Pershing Square's Bill Ackman says his big bet on Valeant Pharmaceuticals (VRX) was a "huge mistake" and that he misjudged the skills of Valeant's previous management led by ousted CEO Michael Pearson. "The highly acquisitive nature of Valeant's business required flawless capital allocation and operational execution, and therefore, a larger than normal degree of reliance on management," Ackman wrote in his annual letter to shareholders. "In retrospect, we misjudged the prior management team and this contributed to our loss. We deeply regret this mistake, which has cost all of us a tremendous amount, and which has damaged the record of success of our firm." Pershing Square recorded a 13.5% loss on investments in 2016, with the sharp decline in Valeant's share price sending the hedge fund to the worst two-year showing since its inception. "A management team with a superb long-term investment record is still capable of making significant mistakes," Ackman wrote. "In retrospect, Valeant's underlying businesses were not sufficiently durable to withstand the impact of the reputational damage caused by the stock price decline, negative media attention, and its impact on employee morale."
A year after Pandora Media Inc. (P) co-founder Tim Westergren became CEO a second time to revive the online radio company and avert a potential sale, he is taking one last chance to prove the company can survive on its own amid competition from Spotify Ltd. and Apple Inc. (AAPL). Pandora is gearing up to roll out Premium, a new service offering millions of songs on demand for $9.99 per month. In order for the effort to succeed, the Oakland, Calif.-based company must convince some of its 81 million users to upgrade from their free, customized radio stations. As it loses listeners and money, Pandora has attracted the attention of Corvex Management LP, which owns an 8.8% stake in the company. Westergren has publicly opposed a sale of the company, but sources say several board members are open to the idea or at least to giving Corvex seats on the board. BTIG LLC analyst Rich Greenfield said in a note this month that "Pandora has clearly failed as a public company" and must sell itself or risk war with Corvex, its second-largest shareholder. Corvex has regulatory clearance to acquire 15% of Pandora and has been beefing up its stake while putting pressure on the company to improve performance or sell. Pandora has fired staff and hired an adviser to review options, including a sale. Furthermore, it has extended the deadline for shareholders to propose new directors. Sources say the two sides are locked in negotiations over the next steps, and that absent a sale, Pandora may expand the board to include Corvex representatives.
Depomed Inc. (DEPO) has installed a new CEO and put two new directors on the board, bowing to pressure from Starboard Value LP. The pharmaceutical firm confirmed Tuesday that industry veteran Arthur Higgins has joined it as president, CEO, and director following the resignation of James Schoeneck. In addition, Depomed named two new directors—including Starboard partner Gavin Molinelli—to the board, replacing two members who have resigned. Following a board shakeup late last year that gave Starboard three seats, six of the nine Depomed board members are now Starboard picks. "We are pleased to have reached an agreement to work with Depomed," said Molinelli on Tuesday, praising Higgins as an "excellent choice to lead Depomed." Starboard began pressuring the company last April, when it disclosed a 9.8% stake and called for a meeting to overhaul the board. The investor has said Depomed should explore selling itself and has blasted the company's corporate governance and capital allocation.
Oasis Management Co. is urging Katakura Industries Co., a Japanese firm founded more than a century ago, to exit businesses that fall short of profit targets. The Hong Kong-based fund, which holds a 3% stake in Katakura, says the diversity of ventures is not sustainable; and at Thursday's shareholder meeting in Tokyo, it presented three proposals aimed at boosting profitability. The plans would shake up the status quo at Katakura, which has denounced Oasis's recommendations as "extremely short-term" in nature. Oasis' chief investment officer, Seth Fischer, is suggesting that Katakura set a target for return on equity (ROE), a measure of profitability. He recommends that the company eliminate units that do not realize ROE of at least 5% and avoid entering businesses that do not have high prospects for returns. The proposals are "aimed at focusing management on increased disclosure, increasing profits and capital efficiency," Oasis said in a Feb. 21 presentation. Its previous recommendations for sustainable long-term growth were spurned "without any consideration," triggering a more public confrontation. "If anything, our proposals are very modest. We deliberately made them uncontroversial," Fischer said in an interview. "Katakura needs to focus on businesses that make money and are an efficient use of capital. The fact is many of its business lines have barely been profitable or have been loss-making for many years despite large investments." Thursday's shareholder meeting has divided the two major proxy advisory firms: Institutional Shareholder Services Inc. is backing Oasis's proposals, while Glass Lewis & Co. is taking the opposite position.
