13D Monitor Real-time Activist Newsfeed


Danone Chairman Steps Down Amid Management Reshuffle
" Financial Times (10/18/17) Agnew, Harriet"

Danone Chairman Franck Riboud, former CEO and son of founder Antoine Riboud, has stepped down, and CEO Emmanuel Faber will assume the chairman role. Riboud will become honorary chairman and continue to serve as a director. Also approved at the Oct. 18 board meeting was Faber's proposal to cut the size of the management committee from nine people to six. According to Faber, "The shortened executive committee will allow us to make faster decisions. We will empower our team of regional vice presidents to make more countrywide decisions. It is crucial to the revolution that our industry is going through that we have a locally routed decision-making process." He also said he had not had any dialogue with Corvex, the U.S. hedge fund that has built up a $400 million stake in Danone without publicly stating its intentions. Leaving the executive committee and the company are Gustavo Valle, who ran essential dairy and plant-based products, and Pierre-André Térisse, who was in charge of Africa and India. Meanwhile, Lorna Davis will step down from the executive committee but remain as a senior adviser to Faber.

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ComScore Fills out Its Board, for Now, With NFL Executive
" Washington Business Journal (10/18/17) Neibauer, Michael"

ComScore Inc. (SCOR) has added a ninth board member as part of a settlement agreement with Starboard Value. Michelle McKenna-Doyle—currently SVP and CIO at the National Football League—will join the comScore board as an independent director, effective immediately. She also sits on the boards of RingCentral Inc. (RNG) and Insperity Inc. (NSP). "Her extensive expertise in technology and marketing, as well as business operations and finance, make her a valuable addition to our Board," said comScore Chairwoman Sue Riley. A deal between comScore and Starboard Value allowed the shareholder to appoint four members to the comScore board, upping its number to nine. But Starboard might not be done. Securities and Exchange Commission (SEC) filings show the investor can recommend another independent director or a Starboard partner to the comScore board, equaling comScore's picks. If comScore fails to file audited financial statements with the SEC by March 31, Starboard would have the opportunity to nominate a sixth member—essentially resulting in its control of the company.

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Top Credit Suisse Investor Backs Part of Break-Up Plan
" Financial Times (10/17/17) Jenkins, Patrick; Noonan, Laura"

Harris Associates—Credit Suisse's largest shareholder, with a 9% stake—is mostly opposed to an investor's plan to break up the company but is encouraging the Swiss bank to entertain parts of the proposal.  Reactions were largely critical on Tuesday following reports that RBR Capital Advisors had acquired a roughly 0.3% stake in Credit Suisse and was preparing to launch a campaign to split it into three.  However, David Herro, Harris' international chief investment officer, admitted to the Financial Times that RBR's idea "does have some points that require a second thought."  Herro, who worked with RBR before when it waged a campaign against the Gategroup catering business, said: "I don't really think there's a lot of merit [in the break-up plan].  From a practical perspective it would be very difficult.  We would just prefer to see management execute the plan that they've developed."  But he advised Credit Suisse CEO Tidjane Thiam not to entirely disregard RBR's proposal and encouraged management to consider certain ideas, such as shifting the domicile of the group's investment banking arm from Switzerland to the United States.  RBR is slated to unveil the full details of the plan at a conference this week in New York.

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Ackman Cranks Up Pressure on ADP
" Wall Street Journal (10/17/17) Mickle, Tripp"

