13D Monitor Real-time Activist Newsfeed


Thyssenkrupp Shareholder Criticizes CEO, Demands Restructuring
" Reuters (01/13/18) Busvine, Douglas"

Thyssenkrupp CEO Heinrich Hiesinger has come under fire from a major shareholder for failing to achieve his own profit targets. The criticism from Swedish investor Cevian in the Frankfurter Allgemeine Sonntagszeitung raises tensions before the German industry group's annual meeting next Friday. Cevian controls an 18% stake in Thyssenkrupp. The remarks from Lars Foerberg, co-founder of Cevian, in the Sunday edition of the newspaper pile pressure on Hiesinger as he tries to complete a merger of its steel business with that of India's Tata Steel. Foerberg took Hiesinger to task over his long-term plans to achieve operating margins of between 6% and 7% at Thyssenkrupp's non-steel operations. The company is still achieving just half of its margin target, according to Foerberg. He said Thyssenkrupp is not developing as expected, and reiterated his call for a restructuring. Foerberg did not give a direct answer to a question on whether Hiesinger should resign, but said: "If a strategy doesn't achieve the desired goal, you have to change it. We expect that both from the Thyssenkrupp management and supervisory boards."

BlackRock's Message: Contribute to Society, or Risk Losing Our Support
" New York Times (01/15/18) Sorkin, Andrew Ross"

Companies need to make profits as well as contribute to society if they want to receive the support of BlackRock (BLK), according to a letter that the chief executives of the world's largest public companies received Tuesday from Laurence D. Fink, founder and CEO of the investment firm. Governments are failing to prepare for the future, and society is increasingly turning to the private sector for answers to broader societal challenges, writes Fink. As the largest investor in the world, BlackRock has the clout to make this kind of demand, which may be a watershed moment on Wall Street, one that raises all sorts of questions about the very nature of capitalism. Fink, who is adding staff to help monitor how companies respond, contends that if a company doesn't engage with the community and have a sense of purpose "it will ultimately lose the license to operate from key stakeholders." Jeffrey Sonnenfeld, a senior associate dean at the Yale School of Management and an expert on corporate leadership, says, "It is huge for an institutional investor to take this position across its portfolio." Until recently, companies like BlackRock have traditionally been passive investors and have done little to pressure the leaders of companies they invested in. In a surprising twist, even activist investors are taking up social causes. Jana Partners and Calstrs recently wrote a letter to Apple (AAPL) demanding that it focus more on the detrimental effects its products may have on children.

NXP Shareholder Ramius to Reject Qualcomm's Buyout Offer
" Reuters (01/16/18) M, Muvija"

On Jan. 16, NXP Semiconductors NV (NXPI) shareholder Ramius Advisors LLC said it would join Elliott Management Corp. in rejecting Qualcomm Inc.'s (QCOM) $38 billion bid for the company. Ramius, an affiliate of Cowen Inc. (COWN), has told NXP that Qualcomm's offer "dramatically" undervalues the company. The New York-based institutional asset manager owns about 2.5 million shares, or less than 1%, of NXP.

Hess Cutting Hundreds of Workers as It Battles Investor
" Reuters (01/16/18) Scheyder, Ernest"

Hess Corp. (HES) says it is cutting about 13% of its workforce and streamlining operations amid a battle with Elliott Management Corp. Most of the cuts are in Houston. Spokewoman Lorrie Hecker confirmed that about 300 workers would be dismissed. The job cuts are part of a plan to reduce expenses by more than $150 million a year.

Ericsson Hit by Writedown of Almost $2bn
" Financial Times (01/16/18) Milne, Richard"

Swedish telecoms equipment maker Ericsson will take a writedown of SKr 14.2 billion ($1.8 billion) after impairment testing of its businesses. Ericsson will also suffer an SKr 1 billion ($125 million) non-cash charge due to the recent U.S. tax reform. Last March, the company took up to SKr 15 billion of charges—one of the biggest writedowns in Swedish corporate history—due to problems with certain contracts as well as restructuring and writedowns in its struggling media and cloud computing businesses. In recent years, a slump in Ericsson's core networks business led to several profit warnings and the ousting of its chief executive in 2016. The problems have attracted the attention of Cevian Capital, which has become Ericsson's second-largest shareholder after the Wallenberg family. Cevian has taken issue with Ericsson's board, causing its chairman—former Volvo boss Leif Johansson—to resign. Ronnie Leten, the well-regarded former chief executive of engineering group Atlas Copco, will replace Johansson later this year. Ericsson said the charges would not affect cash flow but would impact operating profit in the fourth quarter with the final figures due at the end of this month.

Elliott Urges Changes to Bezeq Telecom Board
" Reuters (01/16/18) Cohen, Tova"

Elliott has unveiled a 4.8% stake in Bezeq Israel Telecom and is calling for an overhaul of the board.  In a letter to Bezeq's interim chairman David Granot on Tuesday, Elliott Advisors (UK) Ltd. demanded a restructuring of Eurocom Group—the debt-laden holding group that controls Bezeq—and the immediate resignation of some Bezeq board members.  "Moreover, we believe that the board of Bezeq, as currently composed, is no longer fit for purpose," Elliott wrote.  "A number of the directors are subject both to investigations of serious financial misconduct at Bezeq and/or are affiliated with Eurocom, which is subject to legal actions by its creditors."  Israel's securities watchdog has been investigating Bezeq over accusations that former chairman Shaul Elovitch, who owns Eurocom, had interfered in the merger in 2015 between Bezeq and its satellite TV unit YES for personal financial gain.  Elovitch has denied any wrongdoing.  Elliott proposed the immediate replacement of all Bezeq directors implicated in the Israel Securities Authority's investigation and those affiliated with Eurocom.  On Monday, Eurocom petitioned a Tel Aviv court to allow a debt settlement that would give it a new controlling shareholder.  Elliott argued that any directors nominated by the new controlling shareholder should be chosen according to their relevant experience and their clean records, adding that major Bezeq shareholders should be consulted in the process.  Elliott noted that independent shareholders own 73.7% of Bezeq.  "We ... believe there is significant value to be unlocked if the right steps are taken to improve the company's corporate governance," the letter stated.

GKN Faces Pressure From Elliott to Engage With Melrose
" Reuters (01/15/18) Martin, Ben"

Elliott revealed a 1.7% stake in British engineering company GKN through contracts-for-difference (CfDs) on Monday and is pushing the group to open takeover talks with suitor Melrose Industries.  The pressure from Elliott comes just days after GKN rebuffed a £7 billion ($9.66 billion) bid from Melrose on the grounds that it was "entirely opportunistic" and had undervalued the aerospace and automotive parts supplier.  GKN, which has faced shareholder pressure to separate its divisions in recent months, has said it plans to split itself in two instead.  A source said that while Elliott believed the current offer from industrial turnaround specialist Melrose was too low, GKN should engage in discussions with its suitor.  Melrose approached GKN after it was left vulnerable by two profit warnings last fall, which were sparked by problems at its aerospace division and sent its shares plummeting.  Elliott has been a long-term investor in GKN and believes the engineering firm has underperformed its rivals, the source said.  The fund also disclosed on Monday a 0.5% short position in Melrose shares through CfDs, which the source said was for hedging purposes.  Elliott disclosed its GKN stake on the same day that Melrose indicated its commitment to move forward with its takeover plan.  Melrose said Monday that it had begun to meet with GKN shareholders to discuss its bid, increasing pressure on the company.

GKN's Largest Active Investor Urges Melrose Talks
" Financial Times (01/15/18) Hollinger, Peggy"

Vulcan Value Partners, GKN's biggest active shareholder, is urging the engineering firm to open talks with Melrose Industries after the board spurned an unsolicited £7 billion cash and shares offer from the industrial turnaround specialist last week. The asset manager—which GKN says owns a roughly 4% stake—argues that although the transformation and demerger plans unveiled by the board last week seemed practical, they were not enough to justify refusing talks with Melrose. Melrose made its offer just over a week ago, prompting GKN to accelerate the unveiling of its transformation plan and management changes, but it has not yet launched a formal bid. However, Vulcan Value Partners' push to get GKN's board to talk to Melrose does not mean it is ready to accept the offer as is. "We believe the Melrose offer does not reflect the intrinsic value of GKN, and this position is supported by the current market price of GKN," said C.T. Fitzpatrick, founder and CEO of Vulcan Value Partners. The position of GKN's largest active investor represents a setback to the board, as the company launches its campaign this week to persuade shareholders that a new management team can deliver long-awaited margin and cash flow improvements. The plan includes an eventual split of its aerospace and automotive businesses, a move long sought by some shareholders. BlackRock has the biggest total shareholding at 6% but just 3.2% is actively held, according to GKN. On Monday, Elliott disclosed about a 1.7% position in GKN via contracts for difference.