Tesco CEO Dave Lewis said on Tuesday the company remains "completely committed" to its agreed £3.7 billion ($4.7 billion) takeover of wholesaler Booker, despite opposition from some major investors. On Monday, Tesco's third and fourth biggest shareholders—Schroders and Artisan Partners, which together own a 9% stake—urged the company to withdraw its offer, calling it overpriced and a distraction from the company's turnaround plan. Lewis told reporters on Tuesday that he was very pleased with the shareholder response since announcing the deal on Jan. 27. He said support for the transaction was evident by investors buying Tesco stock over the last two months. Bruno Monteyne, an analyst at Bernstein and a former senior Tesco executive, thinks that shareholders are largely very supportive of Lewis' turnaround plan, and that the opposition from Schroders and Artisan is not enough to derail the deal. Lewis also noted Tesco was still in the early stages of the takeover process, with the deal still to be formally reviewed by competition authorities. If the review is successful, the deal will need to be approved by half of Tesco shareholders at a shareholder meeting.
Buffalo Wild Wings (BWLD) on Monday announced a slate of nominees to stand for election at the company's 2017 annual meeting of shareholders, including CEO Sally Smith and others that already serve on the board. Two individuals plan to retire from the board and would be replaced by former McDonald's executive Janice Fields and CTI Foods CEO Sam Rovit—one of Marcato Capital Management's four proposed nominees. However, Marcato—which owns a 5.6% stake in the company—is not pleased with the move. "In our view these changes do not go far enough," said Marcato. "Rather than scrambling to protect the status quo, Buffalo Wild Wings should address our proposed operational improvements and business model modifications, which we believe are the only ways to drive sustainable value for all shareholders." Marcato has called for fresh management talent, a greater focus on the core brand, and killing new fast-casual pizza and taco concepts. Beyond Rovit, Marcato had proposed the nomination of three other board members, including former Pizza Hut executive Scott Bergen, former TGI Fridays executive Lee Sanders, and Marcato fund manager Mick McGuire.
Tronc Inc.'s (TRNC) second-biggest shareholder, Dr. Patrick Soon-Shiong, has sent a letter to the board questioning its corporate governance amid an increasingly contentious battle with the company's biggest investor. In a letter seen by The Wall Street Journal, a lawyer for Soon-Shiong said that he is "troubled by the company's corporate governance, or lack thereof," following recent moves to remove him from the board of directors and to spend $56 million to purchase another investor's shares. Soon-Shiong also demanded that the board raise a limit on his ownership stake in Tronc from 25% to 30%, as it did last week for the company's top shareholder and nonexecutive chairman, Michael Ferro. The doctor recently increased his stake to 24%, while Ferro owns a 24.8% stake, according to regulatory filings. Soon-Shiong additionally requested all board communications and records related to the decision to remove him from the slate of directors that will be voted on at the annual meeting next month. The letter also sought all communications related to moving up the date of the annual meeting, the raising of the ownership cap for Ferro, and the decision for Tronc to purchase 3.75 million shares from the third-largest shareholder, Oaktree Capital.
Bowleven PLC said on March 27 that as part of its strategic review, it is considering all options, including those recommended by Crown Ocean Capital P1 Ltd. (COC), which owns a 23% stake in the oil explorer. Bowleven said, "As previously stated, the strategic review will consider all options available to the company, including transforming Bowleven into a holding company, as proposed by COC, alongside other matters already being progressed and negotiated by the Board prior to the GM. The strategic review is being undertaken in the interest of maximizing value for shareholders." COC believes the company should cease work on the Bomono gas permit in Cameroon to focus on Etinde, in the shallow waters off the coast of the country, but Bowleven has secured a deal with Victoria Oil & Gas to develop Bomono.