William Ackman declared Tuesday that Automatic Data Processing Inc. (ADP) has "missed the market" by prioritizing meeting revenue guidance over technology development.  The Pershing Square Capital Management founder made the comments during an interview at The Wall Street Journal's WSJ D.Live technology conference.  He argued that there is "no ownership culture in the boardroom," and said the company was too focused on "making its numbers."  He added: "They spend more than the entire industry does on developing products and software and much smaller competitors …have better products than ADP."  Ackman, who acquired a roughly $4 billion stake in August, has estimated the company can double its stock value by bulking up its own software capabilities.  He is seeking three seats on the board ahead of a Nov. 7 vote.  ADP rebuffed Ackman's bid for board representation in August and instead nominated its 10-person board for re-election.  The company said in a statement that although ADP understands the value of diverse director perspectives, Pershing Square's nominees lack the "relevant technology" experience and skills to "be additive" to ADP's board.  Ackman said he does not anticipate making more technology-related investments, noting "the companies are so dynamic that it's hard to predict the future."  He said ADP was different because it is a services business based on long-term relationships with firms that would trigger high costs by switching to competitors.  Ackman also addressed the practice popular among tech companies of issuing nonvoting or low-voting stock.  He said that structure could work when the founder is still involved but "after the founder retires, it should convert to one vote one share."

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Pallet Group Brambles Narrowly Avoids Strike, But Chairman Stephen Jones Hit in Re-election Effort
" Herald Sun (Australia) (10/18/17) Kitney, Damon"

Twenty-five percent of shareholders voted against re-electing Brambles Chairman Stephen Jones, according to proxies, but the company successfully avoided a hit against its executive pay report.  The result came on the heels of a rough year for the pallets supplier, which in February ditched its longer-term sales and profits goals.  Some 23.1% of votes were cast against the remuneration report—just below the 25% threshold for a pay strike under Australian corporate law.  It was described as "a Pyrrhic victory" for the board by one institutional investor.  Meanwhile, director Brian Long garnered an 18% vote against his re-election.  Proxy advisory firm Ownership Matters had recommended that institutional investors vote against key resolutions at the Oct. 17 meeting.

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Ackman, ADP Board Nominees to Discuss Plans for Company Thursday
" Reuters (10/17/17) Herbst-Bayliss, Svea; Shakil, Ismail"

William Ackman's nominees for election to the board of Automatic Data Processing Inc. (ADP) will field questions this week about their plans for their company.  Sanford C Bernstein & Co. investment analyst Lisa Ellis will interview Ackman plus director candidates Veronica Hagen and Paul Unruh.  The event will be streamed live online Thursday at 1 p.m. EDT at  The Q&A session, organized by Bernstein, precedes the Nov. 7 proxy vote where Ackman is angling for three seats on ADP's 10-member board.  While the investor has been making public presentations since August, his two candidates have remained largely under the radar.  Ackman is pressuring ADP to reduce bureaucracy, consolidate its real estate holdings, and enhance technology—all to improve earnings.  Ellis published a research note last week that revealed a survey of shareholders commissioned by her firm found that many supported Pershing Square's campaign for change at ADP.  "The survey results, in our view, increase the likelihood that Pershing will win meaningful support in the Nov. 7 shareholder vote, although we still consider it unlikely the activist wins seats," Ellis said in the note.

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Bain Defends Asatsu-DK Bid as Shareholder Opposition Grows
" Reuters (10/17/17) Barreto, Elzio; Fujita, Junko"

Bain Capital responded to opposition from Asatsu-DK Inc. investors on Wednesday, declaring that its $1.35 billion offer to purchase Japan's third-largest advertising agency is "fully priced" and beneficial for shareholders.  Hong Kong-based hedge fund Oasis Management Company, which owns less than 5% of Asatsu-DK, has argued the offer is too low.  "We believe there is lot of potential growth in earnings by ADK through expanding its digital strategy and animation.  Bain is attempting to buy a steady, consistent platform with large untapped potential," Seth Fischer, chief investment officer of Oasis, said Tuesday.  "We, as long-term shareholders, want to get paid a fair price for our shares, which we think is at a premium to the current market price."  Asatsu-DK's top two shareholders, global advertising giant WPP and London-based fund manager Silchester International, have also argued the offer significantly undervalues the company; and they have called for competing bids.  WPP owns roughly 24% of Asatsu-DK, while Silchester International has about 17%.  Bain has said it will cancel the buyout unless it gathers at least 50.1% of Asatsu-DK.  The tender offer will remain open until Nov. 15.  The battle marks the second time in about a month that a private equity firm fought shareholders for a Japanese asset, after Elliott Management Corp. pressured KKR & Co. LP (KKR) to sweeten its bid for Hitachi Kokusai Electric in a deal valuing the firm at about $2.3 billion.

