trian Fund Management's Nelson Peltz in his fight for a board seat, pointing out that the stock has been a laggard for the past five years. Trian disclosed a $3.5 billion investment in P&G in February, which amounts to only 1.48% of the company, which has raised questions about whether an investor with such a small slice of a company should carry outsized influence. A proxy vote ahead of the company's Oct. 10 annual general meeting will let shareholders decide whether Peltz should get the board seat. These observers point out that both Peltz and P&G CEO David Taylor want the same thing—faster growth—and largely agree on how to achieve it, improving accountability for results by untangling reporting lines. They add that shareholders would benefit from an investor in the boardroom, especially since P&G's existing board mostly comprises establishment corporate leaders. Moreover, they point out that voting for the existing board could be a riskier option, given that the company has a record of complacency and Taylor's talk of change is tempered by the fact that he is an insider.

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Report: Board Directors Speak Out About Their Expectations, Responsibilities
" PRNewswire (09/15/17)"

The Conference Board's Governance Center has released a report that details what corporate board directors believe their role entails. In the report, "Just What Is the Corporate Director's Job? Directors' Perspectives on the Board Member's Job Description," the viewpoints featured result from individual interviews and a panel discussion with board directors of companies from multiple sectors. Directors say they need to communicate regularly with each other and management about complex issues to be effective. They also need the skills necessary to compromise and gain consensus on important issues such as executive compensation, capital allocation, and shareholder engagement. While disclosure of shareholder engagement plans is not a regular practice, directors understand the importance of having such a plan. One director panelist offered three things a board can do before engaging a shareholder: determine how much company stock the shareholder owns, communicate with the company's investor relations department, and understand if the shareholder has an issue with a particular governance area. There also should be a balance of generalist and specialist directors. While there was not a consensus on whether boards need any specialist directors versus hiring outside consultants, most directors who shared their thoughts believe all directors should have basic knowledge about certain areas: the company's business, its industry, its competition, and how to run a business. Board diversity should not be considered a separate goal, but rather it should be part of the regular talent search. At least two directors who shared their thoughts believe that the best way to address the issue of having a low number of women and minorities on a board is to consider a larger talent pool of director nominees that doesn't have to always include CEOs. While new activist directors may tend to have their own constituency, incumbent directors should proactively open lines of communication. One director panelist opted to take such an activist director out to lunch to acclimate herself and found that person had some valuable insight into the company.

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Institutions Picking Up Pace in Governance
" Pensions & Investments (09/14/17) Kozlowski, Rob"

A report from PricewaterhouseCoopers and Broadridge Financial Solutions found that institutional investors have been more aggressive about governance activism in the 2017 proxy season. An analysis of 3,379 shareholder meetings held in the first half of 2017 found that climate change proposals gained momentum, with money managers like BlackRock (BLK) publicly supporting proposals at a number of companies after not having done so previously.

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Will Board Diversity Be the New Proxy Access?
" Cooley PubCo (09/11/17) Posner, Cydney"

The New York City Comptroller's Office is focusing on corporate board diversity, independence, and climate expertise as part of its Boardroom Accountability Project 2.0. Comptroller Scott Stringer is calling on the boards of 151 U.S. companies, 92% of which have adopted proxy access and 80% of which are in the S&P 500, "to disclose the race and gender of their directors, along with board members' skills, in a standardized 'matrix' format—and to enter into a dialogue regarding their board's 'refreshment' process." He believes this level of transparency would "push more boards to be diverse and independent," thus delivering improved long-term returns for investors. In a letter to 139 companies that enacted proxy access after receiving a proposal from the NYC Pension Funds, Stringer has requested information on the matrix the board currently uses to help better understand the range of skills and experiences deemed most critical, how they evaluate individual directors on an ongoing basis, and ways to establish a more structured director search process to source more diverse candidates. According to the comptroller's office, "Over the past three years, at least 27 of the 51 companies that the Comptroller targeted for proxy access due to inadequate board diversity have added at least 43 directors who are women, non-white, or both, and the largest oil and gas company in the world added a climate scientist to its board."

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Studies Show Hedge Fund Activists Have Adverse Impact on Board Diversity and Target More Firms With Women CEOs
" Cooley PubCo (09/12/17) Posner, Cydney"

Recent studies have examined the impact of hedge fund activism on diversity from different perspectives. One study by ISS looked at 93 S&P 1500 companies engaged by hedge fund activists between 2011 and 2015, involving 380 board seats. According to the study, only 8.4% of the directors nominated by hedge funds and the boards themselves in response to activism were women, and fewer than 5% were racial or ethnic minorities. In contrast, 25% of new directors at all companies in the S&P 1500 were women and 13% were minorities in 2015. Furthermore, all-male boards at companies engaged by hedge fund activists rose from 13% to 17%, compared to a 13-point decline among all companies in the S&P 1500. Meanwhile, a separate analysis of S&P 500 companies over the same period by Bloomberg News found that women were only nominated seven times by five of the biggest U.S. activist funds seeking a total of 174 board seats, and of the 108 seats won, five were women. In comparison, among all companies in the S&P 500, women were nominated to fill 26% of open seats and accounted for about 19% of directors. The study authors suggested that the behavior of hedge fund activists might be explained by the "role incongruity theory," in which "bias against women leaders...stems in part from dissimilar beliefs about attributes of leaders and women versus similar beliefs about attributes of leaders and men ('think leader-think male syndrome')."