Dominion Diamond Corp. (DDC), a Canadian miner that has attracted at least two suitors, plans to consider a sale or other strategic options. M&G Investments, Dominion's biggest shareholder, last week urged the company to enter into a formal sales process. Washington Cos.—a group of privately held mining, industrial, and transportation businesses founded by billionaire Dennis Washington—extended a $1.1 billion unsolicited bid in March, which Dominion rejected on the grounds of unusual and unacceptable terms. However, it has since expressed willingness to engage in talks with Washington Cos. Fellow Canadian miner Stornoway Diamond Corp. also has entered into discussions with Dominion, whose U.S. listed shares rose 7.3% to $13.70 in premarket trading on Monday.
Stilwell Group and affiliates have built a 5.2% stake in First Advantage Bancorp (FABK), with plans to start "asserting shareholder rights." The New York investment firm, which manages about $140 million, said it wants to see some changes but did not go into details. "We hope to work with existing management and the board of directors to maximize shareholder value," managers wrote in a filing. "We do not believe the value of the Issuer's assets is adequately reflected in the current market price." The Clarksville, Tenn.-based lender ended 2016 with assets of $528 million—up 8% from 2015—and profit of $2.9 million, down from almost $3.4 million in 2015. In a recent note to shareholders, CEO Earl Bradley III pledged that several strategic initiatives would ensure a stronger 2017. He revealed that he had a "very cordial" phone call with a Stilwell official last week, although it failed to yield insight into what the New York firm has planned. "As long as their ideals and objectives align with the majority of our other shareholders, there shouldn't be any issue at all," Bradley said. Since 2000, Stilwell has acquired stakes of at least 5% in 60 different companies—many of them community banks—where it has pushed for outright sales, urged share repurchases, or pursued board representation.
Rent-A-Center (RCII) announced it will nominate three current directors for re-election at its annual meeting, despite efforts by Engaged Capital to nominate its own slate of directors. In a filing this week with the Securities and Exchange Commission, Rent-A-Center said its board and management team "have held extensive discussions with Engaged," but decided to have current directors Mark Speese, Leonard Roberts, and Jeffery Jackson stand for re-election. Engaged Capital, which owns a roughly 13.7% stake in Rent-A-Center, already has said it will nominate five people for the three board seats that will be up for election at the annual meeting. The investor has been urging the company to hire a financial adviser and attempt to sell itself. The current board has sat idly amid years of waning operating performance, worsening financial results, and a destruction of shareholder value, said Glenn Welling, managing member of Engaged Capital. "As one of the company's largest shareholders, we felt we had no choice but to present shareholders with an alternative slate of directors—directors who can help stabilize the business while also evaluating all strategic options available to the company."
The Israeli pharmaceutical company Teva (TEVA) is planning a major organization that reportedly will cost thousands of jobs. However, Teva now says it will pursue a variety of efficiency measures instead of big layoffs. The Israeli newspaper Calcalist had reported that Teva planned to cut up to 6,000, or 11%, of jobs, but Teva responded that it preferred to end certain activities, consolidate operations, and freeze new hires rather than eliminate thousands of staffers. Recent signs of turmoil at Teva come just weeks after CEO Erez Vigodman left the company. Investor Benny Landa has been pushing for an experienced global player to take over the position. Furthermore, he wants to see the company split in two, with one side taking the generics business and another group spinning off the brand division.
Elliott Management Corp. on Wednesday escalated pressure on Dutch paint and chemicals giant Akzo Nobel NV to engage with U.S. competitor PPG Industries Inc. (PPG). The Amsterdam-based company on Wednesday rebuffed PPG's latest offer, worth €88.72 a share, just weeks after Akzo rebuffed its initial €83-a-share offer. Akzo said both offers undervalue the company and do not merit discussions. Elliott, which owns 3% of Akzo, on Wednesday agreed that the new offer was too low, but threatened to use obscure Dutch corporate rules to call a special shareholder meeting to force Akzo Nobel NV to consider the bid. Akzo's articles include priority shares, which give holders "ultimate discretion" over the makeup of Akzo's management and supervisory boards, according to research firm Olivetree Financial. The priority shares are held by Foundation Akzo Nobel, whose board is made up of members of the company's supervisory board who are not on the audit committee. "There is no real way in which an unwanted suitor can force its way into Akzo, even with the progression of time," Olivetree wrote in a recent report. However, Elliott believes it can successfully challenge the power of Akzo's priority shares if necessary. The hedge fund argues that investors totaling at least a 10% stake in Akzo can request a shareholder vote to oust members of the company's management and supervisory board members, if a majority of shareholders back the move.