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RBR Engages Credit Suisse Despite Signs of Turnaround Success
" Financial Times (10/17/17) Noonan, Laura; Mooney, Attracta"

Although analysts just months ago celebrated a "watershed" moment in the turnaround of Credit Suisse, the Swiss banking company is being engaged by RBR Capital Advisors, which owns less than half a percent of the company. Although the bank still has work to do—return on equity for the six months to June was 4.4% and the bank's cost of equity is approximately 10%—some analysts say RBR's engagement will fail to appeal to investors prior to its next strategy day, Nov. 30. Citigroup analyst Andrew Coombs, for example, told clients he "questions RBR's rationale" because there are "clear synergies" between the wealth management and investment bank. Coombs forecasts that return on equity will advance from 5.5% this year to 9.5% next year.

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Hedge Fund Seeks Credit Suisse Break-up
" Financial Times (10/17/17)"

Credit Suisse is being engaged by shareholder RBR Capital Advisors, which is working to win support for a plan to break up the Swiss banking group. Guests on this podcast discuss whether the plan has merit.

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EQT Makes Case for Acquisition of Rice Energy
" Pittsburgh Business Times (10/17/17) Gough, Paul J."

EQT (EQT) is resisting pressure from Jana Partners about its $6.7 billion acquisition of Rice Energy (RICE). The hedge fund previously urged shareholders to vote against the deal at the Nov. 9 meeting. However, EQT claimed that Jana was wrong when it said a combined EQT-Rice would not be able to meet the operational targets and $2.5 billion in synergies. Having noncontiguous acreage in its portfolio will be addressed through future acquisitions and fillings, the company said. "Each of these methods are routinely employed by EQT and other Appalachian operators to build their respective development programs," EQT said. "Given the multitude of legacy natural gas leases across Appalachia, it is commonplace for small acreage plots to exist given the historical ownership of land in the region." The company noted that the purchase of Rice Energy would help EQT with what it calls the "sum-of-the-parts discount," or how EQT is undervalued by the market due to the upstream and midstream assets it holds. EQT has pledged to create a board committee in 2018 to address this issue, potentially through a sale or split of the company.

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Orchestra-Prémaman S.A. Issues Urgent Letter to Destination Maternity Shareholders
" PR Newswire (10/17/17)"

Orchestra-Prémaman S.A. and Yeled Invest S.A. sent a letter to fellow shareholders of Destination Maternity Corp. (DEST) on Tuesday urging them to vote against the current incumbents on the board and to disregard the company's "misleading information." The letter states that the current directors have refused to discuss their "devastating" tenure, during which the stock has fallen about 85% to 93%, depending on the director, before Orchestra announced its proxy campaign. The letter also points out that under the current directors, the company has underperformed the broad market and its peer indexes. "Destination's upcoming annual meeting may be your last chance to hold the directors accountable," the letter states, and urges them to vote against each of the "failed Status Quo Directors."

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India Proposes Board Rules to Challenge Tycoons
" Financial Times (10/16/17) Mundy, Simon"

During the past year, the Tata conglomerate and IT services group Infosys have been wracked by infighting that has cast a shadow over India's reputation for corporate governance. Now, the Indian securities regulator is gearing up to overhaul governance rules, aimed at addressing complaints about the power of company founders and their families, and boards that too often fail to properly examine decisions. On Nov. 4, the Securities and Exchange Board of India will close a consultation on recommendations put forward this month by a committee it commissioned under Uday Kotak, billionaire founder of Kotak Mahindra Bank. Proposals include the separation of chairman and chief executive roles, as well as boosting the presence of independent directors and shoring up their obligations.