D.E. Shaw Builds Stake in Lowe's
" Bloomberg (01/12/18) Hammond, Ed; Deveau, Scott"

D.E. Shaw & Co. reportedly has acquired an active stake in U.S. home retailer Lowe's Cos. (LOW). Although the investor's specific plans for the investment could not immediately be learned, the firm does plan to push for changes at Lowe's, according to sources. Lowe's shares rose as much as 4.5%, while rival Home Depot Inc. (HD) rose as much as 2.3%. Lowe's lags behind Home Depot in sales growth, and has struggled to pull ahead of its bigger competitor. Both chains are seeking to avoid the slump that has plagued the retail industry. While construction needs after Hurricanes Harvey and Irma helped improve Lowe's third-quarter same-store sales, the company left its full-year profit forecast unchanged, missing Wall Street estimates. D.E. Shaw has launched a new activist platform under portfolio manager Quentin Koffey, who joined the firm from Elliott Management Corp. in June. D.E. Shaw disclosed a 0.12% stake in the company in a November filing. In October, D.E. Shaw unveiled a position in EQT Corp. (EQT) and pushed the company to spin out its midstream assets, among other initiatives to boost shareholder value.

Citigroup Bows to Investor and Discloses Gender Pay Data
" Financial Times (01/15/18) Noonan, Laura"

Citigroup Inc. (C) will increase compensation for women and minorities to bridge pay gaps in the United States, the United Kingdom, and Germany, as part of its annual pay process this year. Citi said it had conducted a survey in the three countries, where it found that women and minorities are paid slightly less than men and non-minorities, respectively. Compensation would be raised based on the pay gaps identified in the survey. Arjuna Capital, which had waged a disclosure campaign, on Jan. 15 declared victory and dropped a resolution for the company's next shareholder meeting that had called for Citi to be more transparent and to produce policies to reduce the gap. "Citigroup is stepping into a leadership role on the gender pay gap that we have not seen from any of its U.S. financial peers," said Natasha Lamb, managing partner at Arjuna. She characterized the move as "a tipping point" for Wall Street banks.

Chipotle Pays to Keep Two Executives Past CEO Search
" Wall Street Journal (01/12/18) Jargon, Julie"

Chipotle Mexican Grill Inc. (CMG) is providing two of its top executives retention bonuses as the company looks for a new CEO. Founder Steve Ells said in December that he would soon exit as chief executive. A securities filing on Jan. 12 showed that Chipotle will pay its finance and marketing chiefs bonuses one year after a new chief executive is appointed. According to Charles Elson, a corporate governance expert at the University of Delaware, enticing top executives to stay in the fold during a transition period is common. Elson noted, "Given what Chipotle has gone through, you want a smooth transition and you certainly don't want the CFO or CMO leaving before the new CEO comes in."  Retention bonuses also safeguard top executives from being immediately replaced by the new CEO.  CFO Jack Hartung will get a $1 million retention bonus if he stays for one year, while Chief Marketing and Strategy Officer Mark Crumpacker will get $600,000.

Singapore Seeks Feedback on Corporate Governance Code
" Bloomberg (01/16/18) Vishnoi, Abhishek"

In an effort to increase investor confidence in Singapore's capital markets and back innovation, a council formed by the city-state's central bank has issued a consultation paper recently revising its recommendations for corporate governance. The Code of Corporate Governance, which was last reviewed in 2012, is geared toward boosting efficiencies at the board level of corporations by enhancing diversity and encouraging board renewals, according to a statement released by the Corporate Governance Council. The council has asked interested parties to submit their feedback by March 15. Some of the proposed changes include strengthening director independence by lowering the shareholder threshold to 5% from 10%, enhancing board composition and diversity by disclosing corporate policy and progress made on that front, and having transparent pay practices.

HomeStreet in Seattle Rejects Shareholder Request for Board Seat
" American Banker (01/11/18) Davis, Paul"

HomeStreet (HMST) in Seattle has rebuffed Blue Lion Capital's demand for a board seat. In a Jan. 11 letter to shareholders, the $6.8 billion-asset company said it voted against the request from Charles Griege Jr., a managing partner at Blue Lion, following a unanimous recommendation from its human resources and corporate governance committees. Blue Lion—which owns a roughly 6% stake in HomeStreet—has criticized the company's reliance on mortgages and bank acquisitions, arguing this strategy has led to underperformance. HomeStreet has countered those claims, and defended its position in its letter to shareholders. "The board has sought to work constructively with" Blue Lion, meeting with Griege several times, wrote Mark Mason, HomeStreet's chairman, president, and CEO. Griege's request was spurned after he completed a questionnaire and participated in a Jan. 8 interview with the company's recommending committee and lead independent director. "After a careful assessment of ... Griege's analysis of our business strategy, however, the board concluded the issues of greatest concern regarding the operating efficiency of our bank are best addressed with the company's current strategic plan," Mason wrote.

Bill Ackman Slashes the Annual Management Fee for Pershing Square Hedge Fund
" New York Business Journal (01/11/18) Noto, Anthony"

Bill Ackman plans to cut Pershing Square Holdings Ltd.'s 1.5% annual management fee. Most hedge funds typically charge 1% to 4% annually. A letter posted on the Pershing Square website says future management fees will be cut for all of the funds which incurred recent litigation expenses of an aggregate $32.2 million. "This fee reduction will be realized in eight equal installments over the next eight quarters beginning with the management fee payable on April 1, 2018. The reduced fees will be allocated among the funds based upon the amount of settlement reserves previously recognized by the respective funds at year-end 2016 and year-end 2017. For example, as Pershing Square Holdings incurred 44.6% of the settlement reserves, its management fees over the next eight quarters will be reduced by a total of $14.4 million. Similarly, the other funds' shares of the fee reduction will be proportional to their share of the settlement." The litigation reference pertains to Ackman and Valeant Pharmaceuticals' (VRX) settling of a long-running dispute against pharmaceutical firm Allergan plc (AGN).

Akamai Technologies: KeyBanc Sees a Takeout as Unlikely
" Reuters (01/11/18) Panchadar, Arjun"

KeyBanc says a takeout of Akamai (AKAM) is unlikely and cut it to "underweight" from "sector weight," prompting a 1% drop in the company's shares premarket. Akamai, under pressure from Elliott Management, is undertaking a strategic review, including a potential sale. Analyst Brandon Nispel says that while the likelihood of a deal has increased, the company's "current elevated valuation, deteriorating fundamental profile, and less expensive alternative assets available, makes a takeout unlikely." He adds that the company review and Elliott pressure would put a "dearly needed" focus on removing costs.

Xerox Is in Talks for a Deal With Japan's Fujifilm
" Wall Street Journal (01/10/18) Benoit, David; Cimilluca, Dana; Mattioli, Dana"

Sources say Xerox Corp. (XRX) is in talks to potentially strike a major deal with Japan's Fujifilm Holdings Corp. that may or may not include a change of control of Xerox. However, the sources note that a full takeover of Xerox is not on the table. The companies already have a joint venture, Fuji Xerox, which sells copiers and printers in the Asia-Pacific region. The talks come as Xerox faces a second fight with investor Carl Icahn, who has a 9.7% stake in the company, over its board of directors and CEO Jeff Jacobson. Last month, Icahn canceled a previous agreement with the company by pulling off his board representative to campaign for more board seats. He has warned that Xerox is at risk of losing ground it staked out with decades of research and development and worries that it could suffer a fate similar to that of Eastman Kodak Co. (KODK), which emerged a year after filing for bankruptcy in 2012 having sold assets and shed unprofitable business lines.

Mellanox to Cut 100 U.S. Jobs as Chip Line Development Halted
" Times of Israel (01/10/18) Solomon, Shoshanna"

Effective immediately, Mellanox Technologies Ltd. (MLNX) said it will cut its U.S. workforce by about 100 people as it discontinues its 1550nm Silicon Photonics development activities amid disappointing results. The decision comes a day after Starboard Value, the company's largest shareholder, said "substantial change" is needed for the company to improve its performance. Mellanox CEO Eyal Waldman said the company had begun a review of the silicon photonics business in May.

Peltz to CEOs: We'll Work With You
" Reuters (01/09/18) Herbst-Bayliss, Svea; Cox, Rob"

Trian Fund Management's Nelson Peltz said in an interview on Jan. 9 that while some influential investors seek to unseat CEOs, he prefers to work alongside management to increase sales, cut costs, and boost revenue. "The word activist has come to mean a fight, it has come to mean short term," Peltz said. "We are really not that concerned about the next quarter's numbers because we will be around for the next 28 of them." He indicated that Trian generally sticks around for seven years and brings an ownership mentality to the board room. Peltz said he wants to work collaboratively with Procter & Gamble Co. (PG) CEO David Taylor when he joins the board in March. He said, "What we do is come with a plan to make a company better. We never come with a plan to throw out the CEO or to embarrass anyone."

Nuance Communications Weighs Options for Automotive Unit
" Bloomberg (01/09/18) Porter, Kiel; Deveau, Scott"

Nuance Communications Inc. (NUAN) has hired investment bank Evercore Inc. to help examine strategic options for its automotive business, according to sources. The process could include selling part or all of the business, the sources said. Nuance could receive as much as $1.5 billion in a sale or retain the business, they said. Nuance has come under pressure from asset manager Neuberger Berman Group to remove Chairman and CEO Paul Ricci. The group's proposals in a December letter included appointing a new independent interim chairman and replacing the chairman of its governance committee. Also in December, Ivory Investment Management, which said it owned a 1.6% stake in Nuance, pushed the company to cut its affiliation with Ricci and name a successor. On Jan. 8, Fairpointe Capital voiced concerns about Nuance's board and CEO succession. Carl Icahn, who had previously engaged the company, sold his stake in it last year.