Innoviva Inc. (INVA) has filed definitive proxy materials with the U.S. Securities and Exchange Commission related to its Annual Stockholder Meeting scheduled for April 20, during which shareholders of record as of Feb. 24, 2017, will be entitled to vote. In a letter to shareholders, Innoviva's Board of Directors emphasized the company's track record of creating value for shareholders. In addition, it said, "Recently, [Sarissa Capital Domestic Fund LP] acquired a 3% stake in the Company and asked for four seats on our seven-member Board. The fund has since dropped its demand to three seats. The fund has provided no rationale for its demands to change the Board or our strategy, particularly given Innoviva's track record and focus on shareholder value." The board stressed that six of its seven directors are independent and that the board comprises "four current or former CEOs; two former CFOs; six directors with relevant industry experience; five directors with experience executing substantial [merger and acquisition] transactions; one director with professional investment experience; three directors with healthcare investment banking experience; and three leaders that have delivered significant outperformance in executive roles." The board also took issue with Sarissa's cost-cutting strategy, among other things, and urged shareholders to vote against replacing its "highly qualified directors with Sarissa's hand-selected nominees."
In a letter on Wednesday, more than 100 institutional investors urged Acting U.S. Securities and Exchange Commission (SEC) Commissioner Michael Piwowar not to delay the implementation of a rule requiring companies to disclose a ratio comparing their CEO's pay with their workforce median. Piwowar said in February the SEC was seeking comments about whether to delay the rule and whether companies might be facing any "unexpected challenges" with compliance. The requirement went into effect in January, and the data is expected to be disclosed in many companies' 2018 proxy statements unless the rule is delayed. The move by Piwowar represents part of a wider push by President Trump's administration to scale back or repeal Obama-era rules that Republicans say stunt economic growth. The CEO pay ratio rule aims to help investors better estimate the fairness of CEO pay. "The SEC's pay ratio disclosure rule is thoughtful, balanced, and carefully crafted to provide companies considerable flexibility and makes accommodations to them in complying with the rule, while giving shareholders valuable new information," stated the letter, which was signed by unions, pension funds, activist investors, state treasurers, and consumer advocacy groups.
Akzo Nobel rebuffed a sweetened bid from U.S. rival PPG Industries (PPG) on Wednesday but faced shareholder pressure to negotiate with the bidder. The Dutch paints and coatings maker said PPG's new 22.4 billion euro ($24.1 billion) takeover proposal, worth 88.72 euros per share, was not enough to justify engaging in talks. A previous March 9 offer of 83 euros per share valued the company at $22 billion. Several Akzo shareholders have said they see value in a deal and urged management to begin talks. Elliott Advisors, which owns more than a 3% stake in Akzo, said that while it considered PPG's second bid "inadequate," it is sufficient enough to warrant further discussions. "It is only through engagement that Akzo Nobel can determine if PPG is prepared to bid at a level that provides adequate consideration to shareholders," Elliott said. "Secondly, it does not appear that Akzo Nobel has adequately consulted with shareholders before rejecting both bids." Akzo said it was worried the deal would lead to major job losses and significant divestitures; it additionally cited differences in corporate culture. Akzo's boards, which unanimously rejected the new offer, also reiterated that they would rather pursue their own strategy of separating the company's chemicals division. Like many Dutch companies, Akzo has stalwart defenses against hostile takeovers; and there is political opposition to the deal.