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P&G Says Nelson Peltz Lost Bid for Board Seat by About 0.2 Percent of Share Count
" Wall Street Journal (10/16/17) Benoit, David; Terlep, Sharon"

Procter & Gamble Co. (PG) revealed it bested Nelson Peltz by 6.15 million votes, only about 0.2% of its shares outstanding. A weeks' long recount is expected to determine the final outcome of the most-expensive proxy fight in history. In a securities filing, P&G disclosed that Peltz received 973 million shares and that Ernesto Zedillo, the P&G director with the least number of votes, won 979.2 million. Zedillo got 48.9% of the shares voted at the meeting, while Peltz received 48.6%, according to P&G's preliminary tally. "Trian continues to believe that the election is too close to call," Peltz's Trian Fund Management stated on Oct. 16. It could take several weeks for an independent inspector to confirm the results.

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Swiss Investor Bohli Engages Credit Suisse
" Bloomberg (10/16/17) Foerster, Jan-Henrik"

Rudolf Bohli's RBR Capital Advisors is calling for Credit Suisse Group AG (CS), Switzerland's second-largest bank, to break into three parts.  The local investor has acquired a 0.2% stake in Credit Suisse, worth about 100 million francs, according to a source.  Bohli has met with executives in recent weeks to discuss some of his ideas, including a split of the firm's investment bank from the private-banking units, the source said.  Credit Suisse launched a restructuring led by CEO Tidjane Thiam two years ago, reducing turbulent trading operations and focusing more on managing money for the wealthy.  Progress on improving profitability has been tepid and the shares have fallen by one-third under Thiam.  However, the stock is up about 10% this year amid greater optimism about the cost cuts; and profit rose 78% in the second quarter as reduced expenses buoyed the global markets business.  While Bohli indicated earlier this year that he did not plan on engaging a bank soon because of their size and complexity, he wrote in an investor update that Credit Suisse was a "misunderstood jewel" with an undervalued wealth-management business.  Gael de Boissard, former co-head of Credit Suisse's investment bank, reportedly is backing Bohli.  The hedge fund is expected to announce its strategy this week at the Robin Hood investors conference in New York.  Analysts and investors suggested it is unlikely Bohli could force a breakup of Credit Suisse, with one noting that the businesses are too integrated and the bank is still undergoing a major restructuring.

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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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Bill Ackman: Activist Investors Aren't Dangerous
" Fortune (10/17/17) Nusca, Andrew"

Corporate boards of directors should not fear activist investors, Bill Ackman, the billionaire hedge fund manager behind Pershing Square Capital Management said Tuesday at the Wall Street Journal's D.Live conference in Laguna Beach, Calif. "What activism does is sort of a replacement for the founders," said Ackman, adding that activist investors can help make decisions like a major owner. Ackman acknowledged that his firm once held shares in Proctor & Gamble (PG), and said most of the directors on P&G's board are working CEOs at other companies who do not have the time to spend on P&G. "It is dangerous to not have opposing viewpoints in the boardroom," according to Ackman. Pershing Square spent much of this year engaged in a battle with ADP (ADP) over seats on its board, and Ackman said the situation at the human resources software company is dangerous. He called supervoting share structures like those at Uber and other tech and media giants a mistake because they protect them from activists and what other shareholders have to say. Ackman also said companies that give guidance to shareholders about their results and focus on meeting specific metrics miss greater opportunity. ADP hits its numbers quarter after quarter only to miss the next wave of innovation affecting its business, according to Ackman.

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Should Credit Suisse Break Up? The Answer Isn't Obvious
" Wall Street Journal (10/17/17) Davies, Paul J."