Akamai Is Working With Morgan Stanley on Strategic Review
" Bloomberg (01/09/18) Deveau, Scott; Hammond, Ed"

Under pressure from Elliott Management Corp., Akamai Technologies Inc. (AKAM) is working with Morgan Stanley to explore strategic alternatives including a potential sale, sources said. Elliott, which owns 6.5% of Akamai, said last month that it would seek talks with the Cambridge, Mass.-based company about ways to improve shareholder value, including a strategic review or a sale.

Akzo Is Said to Put Apollo, Bain on Chemical Unit Shortlist
" Bloomberg (01/09/18) Noel, Andrew Marc; Syed, Sarah; Proper, Ellen"

Sources say Akzo Nobel NV narrowed the list of bidders for its chemical division to four, including the team of Lanxess AG and private equity firm Apollo Global; Carlyle Group, a partnership between Advent International and Bain Capital; and Dutch buyout firm Hal Investments BV. Akzo Nobel has yet to decide whether to sell or spin off the business, which is expected to fetch about 10 billion euros ($12 billion). The company has been under pressure since rejecting a $29 billion takeover offer from PPG Industries Inc. (PPG) last year, fueling a battle with investor Elliott Management Corp. "We had very strong interest in the first round," said Akzo Nobel spokesman Leslie McGibbon on Jan. 9. "We're progressing now with four of the bidders. The dual-track process remains on track."

Carl Icahn Pushes SandRidge to Make Board Changes
" Wall Street Journal (01/09/18) Prang, Allison"

Carl Icahn is urging SandRidge Energy (SD) to make changes to its board and let his firm appoint a new director. The move comes less than two weeks after SandRidge succumbed to pressure from investors to terminate a deal to acquire Bonanza Creek Energy Inc. (BCEI). In a letter to SandRidge Chairman John Genova, Icahn—the company's largest shareholder with a 13.5% stake—called for two of Sandridge's five board members to resign and asked that his firm be permitted to appoint at least one new director, with the other opening potentially filled by another one of the company's biggest shareholders. "Your apparent disregard for any semblance of accountability to the owners of SandRidge reminds me of the medieval belief in the divine right of kings," Icahn wrote.

Barry Rosenstein Says JANA Is 'More Invested Today Than We've Ever Been'
" CNBC (01/09/18) Kim, Tae"

On CNBC's "Halftime Report" on Jan. 9, Jana Partners' Barry Rosenstein said he completely agrees with recent comments by Appaloosa Management's David Tepper that the stock market is cheap. He said, "In fact we are more invested today than we've ever been. We have found more ideas that meet our threshold than any other time." When asked why he is optimistic on equities, Rosenstein said, "The economy is growing. Earnings are growing. Rates are at all time lows. It just seems like the market [rally] is going to continue for awhile."

Facebook Investors Say They Can Help Fix the Company
" Quartz (01/08/18) Kozlowska, Hanna"

Investor Trillium Asset Management submitted a shareholder proposal with Facebook (FB) in October to establish a risk oversight committee within Facebook's board of directors that could include experts in journalism, ethics, or psychology. Trillium filed the proposal to create a separate risk committee, which would address issues ranging from fake news to social media addiction, on behalf of a client, the Park Foundation. The non-profit holds about $3 million in Facebook shares, and Trillium as a whole holds about $13.5 million, giving the two entities only a nominal share of the votes. Trillium expects the measure to be included in the company's proxy statement for vote at the company's annual meeting around early June. Facebook normally urges shareholders to vote against proposals from shareholders. In opposing past shareholder proposals, CEO and founder Mark Zuckerberg has wielded the decision-making clout—he holds more than 53% of the voting power in the company, according to the company's latest proxy statement. Facebook will not be able to ignore the proposal if outside shareholders give it 15-20% of the vote, says Jonas Kron, director of shareholder advocacy at Trillium. In a statement, the investor cited problems such as Russia meddling in U.S. elections, terrorists using Facebook to incite violence, and discriminatory advertising algorithms.

Seeking Enlightenment, Corporate Directors Embark on Tech Pilgrimages
" Wall Street Journal (01/08/18) Nash, Kim S."

At the annual CES trade show in Las Vegas this week, a group of 40 board members from companies in automotive, retail, and other industries have signed up for a guided tour to determine the implications of new technology for corporate governance. The tour was coordinated by the National Association of Corporate Directors (NACD) and is one of several field trips directors are taking to improve their understanding of technology’s implications in business. For board members in attendance, NACD President and CEO Peter Gleason states, scheduled stops among the approximately 3,900 exhibitors will expose them to products in artificial intelligence, biometrics, and more. Gleason commented, "We've got to have directors thinking about disruption as a constant." That includes both thinking about how information technology can bring in new revenue and how firms can guard against cybersecurity attacks, he added.

Fairpointe Adds to Shareholder Demands Over Nuance CEO Plan
" Reuters (01/08/18) Baker, Liana B."

Fairpointe Capital LLC has joined two other shareholders in expressing concerns to the board of Nuance Communications Inc. (NUAN) that its CEO has not yet stepped down.  Nuance is seeking a successor to CEO Paul Ricci, who announced in November 2016 that he would retire in 2018.  Fairpointe—Nuance's tenth largest shareholder with a 1.77% stake—is seeking clarity on when Ricci will exit and who will replace him, Fairpointe portfolio manager Marie Lorden said in an interview.  Fairpointe sent a private letter to the software company's board in recent weeks about the issue, Lorden added.  Fairpointe joins Neuberger Berman and Ivory Investment Management in requesting more information on the succession process.  Neuberger Berman sent an open letter to Nuance's board in December urging the company to immediately sever ties with Ricci, who has been CEO since 2000.  Neuberger—the company's 12th largest shareholder with a 1.6% stake—said it had lost confidence in the management succession plan because there had not been an update on the CEO search in over a year.  The letter also warned that the board's governance and nominating committees "act in deference" to Ricci, and that he "seems to have no intention to relinquish control of the company."  Ivory Investment Management, the seventh largest shareholder in the company, also sent a letter to Nuance's board last month voicing concern that Ricci was backtracking on his decision to retire.  It urged the company to quickly announce a new CEO.

Troubled Babcock & Wilcox Negotiates Truce With Investor
" Charlotte Business Journal (01/09/18) Downey, John"

Babcock & Wilcox Enterprises (BW) has agreed to immediately appoint three new directors to its board in a deal with Vintage Capital Management, its largest shareholder. The investor reportedly spent about $20 million last week to buy a 14.9% stake in the energy engineering and manufacturing company. Vintage and Managing Partner Brian Kahn said in regulatory filings that the purpose of the purchase was to force changes in the "business strategy or prospects" of B&W or "the sale or merger" of the company. On Jan. 3, B&W's board expanded itself from seven members to 10, appointing Kahn and two allies to the new seats. In return, Vintage "has agreed that it will not nominate or recommend for nomination any person for election to the board, (or) submit any proposal for consideration at, or bring any other business before, a shareholder meeting" until the 2019 meeting, according to a regulatory filing. It also says Vintage will not engage in proxy solicitation or other activities "regarding any merger, acquisition, recapitalization, restructuring, disposition or other business combination" for B&W. The company has also faced pressure from Viex Capital Management, which acquired a 6.4% stake in B&W in October and urged management to develop a plan for improving its operations and shareholder returns by November. In response, B&W CEO Jim Ferland announced measures aimed at saving $45 million in annual operating costs.

Kingsgate Staves Off Metal Tiger As Board Spill Attempt Defeated
" Australian Financial Review (01/09/18) Wiggins, Jenny; Ker, Peter"

Kingsgate Consolidated's board narrowly survived an ouster at a bitter extraordinary general meeting on Tuesday, with many investors continuing to demand an overhaul. Metal Tiger, a British shareholder with an 8.5% stake in the Australian gold mining group, called for a board shakeup in November with the goal of ousting three current directors and adding five new ones. All resolutions to remove and install directors were rebuffed on Tuesday, but some failed by narrow margins with 45% of shareholders in favor of ousting executive chairman Ross Smyth-Kirk and independent director Sharon Skeggs. In addition, 45% voted in favor of adding two of Metal Tiger's nominees, including former Dupont Australia CEO and serial corporate board director Richard Warburton. Smyth-Kirk said after the meeting that the company would "look at" board renewal. The head of Metal Tiger, Michael McNeilly, disagrees with the way Kingsgate has handled a dispute over its Chatree gold mine, believing the company should negotiate with the Thai government rather than spend years in arbitration. Metal Tiger also wants to bring in Thai investors and may consider a future listing of the mine on the Thai stock exchange.

Broadcom Turns Focus to Shareholders in Bid for Qualcomm
" eWeek (01/08/18) Burt, Jeffrey"

Broadcom (AVGO) is taking its $105 billion bid for Qualcomm (QCOM) directly to the chipmaker's shareholders, urging them to pressure the company to negotiate a deal. In a letter sent with other proxy materials Jan. 5 to Qualcomm investors, Broadcom President and CEO Hock Tan argued that his company's offer for Qualcomm would be a financial boon to shareholders and urged them to vote for 11 Broadcom-backed candidates for Qualcomm's board at the annual meeting on March 6. Qualcomm directors have spurned Broadcom's unsolicited bid, saying it greatly undervalues their company, and last month declared they would not nominate Broadcom's slate of 11 board candidates. However, in his letter, Tan said Qualcomm investors and users want executives to speak with Broadcom. "…we have spoken with many Qualcomm stockholders and customers, and we have heard their desire for Qualcomm to engage with us regarding our compelling proposal," he wrote. Should shareholders back Broadcom's candidates, those 11 would reappoint three existing Qualcomm directors. The company also is attempting to buy chipmaker NXP (NXPI) for $38 billion. Qualcomm officials had hoped that deal would have closed last week, but it has been held up by regulatory challenges. In addition, Elliott Management has been agitating Qualcomm to sweeten its bid for NXP. Broadcom officials have doggedly continued to pursue Qualcomm despite rejection from its executives, saying they will buy the company with or without the NXP deal closing.