PPG Industries Inc. (PPG) reportedly is drawing up a new takeover bid for Akzo Nobel NV. The Dutch company spurned PPG's unsolicited 20.9 billion-euro ($22.4 billion) offer earlier this month, saying it was too risky and significantly undervalued the company. Shares in Akzo rose as much as 5.3% to a record 79.11 euros at the start of trading on Tuesday. Elliott Management Corp., one of company's largest investors, is urging it to talk with PPG about sweetening the pot and to carefully evaluate any new offer, sources said last week. Political opposition to the deal is building in the Netherlands, meanwhile, and the merger of the world's two biggest coatings companies would attract major regulatory scrutiny in the United States and Europe. The two companies have leading market shares of architectural paint in many European nations, and the combined entity also would control more than half of the global aerospace-coatings market. In rejecting PPG's original bid, Akzo said it plans to separate its specialty chemicals business, which accounts for one-third of revenue. In 2012, Akzo sold its U.S. architectural paints business to Pittsburgh-based PPG for about $1 billion.
Elliott Management Corp. reportedly is urging Akzo Nobel NV to engage with suitor PPG Industries Inc. (PPG), whose $22.1 billion takeover offer it spurned last week. Elliott had wanted the Dutch paint maker to separate its specialty-chemicals business but now is pushing it to consider a sale as well, albeit at a higher price than the $89.17 per share that PPG offered, sources said. In rejecting that bid, Akzo argued that it "substantially undervalues" the company and carries significant risk for shareholders. It did, however, say it would consider separating its specialty-chemicals unit. The U.S. hedge fund, which has owned a position in Akzo since 2016, expressed concern that management declined to engage with PPG and did not consult the hedge fund. Elliott—which owns less than 3%, the reporting threshold in the Netherlands, in Akzo—has also questioned management about the performance of Akzo stock, which before the bid was little changed over the past decade. Elliott's presence could increase the likelihood of a sale, given its reputation for shaking up boardrooms and triggering major changes at companies. Akzo shares rose more than 15% in Amsterdam on Friday, signaling that shareholders are already hopeful for a deal.
Billionaire mining tycoon Anil Agarwal announced on March 15 that he plans to buy a stake of as much as 2 billion pounds ($2.4 billion) in Anglo American Plc, amounting to 13% of the British mining giant. This would make him the company's second-largest shareholder, and while his ultimate motivations are unknown, there is speculation that he likely will take an active role in the company. Analysts say Agarwal could push for a breakup of Anglo, and it is possible that he would win backing from the company's top shareholder, South Africa's Public Investment Corp. According to Citigroup mining analyst Heath Jansen, Agarwal's company "is positioning itself to be in a front-line seat if any break up of Anglo American were to happen. It also potentially introduces a second activist investor, which could ultimately lead to a break up of South African and non-South African assets." Agarwal has said the purchase was a family investment and that he will not make a takeover bid. The purchase will be funded via a mandatory exchangeable bond issued by his holding company, Volcan Investments Ltd., and secured by Anglo's shares. Jefferies analyst Chris LaFemina says, "It is possible that Mr. Agarwal has been eyeing a deal with Anglo for years, and the planned Volcan investment in Anglo may be part—but not all—of that plan. It is not clear to us what the end game is for Mr. Agarwal, but the wheels are clearly in motion."
An investor group in the ASX-listed managed account platform provider Praemium wants to reinstate former CEO Michael Ohanessian, who was removed by the company's chairman last month. On Thursday, Praemium disclosed that a group of investors—including Paradice Investment Management, Australian Ethical, and Abercrombie Group—backed a move by Ohanessian to call an extraordinary general meeting (EGM) and remove four directors, including Praemium Chairman Gregg Camm. In addition, the investor group wants Ohanessian to return to his former role as CEO. "Michael is one of the reasons that the company is doing so well. If something isn't broken, then don't fix it," Australian Ethical portfolio manager Andy Gracey said. The bloc owns about 17% of Praemium, and Ohanessian owns almost 4%. In February, the Praemium board revealed that it had fired Ohanessian as CEO and managing director, a move the shareholder group claims was without grounds. The shareholder bloc appears solidly behind Ohanessian, who is widely attributed for the company's success. On Thursday, Paradice portfolio manager Rishi Khilnani agreed that Ohanessian was an appropriate and "high-performing" CEO, and said the group is hopeful the company will thrive under the leadership of a refreshed board and management. Praemium's directors have about two weeks to respond to the notice and two months to hold the EGM.