RBR Capital Advisors, a small Swiss investment firm, will soon publish details of its plan calling for Credit Suisse (CS) to engage in a three-way split into investment banking, asset management, and wealth management firms. Observers say it is an odd time to make such a move, as the global bank's stock is up nearly 20% since June, and despite early missteps and cuts to profit targets, CEO Tidjane Thiam is winning shareholder support for his multi-year overhaul. However, they note that Credit Suisse's position is far from secure, and RBR would be right to point out inconsistencies in its actions. Furthermore, observers note that not all of the bank's pieces would stand on its own. The wealth management arm might be more highly valued than today, but its asset management arm could struggle to be relevant, and both would lose easy access to products created by the investment bank. Moreover, a stand-alone investment bank would be too small and too expensive to fund without cutting more of its financing and trading businesses. They are not confident that RBR will provide the answer to these issues.

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Discontent in the Boardroom Reaches All-Time High, According to PwC's 2017 Annual Corporate Directors Survey
" PRNewswire (10/17/17)"

PwC's 2017 Annual Corporate Directors Survey compiles insights from 884 board members to examine director sentiment across a range of governance issues—many of which point to stark disconnections between directors and investors. Core topics addressed in the survey include board refreshment; diversity; increasing focus on environmental, social, and governance (ESG) issues; engaging with shareholders; executive pay; and cybersecurity oversight. The survey found that director discontent with peers is on the rise. Almost half (46%) of directors say at least one colleague should be replaced. Directors grapple with achieving—and even defining—diversity. While directors say that board diversity is valuable and the vast majority say their boards are taking steps to increase diversity, they don't all see benefits beyond the boardroom. Environmental issues struggle to break through in the boardroom. ESG broke through with broad and newfound investor support in the 2017 proxy season. However, almost one third of directors (30%) indicate they do not have and do not need expertise in this area. Additionally, 40% say environmental issues should not be taken into account at all in forming company strategy. Executive pay remains a pain point. The majority of directors (70%) at least somewhat agree that executives are overpaid. Two-thirds (66%) at least somewhat agree that executive compensation exacerbates income inequality. Directors have adopted more positive attitudes on shareholder engagement and are now significantly more likely to think direct engagement positively impacts proxy voting (77%, up from 59%). However, 23% still say that directors should not be engaging with shareholders.

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16 Percent of Corporate Board Members Say Racial and Gender Diversity Has No Benefit 'at All'
" Fortune (10/16/17) Zillman, Claire"

A new PwC survey of nearly 900 corporate directors found that 73% recognize that diversity is beneficial. Of that group, 94% said gender and racial diversity bring unique perspectives to the boardroom, 82% said it boosts board performance, and 59% linked it to improved company performance. However, a rather surprising 16% said gender and racial diversity offers no benefit at all. Furthermore, 33% said socioeconomic diversity is "not at all important" to fostering diversity of thought in the boardroom.  Such results may help explain respondents' apparent satisfaction with the current levels of diversity on corporate boards. Indeed, 58% of respondents said their board has achieved racial diversity. But a recent Spencer Stuart study shows only 15% of board seats at the top 200 S&P 500 companies belonged to racial minorities and 21% belonged to females. Some 27% of directors said there is too much focus on gender diversity; 97% of those respondents were men.

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Doing Good Can End Badly for CEOs
" Wall Street Journal (10/17/17) Fuhrmans, Vanessa"

Many CEOs believe that companies should be good corporate citizens in addition to making money. Such leaders variously promote efforts to cut their company's carbon footprint, work with sustainable suppliers, and produce healthier or more eco-friendly products. However, a recent study indicates that although socially responsible initiatives can help protect CEOs from being fired during more prosperous times, such initiatives boost the likelihood they will be fired in bad times. Researchers found that those who heavily invested company resources in good corporate citizenry were 84% more likely to be fired amid poor financial results than CEOs at poor-performing companies that spent less on doing good. On the other hand, spending on corporate social responsibility protected CEOs amid positive financial results. They were 53% less likely to be fired than other leaders of high-performing companies that didn't invest as much in do-good initiatives, according to the study.