Investors Press Apple to Act on Children's Use
" New York Times (01/08/18) Gelles, David"

Two of the largest investors on Wall Street—Jana Partners and the California State Teachers' Retirement System—have asked Apple (AAPL) to look into the health effects of its products and to make it easier for mothers and fathers to limit their children's use of iPhones and iPads. Once uncritically hailed for their innovation and economic success, Silicon Valley companies are under fire from all sides, facing calls to take more responsibility for their role in everything from election meddling and hate speech to physical health and internet addiction. The backlash against big tech has been growing for months. Facebook (FB) and Twitter (TWTR) are under scrutiny for their roles in enabling Russian meddling in the 2016 presidential election and for facilitating abusive behavior. Google (GOOGL) was hit with a record antitrust fine in Europe for improperly exploiting its market power. Until now, Apple had escaped largely unscathed, and concerns about the deleterious effects of excessive technology use have not been among the most pressing matters for Silicon Valley executives. But "companies have a role to play in helping to address these issues," said Barry Rosenstein, managing partner of Jana Partners, which wrote an open letter to Apple this weekend. "As more and more founders of the biggest tech companies are acknowledging today, the days of just throwing technology out there and washing your hands of the potential impact are over."

Wall Street Fighters, Do-Gooders—and Sting—Converge in New Jana Fund
" Wall Street Journal (01/07/18) Benoit, David"

Jana Partners LLC plans to launch the Jana Impact Capital fund this year to invest in companies the hedge fund believes are good bets but could do better for the world. The fund's board of advisers includes musician Sting and others who have a track record of pressuring companies on environmental, social, and governance issues. Jana's presence, coupled with that of Sting, is expected to lend more legitimacy to socially responsible investing. Jana's first endeavor on this front is a partnership with the California Teachers' Retirement System to push Apple Inc. (AAPL) to address concerns about teenage iPhone addiction. "We still plan on finding good investments, but they will also be companies that can enhance and protect long-term value by focusing on the well-being of the public, our economy, and our society, all of which are inextricably linked with long-term returns," said Jana partner Charles Penner. Outside of the new fund, Jana will continue to push for board changes at companies, among other moves.

Tenet Healthcare Increases Job Cuts
" Wall Street Journal (01/08/18) Evans, Melanie"

Tenet Healthcare Corp. (THC), under pressure from shareholders, announced Monday it is ramping up its cost-cutting efforts without waiting to replace its CEO. Since longtime Tenet CEO Trevor Fetter left in October, Tenet has revealed plans to slash jobs and squeeze $250 million from its costs, and announced the possible sale of one of its three business segments. On Monday, the company said it was increasing the number of job cuts to 2,000, or roughly 2% of its workforce, from the 1,300 it had previously announced. "I am not a caretaker," interim CEO Ronald Rittenmeyer said in an interview. "My objective is to clearly reshape the company so that we are more effective, more efficient, more focused on patient care and doing what we're supposed to do to return to our shareholders the right kind of value," he said. The search for Fetter's successor continues, said Rittenmeyer, who was also named Tenet's executive chairman late this summer. The shake-up followed a move in August by Tenet shareholder Glenview Capital Management LLC to terminate a standstill agreement that prevented Glenview from launching a proxy fight. The next month, media reported the company was exploring strategic options, including a possible sale of the company. Tenet announced in December it is exploring the sale of Conifer Health Solutions, which could raise cash to help lower Tenet's nearly $15 billion in debt. Asked if Tenet was exploring the sale of any other assets, Rittenmeyer said that, as a public company, Tenet is "for sale in the marketplace every single day. At this point, I would say that we're very focused on providing our shareholders the best possible return in the quickest amount of time."

'Safeguards' Must at Tata Group for Minority Shareholders: Cyrus Mistry
" Economic Times (India) (01/08/18)"

Counsel for Cyrus Mistry, ousted chairman of Tata Sons, argued before the National Company Law Tribunal for the introduction of certain "safeguards" within the Tata Group to protect the interests of minority shareholders. C. Arya Sundaram said such safeguards would ensure the diversified conglomerate works like a "board-managed" entity. He also noted that Mistry's ouster was a "consequence of the company's rampant practice of allowing the nominee trustee directors of Tata Trusts to override the opinions of the minority shareholders and even the company board." Sundaram said, "Increasingly, all decisions for Tata Sons as well as other group companies were being taken or approved by the two nominee trustee directors of the Tata Trust, who superseded the decisions of even the Tata Sons board...One of these articles allows the Tata Trusts to nominate one-third of the directors of Tata Sons. Another article permits the majority shareholders to force the minority shareholders to sell their shares or to allow transfer of shares. They are oppressive to the interest of the minority shareholders and defeat the purpose of having a board-run/managed company. All that Mistry is seeking is that these articles be struck down or that some essential safeguards be introduced."

iPhones and Children Are a Toxic Pair, Say Two Big Apple Investors
" Wall Street Journal (01/07/18) Benoit, David"

Jana Partners LLC and the California State Teachers' Retirement System (Calstrs), which together own nearly $2 billion of Apple (AAPL) shares, sent a letter to the technology giant over the weekend urging it to develop new software tools that would help parents control and limit phone use more easily and to study the impact of overuse on children's mental health.  The investor and pension fund say the smartphone maker needs to respond to what more people are seeing as a growing public-health crisis of youth phone addiction.  The move is a precursor to a new multi-billion-dollar fund Jana is looking to raise this year to engage companies it believes can be better corporate citizens.  It is the first instance of a big Wall Street investor of its type looking to profit from the kind of social-responsibility campaign typically associated with a small fringe of investors.  "Apple can play a defining role in signaling to the industry that paying special attention to the health and development of the next generation is both good business and the right thing to do," the shareholders wrote in the letter.  "There is a developing consensus around the world including Silicon Valley that the potential long-term consequences of new technologies need to be factored in at the outset, and no company can outsource that responsibility."

Starboard Says Chipmaker Mellanox's 2018 Targets Insufficient
" Reuters (01/08/18) Venugopal, Aishwarya"

Starboard Value LP sent a letter to Mellanox Technologies Ltd. (MLNX) on Monday criticizing the Israeli chipmaker's 2018 targets as insufficient and overly dependent on revenue growth. The hedge fund—Mellanox's largest shareholder—purchased a 10.7% stake in the company in November to sway strategy. Last month, Mellanox predicted low to mid-teens revenue growth in fiscal 2018, compared with an estimated 0.5% increase this fiscal year, but far off from 19% to 30% growth rates between 2014 and 2016. Mellanox had also anticipated 2018 operating margins would be better than in 2017, but lower than in 2016. In its letter, Starboard said the targets are "not nearly enough" to counterbalance years of sluggish performance and missed expectations. It added that Mellanox lacks credibility to convince shareholders that it will reach even these modest targets. Starboard said it remains worried that the targets were "merely reactionary" and do not come close to addressing the extent of the problem at the company.

Acorda Therapeutics Exploring a Potential Sale
" Wall Street Journal (01/05/18) Mattioli, Dana"

Biotechnology company Acorda Therapeutics Inc. (ACOR) reportedly is exploring a possible sale, bowing to calls from Scopia Capital Management LP. The process is at an early stage and it is possible Acorda will choose not to proceed with a formal auction. Acorda, which has faced some difficulties lately, had a market value of $970 million as of Friday afternoon. The biotech has been facing the threat of generic competition for its main product, multiple-sclerosis drug Ampyra, since a federal court invalidated several important patents early last year. It also recently ended development of a Parkinson's drug after reporting five deaths in treatment studies. The company has made efforts to conserve spending, including a restructuring to slash 20% of jobs, while waiting on its most advanced drugs in development to succeed. In August, Scopia penned a letter to Acorda's board urging it to launch a sales process and find an owner that could help develop its Parkinson's treatment. The hedge fund owns an 18% stake after first investing in 2015. Acorda recently adopted a poison pill, a common tactic for a company seeking to foil an unwanted takeover.

Hershey and Ferrero Compete for Nestle's U.S. Candy Business
" CNBC (01/07/18) Hirsch, Lauren"

Nestle's U.S. confectionery business reportedly received final bids on Friday from candy behemoths The Hershey Co. (HSY) and The Ferrero Group. The business is valued at $2 billion to $2.5 billion, say people familiar with the bidding. The sources noted that Ferrero appears to be in the lead because it is more willing than Hershey to be aggressive on price. Yet it may take another week or more to come to a decision, the sources said, adding that private equity firms have also expressed interest. They cautioned it is possible negotiations could fall through. Nestle announced in June that it was exploring strategic options, including a possible sale, for its U.S. chocolate and candy business. The company has been under pressure to boost returns from hedge fund Third Point, which owns a $3.5 billion stake in the company. Nestle has also been focusing on its shift to becoming a health and nutrition company amid greater calls for healthy snacks. Last month, it announced its $2.3 billion acquisition of nutritional health product company Atrium Innovations.