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As Activist Investors Engage Asia, China Becomes a Hot Spot
" Wall Street Journal (09/14/17) Hunter, Gregor Stuart"

Activist investors are increasingly turning to Asia, but it is at companies based in China—rather than market economies like Japan or South Korea—where they have had the most success. Activists have successfully pushed for change in 40% of the companies they have engaged in Asia since 2013, according to data from Activist Insight, compared with a 56% success rate in the United States over the same period. Meanwhile, the frequency of campaigns by activist investors in Asia is accelerating. Some 38 companies in Asia were engaged by activist investors in the first half of 2017, already more than the total in 2013 and on track to outdo 2014's tally as well, according to the report. Activist investors in Asia can find it difficult to overcome resistance to change from big family owners of companies and other major shareholders. The presence of the state as a big investor in countries like China can be another barrier. Yet, perhaps surprisingly, China has emerged as a happy hunting ground. Half of all activist campaigns waged there in the past four years have been successful, according to Activist Insight. In Japan, activist investors have fought 83 campaigns against companies in the past four years, taking their cue from Prime Minister Shinzo Abe's calls for better corporate governance. Still, activists have successfully pushed for change in just 20% of the campaigns launched in the country, with corporate boards often pushing back against demands. In South Korea, where family-owned conglomerates known as chaebols control huge chunks of the economy, change has also been slow. Just 10 activist campaigns have been launched over the past four years, with only 13% proving successful—the lowest level in the survey.

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Big Investors Take Aim at Banks Over Climate Change Risk
" Financial Times (09/14/17) Flood, Chris"

A group of institutional investors managing more than $1 trillion in assets is calling on 60 of the world's biggest banks to take action on climate change. The devastation caused by Hurricane Irma across the Caribbean and Florida has added urgency to efforts by pension funds and asset managers to step up the fight against climate change. Letters have been sent to the CEOs of banks including HSBC (HSBC), Lloyds (LYG), Bank of America (BAC), JPMorgan Chase (JPM), Morgan Stanley (MS), and Deutsche Bank (DB) to demand more information about their exposures to climate-related risks and their plans to ensure compliance with the Paris climate accord reached by governments in December 2015. Banks are exposed to climate-related risks through their lending activities as well as other financial services, including project finance and equity and debt underwriting.

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P&G: Peltz Lacks Skills Needed for Board, but Here's What We're Looking For
" Cincinnati Business Courier (09/12/17) Brunsman, Barrett J."

Procter & Gamble (PG) says Trian Fund Management CEO Nelson Peltz lacks the required skills to fill a seat on the company's board, stating in a 94-page report focused on why shareholders should vote against adding him to the board that he "has no magic." Peltz oversees more than $3.4 billion worth of P&G stock and is leading the biggest proxy challenge ever for a board seat based on the company's market capitalization of $238 billion. Of P&G's current 11 board members, six are former CEOs, four are current CEOs, and board member Ernesto Zedillo was president of Mexico. P&G Chairman and CEO David Taylor said in a recent interview that he prefers that the next person to join P&G's board have expertise in one of five potential areas. "I'd want somebody who understands technology and how to apply it to the consumer products industry," Taylor said. "I'd want someone who has deep understanding of developing markets—who understands India, China, and markets where future households are formed that will be future consumers. I could say I want somebody who has deep understanding of the healthcare industry because we've got a couple of businesses there and that's an interesting area. I'd want somebody who has deep experience in...cycle innovation because the pace of change has gotten higher. I'd want diversity of thought," he said. "I listen to every one of the investors who wants to speak to me. But to me it's different than being on a board—and being a person who's tasked with representing shareholders but also helping input to the strategy and future of the company."

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Proxy Adviser ISS Outlines View of CEO Removals From Boards
" Reuters (09/12/17) Flaherty, Michael"

In light of major proxy contests at Procter & Gamble (PG) and Automatic Data Processing Inc. (ADP), Institutional Shareholder Services (ISS) on Tuesday released a paper offering its perspective on the trend of activist investors actively seeking to unseat CEOs from company boards.  The report follows an Aug. 25 post on the Harvard Corporate Governance blog, written by Skadden Arps Partner Richard Grossman, that urged ISS to raise its recommendation standard when a dissident shareholder seeks to remove a CEO from the board.  The proxy adviser on Tuesday responded that it closely examines the unintended consequences of any potential top executive change resulting from a contest.  "The removal of a CEO from a board represents a vote of no-confidence that carries further-reaching consequences than the removal of most other directors," it explained.  ISS did note that the tactic may be appropriate in cases of proven poor execution, operational problems, or unjust management influences over the board.  In the blog post, Grossman cited a steady increase since 2011 in activist campaigns pursuing removal of company CEOs from the board—including at least nine so far this year.

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