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VIDEO: William Ackman: 'Supervoting Is Dangerous'
" Wall Street Journal (10/17/17)"

William Ackman offers his thoughts on supervoting.

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Sidebar: Mixed Results for Investors Engaging Banks
" Financial Times (10/17/17) Fortado, Lindsay"

Activist investors tend not to engage banks as frequently as they do companies in other industries, partly due to the size of many of the biggest banks, insufficient transparency around their revenues and structure, and the vast amount of regulation that covers the industry. However, there has been some engagement. When Monaco-based Knight Vinke engaged both UBS (UBS) and HSBC (HSBC), two of the biggest banks in Europe, shares in both banks climbed. Dan Loeb's Third Point currently has a stake in Italian lender UniCredit but has not yet made any public demands. And ValueAct acquired a stake in Morgan Stanley (MS) last year; shares rose after the fund asked the bank to invest more time and resources in its wealth management unit and advisory businesses.

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Can a New Long-Term Stock Exchange Disrupt Capitalism?
" Wall Street Journal (10/17/17) Osipovich, Alexander; Berman, Dennis K."

Some of Silicon Valley's technology companies intend to launch a new framework for corporate governance, investing, and trading called the Long-Term Stock Exchange (LTSE). Backed by key Valley players, the LTSE says it intends to seek regulatory approval by the end of this year to become the newest U.S. stock exchange. Its primary feature will be a system in which the voting power of shares increases the longer investors hold them. Firms listed on the exchange would need to use such a structure, often called "tenure voting," while abiding by numerous other rules, such as a ban on linking executive pay to the company's short-term financial performance.

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Light Backing From State Street Weighs on U.S. Diversity Drives
" Reuters (10/16/17) Kerber, Ross"

State Street Corp. (STT) did not fully back boardroom diversity measures this year, according to a new analysis by Proxy Insight.  Of eight shareholder resolutions on board diversity in 2017 at Russell 3000 companies, funds run by State Street's asset-management arm supported one, opposed four, and abstained on three others, the research shows. Rival asset managers BlackRock Inc. (BLK) and Vanguard Group backed five and six of the eight resolutions, respectively.  State Street has been applauded for its past efforts to put more women on corporate boards, including the "Fearless Girl" statue it installed near Wall Street.  But activist shareholders are frustrated that the firm's public stance on diversity did not translate into a greater show of support during shareholder votes—especially since its $2.6 trillion under management gives it considerable clout on corporate matters.  For example, State Street opposed a shareholder resolution calling for Apple Inc. (AAPL) to accelerate efforts to diversify its senior management and board.  The proposal received 4.9% support at Apple's meeting in February, missing the 6% threshold needed to be refiled.  State Street abstained, meanwhile, on a measure asking Discovery Communications (DISCA) to include qualified women and minority candidates in board searches, backed by 35% of votes cast.  State Street said it engages with companies in various ways and voted against directors when necessary.  Representatives noted that, including abstentions, State Street did not support management in half of the eight cases and that its funds often voted against directors as well.

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Financial Services Found to Have Widest Gender Pay Gap in U.K.
" Financial Times (10/15/17) Gordon, Sarah"

Financial services companies in the United Kingdom have the biggest gender pay gap, according to early returns on the government's gender pay gap registry.  Financial services has a median gender pay gap of 31%, according to analysis by data analytics company Staffmetrix.  The number is based on data logged by companies and public sector organizations on the government's website.  Electricity and gas suppliers have the second highest gap, at 26%, followed by the construction sector at 23%.  Companies with more than 250 employees must publish the gap for mean and median wages and bonuses, as well as the percentages of men and women receiving bonuses at a number of pay scales.