Kingsgate Chairman Ross Smyth-Kirk 'Confident' on Vote
" Australian Business Review (01/09/18) Garvey, Paul"

Kingsgate Consolidated Chairman Ross Smyth-Kirk says he is "quietly confident" a likely board coup will be thwarted, despite the involvement of the Thai government and Institutional Shareholder Services (ISS).  Shareholders will meet Jan. 9 to formally vote on a proposal from British-listed Metal Tiger to overhaul the Kingsgate board.  Metal Tiger owns an 8.1% stake in Kingsgate and wants to replace the existing board with a slate led by corporate veteran Dick Warburton.  Kingsgate argues the measures would result in Metal Tiger "taking control and destroying" the company.  Smyth-Kirk has served on the Kingsgate board for 23 years, including 17 as chairman.  The most recent years have seen the Thai government ordering the premature closure of Kingsgate's flagship Chatree goldmine, prompting a sharp slide in the company's share price.  Although shares are down approximately 95% from their apex, the company continues to experience robust shareholder backing.  Investors backed the company at its annual general meeting last year, soon after Metal Tiger went public with its plans.  ISS has recommended the ouster of Smyth-Kirk and fellow director Sharon Skeggs as well as the appointment of Metal Tiger's nominees Warburton and Neville Bergin.  The proxy advisor is not supporting Metal Tiger's five other resolutions.  CGI Glass Lewis endorsed Kingsgate's recommendation to reject all nine Metal Tiger resolutions, saying the investor had not presented a "compelling case" for change.

Canada: Glass Lewis' 2018 Canada Policy Guidelines On Proxy Advice
" Mondaq (01/05/18) Riley, Victoria"

Proxy voting firm Glass Lewis recently unveiled its 2018 Policy Guidelines for Proxy Advice in Canada, which contains three major changes from the previous year's report related to board gender diversity, virtual shareholder meetings, and proxy access. First, Glass Lewis this year will not make voting recommendations solely on the basis of board diversity. However, starting in 2019, Glass Lewis says it will typically recommend voting against the nominating committee chair of a board that has no female members or that has not adopted a formal written gender diversity policy. Second, Glass Lewis believes virtual-only meetings could potentially prevent shareholders from meaningfully communicating with the company's management; but a "hybrid meeting" may encourage participation of shareholders who are unable to attend in person. Beginning in 2019, Glass Lewis plans to generally recommend voting against governance committee members where the board is planning—and does not provide disclosure—to hold a virtual-only meeting. In 2018, Glass Lewis will study Canada's regulatory landscape to determine whether existing proxy access rights are sufficient or preferable over U.S.-style proxy access rights, which a number of shareholder proposals have requested at Canadian companies. In situations where Glass Lewis believes the current laws, policies, or regulations either provide shareholders with sufficient proxy access rights or would prevent a company's adoption of the requested provision, it will recommend that shareholders vote against such U.S.-style proposals.

Envision Healthcare Provides Business & Governance Update
" Business Wire (01/04/18)"

Envision Healthcare Corp. (EVHC) on Thursday announced moves to enhance corporate governance, including destaggering the board and allowing proxy access. Envision's board plans to submit a proposal to shareholders at the 2018 annual meeting to amend its charter to allow for annual director elections. If approved, directors voted in at this year's meeting will be elected to a three-year term, and beginning with the company's 2019 annual meeting, directors whose terms expire at each annual meeting would be elected for a one-year term. Thus, by the company's 2021 annual meeting and after, the entire board would be elected annually. In addition, the board intends to amend its bylaws before the 2018 annual meeting to allow proxy access. This will allow a shareholder or group of up to 20 shareholders owning 3% or more of the company's outstanding common stock for at least three years to nominate a limited number of director candidates. "These steps to modify and enhance our governance are reflective of our conversations with shareholders and consistent with our commitment to adopt corporate governance best practices," said Envision Chairman William A. Sanger. The board has also appointed James D. Sheldon as lead independent director, effective immediately, amid an ongoing review of strategic alternatives.

Whitbread Picks Former ITV Boss Adam Crozier as New Chairman
" Financial Times (01/04/18) Ahmed, Murad"

Whitbread—the owner of Premier Inn and Costa Coffee—announced Thursday that veteran executive Adam Crozier will become the company's new chairman, replacing Richard Baker when he retires in February. Crozier has an impressive track record spanning British business, having previously served as CEO of ITV, the Royal Mail, the Football Association, and Saatchi and Saatchi. Crozier has been a senior independent director on Whitbread's board since April last year. In his new role, Crozier will be faced with demands to break up the company. In December, it emerged that New York-based investor Sachem Head had acquired a position worth 3.4% of the company's voting rights. Analysts at Barclays said at the time that the two most likely avenues for Sachem Head to pursue were a spinoff of Costa, and a sale and leaseback of assets. Crozier said Thursday, however, that he backed the strategy set out by CEO Alison Brittain, indicating continuity at the top. For Costa Coffee, this includes introducing finer blends in its coffee shops to attract new customers, the introduction of self-service "express" machines in locations throughout the U.K., and attempting to break into new markets such as China. For its Premier Inn chain of hotels, it includes a renovation plan for its U.K. venues and continuing with steady expansion internationally.

Avaya CIO Joins Akamai, Seizing on 'a Dream Opportunity'
" Boston Business Journal (01/04/18) O'Brien, Kelly J."

Akamai Technologies Inc. (AKAM) has named Fari Ebrahimi—previously the chief information officer of Avaya (AV)—as its new CIO. The management shakeup comes a few weeks after Elliott Management disclosed a significant stake in Akamai, although there is no evidence that the hedge fund influenced the move. Akamai did not reveal how long the search for a new CIO has been underway, but called the process a "planned transition." Ebrahimi has been at Avaya—a California-based maker of corporate communication infrastructure—since 2013, and previously worked as an IT executive at Verizon Communications (VZ) for over a decade. "CIOs have the opportunity to be a change agent," Ebrahimi stated. "In Akamai's case, they are already extremely successful, and I have the opportunity to leverage the company's own technologies to further propel and enable transformation and growth. That is a dream opportunity for a CIO." Cambridge-based Akamai, which says it delivers up to 30% of global internet traffic through its international network of servers, is one of the state's largest tech companies, with a market valuation over $11 billion. However, Akamai has struggled in recent years as the largest customers of its content delivery business have begun to build their own in-house delivery networks. Revenue for the company's Media Delivery Solutions segment fell 9.4% to $787 million from 2015 to 2016.

Casey's Comments on Letter from JCP Shareholder Group
" Business Wire (01/03/18)"

Casey's General Stores, Inc. (CASY) responded Wednesday to a letter from JCP Investment Management, LLC, BLR Partners LP, and Joshua E. Schechter, which together own a roughly 1% stake in the company. Terry Handley, Casey's President and CEO, noted that the company met with representatives from JCP this past summer. However, during those talks the shareholders did not raise their suggestions that the company explore strategic alternatives, "and there has been no substantive engagement with them since that time," he said. Nevertheless, the board will thoroughly review the shareholders' letter. Casey's has a strong history of delivering value for shareholders: the company's 5-year total shareholder returns of 121% exceed that of the S&P 500 index (108%) and the S&P Retail index (46%) over the same period. Hadley noted the company is focused on delivering long-term value for shareholders, citing "new initiatives to accelerate same-store growth and returning cash to shareholders through share repurchases and a steadily increasing dividend."

Jeffrey Pierce's Patience Wearing Thin With Cedar Realty
" ValueWalk (01/02/18) Melin, Mark"

Sources say Jeffrey Pierce's Snow Park Capital's "patience is running thin" with the management of Cedar Realty Trust Inc. (CDR), in which the hedge fund has a 6.4% stake. These sources believe more aggressive moves to change the board of directors could potentially be undertaken in the near-term. In an investor letter, Pierce called the real estate investment trust (REIT) an "orphan" with good underlying assets but poor management performance. In October, Snow Park asked Cedar Realty's board to explore either selling the REIT or liquidating the company's assets. There are concerns that Cedar Realty has underperformed U.S. Strip Center REITs by 27% since August 2016, and that Cedar Realty is considering a new strategy to enter mixed-use development with hotels and apartment rentals, where there is little institutional experience.

Howard Hughes Shares Hurt as Ackman Trims Stake to Invest in Own Fund
" Reuters (01/03/18) Herbst-Bayliss, Svea"

William Ackman, the chairman and biggest shareholder of Howard Hughes Corp. (HHC), announced Wednesday his hedge fund Pershing Square Capital Management would sell 2.5 million shares in the company. Howard Hughes' stock fell more than 3% following the news. Ackman, who called the company an attractive buy in May, is slimming the firm's holdings for tax reasons and says he has not turned on one of his hedge fund's longest-held investments. He needs to make the move in order to invest roughly $300 million of his own money into Pershing Square Holdings, his publicly listed portfolio that trades like a closed-end fund. The company helped performance at Ackman's firm in the first three quarters of 2017, he told clients. Ackman announced the move—which trims his Howard Hughes stake from 23.4% to 17.6%—as he tries to fix his lagging portfolio. After months of buying back more than $40 million worth of Pershing Square Holdings shares, the shares were still trading roughly 20% below their net asset value. Poor returns along with investor withdrawals and concerns that Ackman's investment ideas are not as powerful anymore are driving new moves, including the planned $300 million cash infusion from Ackman and senior associates. The cash infusion from Ackman aims to "assist in reducing the discount to net asset value at which PSH's public shares currently trade," the release said.