Sources say Paul Singer is reopening his $32.8 billion hedge fund to new cash to take advantage of future investment opportunities. Investors will be able to start pledging capital to the multistrategy hedge fund in the second quarter, according to one source, and it may be used within two to three years. Singer's Elliott Management raises money by locking in commitments from investors and using that capital for future investment opportunities, an unconventionial tactic for the industry. The last time Elliott reopened to additional cash in this way was in 2015, when it reportedly raised $3.8 billion. It gained 13.1% last year in its flagship fund, surpassing the 5.3% gain of the average multistrategy fund, according to Hedge Fund Research Inc. The firm has one of the most impressive long-term track records in the industry, producing an average annual gain of roughly 13.5% since it launched, a source said. Funds including Elliott are seeking additional capital after the industry last year experienced its first net outflow since 2009. Investor sentiment has been favorable toward multistrategy funds, which saw $3.8 billion in inflows in January, the most among the strategies tracked by eVestment. Clients withdrew more than $5.2 billion from the industry as a whole.
Green Dot Corp. (GDOT) and Harvest Capital Strategies LLC announced Monday that the company has invited Jeffrey B. Osher to serve as an observer and advisor to the board of directors. Osher is a managing director and portfolio manager of Harvest, one of Green Dot's biggest long-term shareholders. "With [CEO Steven W. Streit's] leadership and operational, strategic, and entrepreneurial accomplishments, combined with Jeff's experience as a long-term investor in and knowledge of our company, I am confident that we will be well positioned to further expand Green Dot's terrific equity performance over the past year and generate very positive future results," said William I. Jacobs, Green Dot's independent chairman. Jeffrey B. Osher applauded Streit's "successful leadership and strategic vision" and the company's strong financial performance, which has led to significant shareholder value creation over the past year. "I am delighted to have the opportunity to work with Steve, Bill, and the entire Board, and I am eager to help play a part as Green Dot continues to deliver on its mission of building a great business that creates meaningful shareholder value," Osher said.
Throwing a wrench in Marcato Capital Management's plans for Buffalo Wild Wings Inc. (BWLD), a large group of franchisees on Monday expressed support for the company and CEO Sally Smith. The bloc, called Franchise Business Services, said it appreciated the ideas offered by Marcato's Mick McGuire but that it felt the restaurant chain's executives were "listening and responding appropriately." Since the group represents roughly 90% of the company's franchisees, the statement is a blow for McGuire, who is preparing for a showdown in the board of directors election at the company's annual meeting this spring. McGuire last month nominated himself and three others to the board. Marcato acquired a 5.2% stake in the company last summer, with a demand for "new talent" and greater reliance on franchising. McGuire has recommended that Buffalo Wild Wings reduce its ownership from about 50% of locations to just 10%, with the rest owned and operated by franchisees. In its statement Monday, the franchisee group warned that McGuire's vision overreaches. It also said it will back current directors and executives at the annual meeting. Marcato issued a statement Monday reiterating its criticism of the company. "Buffalo Wild Wings' incumbent board and management have failed to address the numerous shortcomings at the company for years," the statement read, adding that a refreshed board will lead to long-term value creation for shareholders.
Billionaire investor Carl Icahn indicated in a recent filing that he has purchased another 373,342 shares in Herbalife (HLF), bringing his total stake to 22,872,342 shares, or 24.57% of shares outstanding, valued at nearly $1.2 billion. The move marks another blow against Pershing Square Capital CEO Bill Ackman's short position. In December 2012, Ackman disclosed that he was shorting $1 billion worth of Herbalife and that the stock would drop to $0, indicating a belief that the company was operating as a "pyramid scheme" that targets poor people and that the Federal Trade Commission (FTC) would shut it down. However, Icahn and other fund managers have gone long on the stock. After Herbalife agreed last July to pay a $200 million settlement with the FTC and "fundamentally restructure" its business, Icahn said the board had decided to increase his ownership limit from 25% to 34.99%.