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Dual-Class Shares Should Build in Expiration Plan
" (10/16/17) Indap, Sujeet"

This year will perhaps be remembered as a tipping point in the debate over the concept of dual-class stock that places disproportionate power in the hands of a few people. Snap's (SNAP) shares have dipped 15% since the tech group introduced no-vote stock in its March initial public offering, and Mark Zuckerberg of Facebook (FB) and Barry Diller of IAC (IAC) have abruptly abandoned plans to create new, no-vote shares. Major indices such as S&P Dow Jones and FTSE Russell have announced plans to exclude companies that have multi-class structures from the baskets that passive mutual funds track. Prominent shareholder advocacy groups are leery of dual-class shares because the structure means that ordinary shareholders who have the same economic interest in a company do not receive an equal say in corporate governance. Those less alarmed by dual-class shares point out that the arrangement can help shield companies from activists seeking short-term gain so founders can pursue long-term value creation. The present system creates a fair choice, but some academics favor a compromise in the form of "sunset" provisions that force super shares to collapse into ordinary shares. The ideal dual-class structure is one that lasts 10 to 15 years post-IPO with the option for shareholders to extend if they consent, according to research from Harvard professor Lucian Bebchuk. The most reasonable sunset provision should rest on the founder's level of engagement, says Stanford academic Andrew Winden.

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The Hedge Fund, the CEO, and the Fight for P&G's Future
" (10/13/17) Nicolaou, Anna; Daneshkhu, Scheherazade"

Trian Partners' Nelson Peltz recently was denied a seat on the board of Proctor & Gamble (PG). In one of the largest and most expensive proxy battles corporate America has ever seen, Peltz charged P&G, which has been losing market share for a decade, with being slow, closed-minded, and too focused on its big brands at a time when consumers are looking for more distinctive products. Trian, which paid $3.5 billion for a 1.5% stake in P&G in February, wants to simplify the consumer goods group's corporate structure from 10 business units to three, but has not demanded more extreme measures, like a change of leadership or spinoffs. Both sides spent tens of millions of dollars on campaigns and nearly double the number of shareholders—more than 400—showed up to the meeting in Cincinnati compared to previous years. Trian drew the "vast majority" of its support from institutional investors, but P&G won over retail investors and employees, who make up an unusually high share of its investors. Analysts say P&G has made progress, with shares growing more than 20% since CEO David Taylor took over two years ago, keeping pace with the S&P 500. However, the message from large investors is clear and Peltz is unlikely to go away, according to market observers.

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Japan Inc. Scandals Build a Case for Corporate Reform
" Bloomberg (10/12/17) Smith, Noah"

Kobe Steel Ltd., which has admitted faking data about the quality of its materials, offers further evidence that Japanese companies need to adhere to better corporate governance, rather than relying on apologies after the fact. Corporate governance would prevent scandals and also foster productivity. Investors and independent directors are the best people to force Japanese managers to improve, according to research by economists Naoshi Ikeda, Kotaro Inoue, and Sho Watanabe of the Tokyo Institute of Technology. Without shareholder pressure, they say, managers tend to favor "satisficing" or "the quiet life"—avoiding big decisions and contenting themselves with managing stable corporate empires, which allows their companies to stagnate. This tendency was recognized in the 1930s, and Ikeda and his colleagues say that this is going on in modern corporate Japan. Numerous Japanese companies engage in cross-shareholding, where corporations own one another's stock, resulting in a "you don't push us too hard, and we won't push you" mentality. Exacerbating the problem is the fact that Japanese companies don't have a lot of independent directors on their board, which often leaves managers themselves in control. The researchers also discovered that companies with more cross-shareholding spend less on both capital investment and research and development, and engage in less corporate restructuring. Capital expenditure and R&D suggest a desire for growth and expansion into new markets, while restructuring suggests a push for efficiency. Japanese managers who are protected from shareholder pressure tend not to do either of these things. The presence of independent directors on a company's board is correlated with more investment, R&D, and restructuring, the researchers say.

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