JCP Issues Letter to Shareholders of Casey's General Stores
" PRNewswire (01/03/18)"

JCP Investment Management LLC, BLR Partners LP, and Joshua E. Schechter, together significant shareholders of Casey's General Stores Inc. (CASY) who collectively own approximately $45 million of the company's common stock, today issued an open letter to Casey's shareholders. The letter says the investors "believe Casey's shares are significantly undervalued as they do not reflect the true earnings power and full real estate value of the Company's irreplaceable fleet of 2,000+ stores. ... Casey's has significantly underperformed the industry leader, Alimentation Couche-Tard Inc., since Casey's decision to reject ATD's offer and remain independent in 2010. Casey's has also underperformed Murphy USA Inc. (MUSA) since Murphy became an independent company in August 2013. We are concerned that Casey's store level returns on invested capital have declined as the Company has gone from operating in nine states to 15 states. Prior to 2010 (before the offer from ATD), the Company had only operated in nine states since 1995. We believe such rapid expansion coupled with seeming declining returns on invested capital is symptomatic of a company that has been unable to manage growth effectively. ... We believe Casey's shares could be worth from $150 to greater than $170 per share to a potential acquirer. We believe this is realistic given the significant synergies and real estate value that Casey's offers. The gap between Casey's current share price and its strategic value is significant. We do not believe that waiting for an increase in share price in the face of significant declining EBITDA is the prudent path to take considering that we believe that Casey's could potentially realize $150 to greater than $170 in a sale today. We believe that Casey's Board should immediately engage a financial advisor to explore all strategic alternatives, including a potential sale, merger, or similar transaction in order to maximize shareholder value."

Alexion Agrees to Work With Hedge Fund Elliott on Filling Board Seat
" Wall Street Journal (01/02/18) Al-Muslim, Aisha"

Following pressure from Elliott Management Corp., Alexion Pharmaceuticals Inc. (ALXN) announced Tuesday it will work with the hedge fund to find a new director. The agreement is part of efforts to "maintain active and constructive dialogue with all of our shareholders," Alexion Chairman David Brennan said. Elliott reportedly acquired a position in the rare-disease drugmaker last month and urged it to make changes to boost its stock price. Alexion revealed in November that it was looking for someone to fill a seat on its board, which currently has 11 members. The company has reshuffled management over the last year, including hiring CEO Ludwig Hantson in March, after an internal investigation showed senior management pushed staff to convince customers to order its flagship drug earlier than needed to meet financial targets. Under Hantson's leadership, many senior executives were replaced. Alexion announced in September it was slashing its workforce by 20%, moving its headquarters from Connecticut to Boston, and shuttering sites as it works to reduce its overhead. The moves were expected to create $250 million in annual cost savings by next year. "We are encouraged by actions taken under Ludwig's leadership to improve financial performance and reset Alexion's strategy," an Elliott spokesperson said.

Outspoken CEZ Shareholder Group Gets More Rights After Building 1% Stake
" Reuters (01/03/18) Hovet, Jason"

A shareholder group critical of Czech power utility CEZ's strategy has purchased a more than 1% stake in the company, giving it greater power to defend its interests. A representative of the group, Michal Snobr, informed an investor conference on Wednesday that the group had reached qualified shareholder status, giving it the ability to call for general meetings along with other rights. The group blasted a cut in CEZ's dividend payout last year and opposes CEZ financing the Czech Republic's plans to expand its nuclear power capacity. The country is debating how to fund nuclear power expansion but the government has so far refused to provide any support to 70% state-owned CEZ, such as price guarantees, for the construction of reactors. Prime Minister Andrej Babis has said CEZ itself could fund the expansion, an option opposed by Snobr. "In the position of a qualified shareholder we will have enough tools to defend against such things," Snobr said. CTK news agency reported that the group would seek an extraordinary general meeting before the annual general meeting this year to address the issue of financing nuclear power expansion. CEZ last year reduced its dividend payout, although Snobr said CEZ had a high cashflow and could have maintained its dividend at past levels.

Pershing Square, Valeant to Appear in Court on Insider Trading Suit Settlement
" Reuters (01/02/18) Vijayaraghavan, Abinaya"

A U.S. court on Tuesday requested that Valeant Pharmaceuticals International Inc. (VRX) and Bill Ackman's Pershing Square Capital Management appear for a hearing on Jan. 16 to discuss the proposed settlement in an insider trading lawsuit. The hearing comes after Pershing Square and Valeant last week elected to pay $290 million to settle the lawsuit that accused them of insider trading before bidding for Allergan Plc (AGN) in 2014. The lawsuit was filed on behalf of shareholders who sold Allergan shares in the two months before Pershing Square and Valeant made an unsolicited $51 billion offer for Allergan. The court has "substantial questions regarding whether the settlement amount is reasonable and fair," according to documents filed in the U.S. District Court, Central District of California. A Valeant spokeswoman stated: "Today's order is a mandated step in the settlement process. We believe the settlement is fair, reasonable, and adequate, and we look forward to explaining our position to the Court."

Rent-A-Center CEO Steps Down
" Reuters (01/02/18) Sampath, Uday"

On Jan. 2, Rent-A-Center Inc. (RCII) announced that CEO Mark Speese had resigned and would be succeeded by former president Mitchell Fadel, effective immediately. The company has been under pressure from Engaged Capital and Marcato Capital to sell itself. Speese's departure comes a little more than two months after the resignation of Chairman Steven Pepper, citing his disagreement with the board's decision to explore strategic options.

Pershing Square, Valeant to Pay $290 Million to End Lawsuit
" Bloomberg (12/29/17) Pettersson, Edvard"

Bill Ackman's Pershing Square Holdings Ltd. and Valeant Pharmaceuticals International Inc. (VRX) agreed to pay $290 million to settle investor claims that they engaged in insider trading in their failed takeover bid for Allergan Inc. (AGN) in 2014. The deal ends a battle between Pershing Square and Valeant over whether to settle the investors' lawsuit and when, agreeing to divide the payout. If approved, Pershing Square will pay $193.75 million toward the settlement, and Valeant will pay $96.25 million. "We continue to believe the case had absolutely no merit," Ackman said. "We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation." Allergan's shareholders claimed in the lawsuit that they were tricked when Ackman bought their shares with the secret knowledge Valeant was planning a hostile bid.

Oi Shareholder Calls for Vote to Take Action Against CEO, CFO
" Bloomberg (12/29/17) Harrison, Crayton; Moura, Fabiola"

Pharol SGPS SA—Oi SA's biggest equity investor—is calling for a shareholder meeting to determine whether to take legal action against the Brazilian phone company's management and to inspect its restructuring plan. The investor declared in a letter on Friday that CEO Eurico Teles and CFO Carlos Brandao overreached their authority by negotiating the plan with creditors without the board's approval, and investors should decide whether to file a civil liability claim against them. The bankruptcy court overseeing Oi's restructuring awarded Teles full authority to negotiate with creditors without requiring the board's approval, but shareholders are nevertheless threatening legal action to prevent the deal from moving forward. The plan's installment of new board members and a capital hike also require shareholders' approval, argued Pharol, a Lisbon-based publicly traded holding company. Oi spurned the call, saying: "There's no support for any allegation of supposed illegal behavior or violations of corporate bylaws by an Oi executive. The plan … adhered to the highest corporate governance standards and established legal precepts." Teles was fulfilling a judge's decision to present a plan for creditors' approval, regardless of the board's input on it, Oi said. Along with another top investor—Societe Mondiale—Pharol has fought against the restructuring plan, which would dilute the holdings of shareholders and give control of the company to creditors.

Buffalo Wild Wings CEO Outflanked Investor to Set Up Company's Sale
" Minneapolis Star Tribune (12/29/17) Ramstad, Evan"

Although in June it seemed that Buffalo Wild Wings (BWLD) CEO Sally Smith was pushed into retirement by a proxy battle with investor Mick McGuire, it appears that she actually was leaving on her own terms and had already taken steps toward the company's $2.9 billion sale to Roark Capital Group. The deal was reached in November, but Smith reportedly was approached by representatives of the Atlanta-based investment firm in February. Buffalo Wild Wings confirmed on Dec. 29 that Smith would stay with the company through the completion of the sale. On the previous day, the company sent shareholders the voting documents to accept or reject Roark's takeover offer at a Feb. 2 special meeting. Those documents detailed the 10-month process during which the deal came together. McGuire's Marcato Capital had taken a significant stake in Buffalo Wild Wings in the summer of 2016, and at the company's annual meeting on June 2, he won some board seats. Smith's plan to retire by the end of the year also was announced at the annual meeting.

RBS Investors Renew Push for Better Oversight
" Straits Times (12/30/17)"

Small shareholders in the Royal Bank of Scotland (RBS) are backing a second effort to force the state-backed lender to set up a shareholder committee to improve corporate governance after a first bid failed earlier this year. ShareSoc and the U.K. Shareholders' Association (UKSA) have organized over 100 investors to put forward a proposal for consideration at RBS' annual general meeting in 2018, calling for the creation of a committee that would include shareholder representatives.  The committee's primary objective will be to improve investor engagement at the lender.