Miner Anglo American announced Monday it is set to cap executive bonuses, following shareholder resistance last year over high payouts even when the company's share price had spiraled. In its annual report, Anglo American said it would lower maximum annual bonuses for CEO Mark Cutifani to 300% from 350% of basic salary, leveling it with other executive directors. For Cutifani, the max is 13.1 million pounds ($16 million). The company also said the value of long-term incentive plans (LTIP) would be limited at twice the face value of the award at the time of vesting—a response to shareholder worry that executives could benefit from share price swings that were not reinforced by improved company strategy. The Pensions and Lifetime Savings Association (PLSA), representing pension funds with a total of one trillion pounds in assets under management, argued the proposed change did not go far enough. "While Anglo-American's direction of travel is to be welcomed, an annual bonus potentially worth 300% of a salary, on top of fixed pay approaching 2 million pounds, still seems far too generous," said Luke Hildyard, a policy lead at the PLSA. In addition, Anglo American said it was raising executive directors' salaries by 2% in 2017 after freezing them in 2016. The new policy will be voted on at Anglo American's annual general meeting (AGM) next month. At last year's AGM, opposition to the remuneration policy was near 50% as shareholders protested windfalls for directors connected to volatile commodity markets rather than savvy strategy.
BlackRock Inc. (BLK) revealed efforts Monday to place new pressure on companies to explain themselves on issues like boardroom diversity and the impact of climate change on their business. The move could step up efforts like climate-risk disclosure practices created by the Financial Stability Board. BlackRock, the world's largest asset manager, specified its top "engagement priorities" for meetings this year with corporate leaders in documents posted on its website on Monday. Its action represents a rise in its advocacy with boards and executives and comes after the fund giant was condemned by environmental and labor activists for not supporting proxy resolutions regarding climate change and other topics more often at shareholder meetings. BlackRock did not, however, vow to vote more often against companies' management, saying that it still prefers private meetings with executives and that critical proxy votes are a last resort. BlackRock also said it will seek to understand how companies are working to increase boardroom diversity. "Diverse boards, including but not limited to diversity of expertise, experience, age, race and gender, make better decisions," it said in the documents.
On March 9, U.S. Securities and Exchange Commission (SEC) Commissioner Kara Stein raised questions about Snap Inc. (SNAP) and other companies that offer shareholders unequal voting rights, which she said "present complex and new issues that need to be understood and addressed." Furthermore, she said, "We also must be mindful of the precedent being created" and that the agency should "focus on how some innovations may prove detrimental to investors." Snap's unprecedented move involved selling shares to outside investors that did not include any voting rights. "What is the effect on capital formation and emergent public companies when the bundle of rights offered to shareholders in a public offering excludes voting rights?" Stein asked. Ken Bertsch, executive director of the Council of Institutional Investors, noted that share structures like Snap's pose risks and that the SEC should conduct further reviews, including with stock exchanges that list companies with unequal voting rights. "At some point," Bertsch said, "there's some question of market confusion and a disabling of passive strategies."
American International Group Inc. (AIG) Thursday announced CEO Peter Hancock will step down after two years leading the insurance conglomerate, following a big setback in its turnaround plan. The board was expected to discuss Wednesday whether to replace Hancock following the company's $3.04 billion fourth-quarter loss. Hancock's exit marks a success for Carl Icahn, who had called for a new leader at AIG in late 2015, before agreeing with the insurer to appoint a representative to the board. In response to Thursday's announcement, Icahn tweeted, "We fully support the actions taken today by the board of AIG." Following last month's lackluster results, some analysts began proposing possible replacement candidates, saying the company may need someone with extensive insurance experience, which Hancock lacked before joining AIG. Hancock had been seeking to bring AIG's performance in line with peers by the end of 2017, working with a timetable he and the board announced in January 2016. That timetable was created amid the calls in late 2015 by Icahn and billionaire investor John Paulson for a breakup of the company. Those promises were key in the investors' decision to decline a board fight last year, and last spring Paulson joined the board alongside Icahn's representative, Samuel Merksamer. Over the past year, Hancock's team has been selling operations and assets to appease investors' demands for a more efficient and focused company, including selling its lucrative U.S. mortgage-insurance business.