In SandRidge Proxy Fight, Icahn's Reputation for Turnarounds at Stake
" Reuters (06/15/18) McWilliams, Gary"
On June 19, shareholders of SandRidge Energy Inc. (SD) will cast their votes for directors, and they will have to determine how much control they will give to Carl Icahn, whose hedge fund owns a 13.6% stake in the company. Under the formula set by the board, Icahn is assured at least two of seven board seats, and observers note that he is staking his reputation by pushing for a straight vote on his seven-person director slate. According to Coker Palmer International analyst David Beard, he could win three or four seats with the support of many of its largest shareholders, activists, or distressed company investors. Thomson Reuters data indicates that institutions including Icahn's hedge fund, Fir Tree Partners, Paulson & Co., Guggenheim Capital, and Apollo Capital hold 88% of SandRidge's stock. Although Icahn has support for three board seats from Institutional Shareholder Services and Glass Lewis & Co., SandRidge has attacked his board slate in a series of shareholder letters. The company has argued that his losses from $7 billion in past energy company investments total $540 million and that Icahn wants to "gain control of SandRidge without paying an appropriate premium." Meanwhile, Beard added, "Whether he wins two seats or all the seats, there is no magic switch that he can flip to drive shareholder value in the short term."
Lessons from Europe: How to Get More Women on Corporate Boards
" Fortune (06/15/18) Kowitt, Beth"
U.S. boardrooms—where only about 20% of corporate directors are female—could take a lesson from Europe, where the momentum behind adding women to boards has picked up steam. At Fortune’s MPW International Summit in London, women leading the push to diversify European boards shared their strategies. Sophie L’Helias, co-founder of International Corporate Governance Network, has a philosophy that comes from her time in the activist hedge fund industry. “I believe in numbers,” she said. But when it came to gender in the workplace, she did not feel like the data was out there. She thus started LeaderXXchange, an organization whose mission includes promoting diversity in governance, leadership, and investment. LeaderXXchange recently launched the Gender Diversity Exchange, a database that not only tracks what companies announce in regard to their gender policies, but whether they are meeting their targets. The tool also looks beyond boards to diversity in the c-suite and management, as well as the trends over a five-year period. Helena Morrissey, head of personal investing at Legal & General Investment Management, founded the 30% Club to push U.K. companies to have 30% of their boards comprised of women by 2010. The investor and institutional asset manager has been voting against the chairs of boards of FSTE 350 companies whose boards are not at least 25% women. Last year, that resulted in the company voting against 37 board chairs in the U.K.
Two Corporate Governance Mechanisms: Activism and Hostile Takeovers
" London School of Economics Business Review (06/12/18) Burkart, Mike; Lee, Samuel"
New research from London School of Economics professor Mike Burkart and Samuel Lee, an assistant professor of finance at Santa Clara University's Leavey School of Business, compares shareholder activism with hostile takeovers. Their key insight, when examining takeovers and activism in isolation, is that the prospect of larger value improvement in an engaged firm raises the takeover premium more than net surplus, but also makes an activist campaign more rewarding relative to its costs. Thus, activism becomes more profitable as takeovers become too "expensive," and more valuable campaigns also are more profitable but tender offers with larger surpluses yield smaller bidder returns. Burkart and Lee show that the legal risk of a price revision has opposite effects on activism and hostile takeovers; in takeover activism, it merely reinforces ex post free-riding. As a result, activists are better off acting as control brokers, rather than using control to implement value improvements on their own. When considering the two governance mechanisms as feasible alternatives, the research shows the potential of a tender offer erodes activists' incentives and reduces campaign profitability, making takeover activism the only relevant alternative. Implications for takeover activism from the theoretical analysis are higher returns over other forms of activism while enabling takeovers that otherwise would not occur and replacing some tender offers with more efficient mergers.
Abstract News © Copyright 2016 INFORMATION, INC.