United States: ISS And Glass Lewis Update Proxy Voting Guidelines for 2018
" Mondaq (12/28/17) Lowder, Janet D."

Institutional Shareholder Services (ISS) has released policy updates for annual meetings occurring after Feb. 1, 2018. Key changes for 2018 include updates to what constitutes a liberal change in control (CIC) definition; extension of the Equity Plan Scorecard (EPSC) to evaluate additional types of plan amendments; identification of new problematic pay practices; the impact of CEO pay ratio disclosures on ISS's review; a new policy targeting excessive non-employee director pay; revisions to the EPSC affecting minimum vesting, CIC vesting, stock ownership guidelines, and other matters; addition of a new performance element (Financial Performance Assessment) to ISS's quantitative pay for performance screen; and a new policy and increased focus on board gender diversity. Meanwhile, Glass Lewis's 2018 Proxy Paper Guidelines contain several key changes in the areas of board gender diversity, dual-class share structures, board responsiveness, virtual shareholder meetings, and CEO pay ratio. Glass Lewis also made clarifying edits to its Director Commitments and Pay for Performance policies.

Corporate Governance: Over 150 Independent Directors Quit in Last Two Months
" IBTimes (12/29/2017) Deb, Purnita"

In India, more than 150 independent directors have quit in the last two months due to strict regulatory interference by the market, banking, and insurance regulatory bodies, according to Prime Database. Some 982 directors have quit since January last year. As the compliance burden on them increases, more directors are likely to resign, thereby negatively affecting the talent pool. "This is a concern not just for independent directors, but also for the companies, as potential independent directors are becoming more selective and cautious," says Ketan Dalal, managing partner at Katalyst Advisors. Independent directors are concerned about potential personal liability stemming from any corporate malfeasance. Directors increasingly are setting aside a portion of their assets in an asset-protection trust to protect their personal wealth. An increasing number of board members at companies with stressed loans are being taken to task by the regulators. A number of independent directors at these companies have resigned. Markets regulator Securities Exchange Board of India earlier in 2017 proposed several changes in regulations to boost corporate governance. If implemented, the changes could result in a bigger compliance burden on independent directors.

Icahn Wins Tussle With SandRidge as Bonanza Deal Is Scrapped
" Bloomberg (12/29/17) Caminada, Carlos; Fournier, Elizabeth"

SandRidge Energy Inc. (SD), bowing to pressure from Carl Icahn—who owns a 13.5% stake—gave up on its proposed purchase of Bonanza Creek Energy Inc. (BCEI). After consulting with its biggest shareholders, the company's board of directors concluded it would not receive the green light for the transaction at its planned special meeting. SandRidge said Thursday in a statement that it will reimburse as much as $3.7 million to Bonanza Creek for transaction-related expenses. "We're obviously pleased with the result but we still have grave concerns about many of the things that the board has permitted to happen at the company," Icahn said following the announcement. Fir Tree Partners Inc. earlier this month joined Icahn in opposing the takeover. "We believe SandRidge would better position itself by returning capital to its shareholders and growing production in a disciplined manner, not through pursuing this reckless transaction," Fir Tree stated in a letter.

RBS Shareholders Revive Call to Set Up Committee
" Financial Times (12/28/17) Arnold, Martin"

Investors are calling on Royal Bank of Scotland (RBS) to establish a new shareholder committee to interact with the board on corporate governance issues. For the second year in a row, two individual shareholder associations have urged the bank to submit a resolution at its annual meeting to set up a new committee. After their first request was spurned on legal grounds by RBS last year, the groups said they had modified their proposals to address the bank's concerns. "If anything we are even less prescriptive than we were last year," said Mark Northway, chairman of ShareSoc, one of the associations behind the proposal. "We are in this for the long haul here. We will keep coming back." ShareSoc and UK Shareholders' Association intend to submit the resolution on Dec. 29 on behalf of 136 investors, demanding that RBS set up a committee of shareholder representatives "to improve the corporate governance and shareholder engagement." The company—which did respond to investors' criticism last year by arranging two meetings between private shareholders and its directors and executives—said it will review any proposal and respond in due course. Cliff Weight of ShareSoc said it had adjusted its proposal to RBS by erasing the formal rights of the shareholder committee to be able to request specific information and to report back to all shareholders at the annual meeting. Instead it simply suggested that these powers "might be a good idea," he said.

Chipotle Seeks a New CEO Who Can Restore Buzz for a Damaged Brand
" Bloomberg (12/27/17) Giammona, Craig; Melin, Anders"

Chipotle Mexican Grill Inc. (CMG) is searching for a new CEO to replace Steve Ells, who said last month that he will step down but stay on as chairman. The chain faces numerous challenges, including the fallout from the company's food-safety crisis more than two years ago and pressure to mount a turnaround. Chipotle's shares will finish 2017 down for a third consecutive year, and its largest shareholder, Bill Ackman of Pershing Square Capital, has not commented on who should lead the company. Observers say there are five possible candidates for the role: Ron Shaich, founder of Panera Bread Co.; J. Patrick Doyle, CEO of Domino's Pizza Inc. (DPZ); Cheryl Bachelder, former CEO of Popeyes; Brian Niccol, CEO of Taco Bell; and Lucy Brady, an executive at McDonald's Corp. (MCD).

Gigamon Announces Completion of Acquisition by Elliott Management and Qatar Investment Authority
" PRNewswire (12/27/17)"

Gigamon Inc. (GIMO) announced on Dec. 27 the successful completion of its acquisition by Elliott Management and the Qatar Investment Authority for about $1.6 billion. Gigamon shareholders approved the transaction on Dec. 22, and they will receive $38.50 per share in cash. Gigamon common stock will no longer be listed for trading on the NYSE. Elliott's investment is being led by its private equity affiliate, Evergreen Coast Capital. "This is a landmark transaction for Evergreen and Elliott," said Elliott partner Jesse Cohn. "We are deeply committed to the success of Gigamon as it continues to innovate and deliver customer value. Gigamon's market-leading platform and position in next-generation infrastructure represents significant potential for the future."

Rent-A-Center Board Sets Stage for One-Year Terms
" Furniture Today (12/26/17) Engel, Clint"

Rent-A-Center (RCII) will ask shareholders to vote on an amendment to declassify its six-member board and set the stage for all directors to stand for election annually. Rent-A-Center's board members are currently divided into three classes, with the members of each class serving staggered three-year terms so that one-third of the seats are up for election each year. To facilitate the change, each current director has pledged to tender his resignation following the 2018 annual meeting if he is a board member at that time. The resignations would occur serially, with remaining board members reappointing the just-resigned member to a new term, until all directors are reappointed. This will result in each member serving a one-year term following the company's annual meeting on June 5. Rent-A-Center's biggest shareholder, Engaged Capital, said it "fully supports the declassification … and the corresponding resolution." It added: "We applaud the new board's proactive decision to announce further shareholder friendly actions following their decision to explore strategic alternatives. It is clear the board realizes robust corporate governance practices, including strong and independent oversight, are and will continue to be important contributors to enhancing shareholder value at RCII." The amendment allowing the declassification of the board will require the approval of common shareholders representing at least 80% of all shares.

FSC to Improve Corporate Governance
" Taipei Times (12/27/17) Chen, Ted"

Taiwan's Financial Supervisory Commission (FSC) is considering measures to improve corporate governance by strengthening the independence of outside directors. The Company Act enables a government agency or a juristic person to act as a shareholder and be elected as a company director or supervisor, and appoint a neutral individual as its proxy on the invitee's board of directors. Industry and legal experts who have criticized the act argue that major shareholders can easily replace proxies and their undue influence compromises the independence of outside directors, limiting their ability to carry out their supervisory duties. "We want to see more neutral board members rather than proxies of major shareholders," FSC Chairman Wellington Koo said. "We also want to set a new rule that requires companies to allocate more than half of total board seats to independent directors," Koo said, adding that many boardrooms of the country's listed companies are occupied by institution-appointed proxies. Meanwhile, 272 independent directors resigned between 2014 and the first half of this year, Taiwan Stock Exchange and the Taipei Exchange data showed. Their exit is due to low pay relative to the extreme potential legal consequences they could face if they are unable to spot and prevent mismanagement or poor operating performance, Koo said. Contrary to beliefs that directors are highly paid, 92.8%—or 3,429 independent directors—earn less than NT$2 million per year, while 6.9% were paid between NT$2 million and NT$10 million, Koo said, citing FSC data. Only 0.03% were paid more than NT$10 million last year, he said.

Judge Sides Against Ackman and Valeant in Preliminary Allergan Ruling
" Wall Street Journal (12/23/17) Morgenson, Gretchen; Benoit, David"

A federal judge's preliminary ruling against William Ackman, Pershing Square Capital Management LP, and Valeant Pharmaceuticals International Inc. in an insider-trading case could prompt a settlement between the billionaire and shareholders of Allergan (AGN). Ackman, his partners, and the plaintiffs have recently been in contact with the mediator in the matter, according to sources, although a deal is far from guaranteed. In a ruling, federal Judge David O. Carter sided with plaintiffs on most of the issues in the case and rebuffed two major legal arguments from Ackman, Pershing Square, and Valeant. Allergan shareholders allege that the three improperly traded ahead of their takeover bid for Allergan in 2014. The judge emphasized that he could change his mind, though the tentative ruling could raise the risk for Ackman, Valeant, and other defendants of paying major damages following a trial, which is slated for February. Addressing one of the defendants' arguments—that they were partners in the Allergan bid and thus permitted to trade—the judge said, "This cannot be correct." He added that if it were, it "would undermine the very purpose" of rules about who can trade in the takeover attempt. Pershing Square's Allergan profit was demolished by a $4 billion loss it suffered on a stake it subsequently bought in Valeant. The firm secured a $2.3 billion gain on the Allergan trade, while Valeant made more than $400 million. But both have struggled following losses at the Canadian drugmaker after their Allergan collaboration ended. The result of the trial could alter the story of one of Ackman's best trades when he is already facing pressure. Pershing Square, roughly flat this year, is facing its third-straight year of underperformance compared with the broader market.

Nestle Cites 'Robust' Interest, Plans to Sell U.S. Chocolate Business by March
" Food Dive (12/22/17) Siegner, Cathy"

Nestle SA plans to sell its U.S. confectionery unit by the end of March. The world's biggest food company likely will reach an agreement in the first quarter of 2018, according to a spokesperson. The unit could sell for $1 billion to $3 billion, analysts say. The sale comes amid a sputtering U.S. chocolate market; in August, Lindt & Spruengli AG blamed North America when it forecast the weakest revenue growth in at least eight years, and other companies also are struggling. Meanwhile, Hershey Co. (HSY), which has been cited as one of the potential bidders, this week agreed to pay $921 million for Amplify Snack Brands Inc. (BETR), to expand into popcorn and potato chips. Nestle CEO Mark Schneider has been seeking ways to tighten the company's focus since he took over the top leadership position in January. And in June, Third Point took a $3.5 billion position in Nestle, or about 1.25% of the company's shares. The hedge fund has called for changes such as improving margins, innovating the core business, and selling non-core assets. Nestle recently sold two of its tea brands. The move to sell "represents a compelling opportunity for U.S. candy companies to consolidate the category at a critical moment. Consumers have cut back on sugar-based snacks and shifted more of their shopping online," Robert Moskow of Credit Suisse noted when the decision was first announced.

Qualcomm Board Rejects Broadcom, Silver Lake Director Nominees
" Reuters (12/22/17) Venugopal, Aishwarya"

Setting the stage for a proxy battle, Qualcomm Inc. (QCOM) on Friday spurned the slate of directors proposed by Broadcom Ltd. (AVGO) and private-equity firm Silver Lake Partners. Broadcom earlier this month took its first formal step to overhaul Qualcomm's 11-member board with its own nominees. Silver Lake, an investor in Broadcom, assisted in the recruitment process. Qualcomm in November rebuffed Broadcom's $103 billion cash-and-stock bid, arguing it significantly undervalued the company. The semiconductor firm said Friday its board is nominating its 11 incumbent directors for re-election at the 2018 annual meeting. Broadcom's nominees included a former president of the mobile networks business group of Nokia (NOK), and the former director and chairman of the board of Dialog Semiconductor Plc. After reviewing Broadcom's nominees, Qualcomm's governance committee decided that they are inherently conflicted and would not bring incremental skills or expertise to its board, the chipmaker said on Friday. Qualcomm declared: "These nominees are inherently conflicted given Broadcom's desire to acquire Qualcomm in a manner that dramatically undervalues Qualcomm to Broadcom's benefit."

House Moves to Regulate Proxy-Advisory Firms
" Pensions & Investments (12/21/17) Bradford, Hazel"

On Dec. 20, the House passed the Corporate Governance Reform and Transparency Act of 2017 along party lines. The measure—which currently has no counterpart in the Senate—would require greater transparency from proxy-advisory firms. Rep. Sean Duffy (R-Wis.), who sponsored the bill, said proxy-advisory firms play an important role in advising clients but "are susceptible to conflicts of interest." In addition to requiring more accountability and transparency from these firms, the legislation would create more competition in the proxy-advisory firm industry. According to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), his panel discovered "numerous instances whereby the two largest proxy-advisory firms (Institutional Shareholder Services and Glass Lewis) have issued vote recommendations to shareholders that include errors, misstatements of fact, and incomplete analysis." He added that those firms make up approximately 97% of the proxy-advisory industry "and can control a significant percentage of shareholder votes in corporate elections."

Snow Park to Challenge Altisource Residential's Board - Sources
" Reuters (12/21/17) O'Donnell, Carl"

Snow Park Capital Partners LP reportedly is lining up a slate of nominees to replace directors on the board of Altisource Residential Corp. (RESI). Sources said the hedge fund could announce the move on Thursday. The challenge comes after Snow Park held unsuccessful private discussions with the company urging it to reconsider its portfolio management agreement with its external manager, Altisource Asset Management Corp. (AAMC). Snow Park has informed Altisource Residential that the agreement with Altisource Asset Management damages shareholder returns and causes Altisource Residential's stock to trade at a significant discount to the value of its real estate, the sources said. Based in the U.S. Virgin Islands, Altisource Residential is a residential real estate investment trust (REIT) with a market capitalization of $615 million. Altisource Residential's management agreement with Altisource Asset Management provides the latter with a payment equal to 2% of the REIT's invested capital, and additional payments linked to performance. Some of the payments can be made in stock instead of cash. Snow Park wants Altisource Residential to also review other legacy agreements, including its deal with Altisource Portfolio Solutions SA, a Luxembourg-based real estate services firm. Altisource Residential's stock has lagged recently, falling by roughly two-thirds since its peak in early 2014. Last year, Altisource Residential agreed to add two new independent directors to its board to settle a fight with RESI Shareholders Group, which owned about 2.5% of the company's shares.

Guggenheim Joins Icahn in Opposing SandRidge-Bonanza Deal
" Financial Times (12/21/17) Badkar, Mamta"

Guggenheim Partners—SandRidge Energy's (SD) second-largest shareholder with an 11.9% stake—has announced it will vote against the company's proposed acquisition of Bonanza Creek (BCEI), joining Carl Icahn in opposition to the deal. The asset manager revealed Wednesday that after meeting with management and reviewing the proxy statement and marketing materials, it "intends to vote all the SandRidge shares under its management … against the proposed acquisition of Bonanza Creek and the associate share issuance." The declaration comes after Icahn, SandRidge's biggest shareholder, escalated his row against the company last week by calling on shareholders to rebuff the $746 million deal that he has dubbed "overpriced" and "value-destroying." Another longtime SandRidge shareholder, Fir Tree Partners, has come out against the transaction as well.

Offshore Driller Ocean Rig Prepares to Explore Sale - Sources
" Reuters (12/20/17) French, David"

Ocean Rig UDW Inc. (ORIG) is considering a sale amid pressure from some of its largest shareholders to review its strategic alternatives, multiple sources say. The move will be an important test of the offshore driller's value after having emerged from Chapter 15 bankruptcy in September. Its business has taken a hit as low oil prices have made offshore drilling less economically attractive. The company has interviewed investment banks in recent weeks to appoint a financial adviser that will help it explore a sale, although whether a deal will be reached is uncertain, the sources say. Shares rose 7% on the news and were up 4.3% in morning trading in New York on Dec. 20. Within a month of exiting bankruptcy, Ocean Rig's biggest shareholder, Elliott Management Corp., called for the company to review strategic options. Elliott said it planned to recruit the company's second biggest shareholder, BlueMountain Capital, in its efforts. A day later, Avenue Capital Group—the company's fifth-biggest shareholder—was on board, demanding that Ocean Rig evaluate a possible sale. The three hedge funds collectively own 39% of Ocean Rig's shares.

Shareholder Group Issues Letter to Aegean Marine Petroleum Network Chairman
" PRNewswire (12/20/17)"

The Committee for Aegean Accountability, a group of shareholders led by Tyler Baron, and collectively owning more than 12% of the outstanding shares of Aegean Marine Petroleum Network Inc. (ANW), has delivered a letter to the chairman of the company's board of directors identifying concerns with the board's ongoing conflicts of interest, poor financial management, and inadequate corporate governance practices. The committee seeks to engage in constructive dialogue with the board to unlock value for all shareholders through board refreshment and enhanced corporate governance controls. To that end, the committee plans to nominate a slate of four independent director candidates for election at the company's 2018 annual meeting of shareholders.

Exxon Ends Restrictions on Meeting Shareholders
" Financial Times (12/19/17) Crooks, Ed"

ExxonMobil (XOM) has bowed to shareholder demands to let investors directly engage board members. The oil company said its board has decided, "where appropriate, to engage directly with key shareholders," adding that it understood the importance of keeping investors up-to-date about the business. The move comes after Exxon also announced last week it would allow a shareholder vote calling for it to report on the potential impact of climate policy on its business. It is unusual for a top U.S. company to refuse to allow even its biggest shareholders to meet with board directors, with Exxon until now sending investor relations executives instead to meetings. Calpers, the California state employees' pension fund, was one of the investors to express frustration with the restrictions. Anne Simpson, the fund's investment director for sustainability, last year called Exxon "an outlier, a minority of one" among top U.S. companies in not allowing contact between directors and large shareholders. The issue of access to directors especially concerned investors seeking to urge Exxon to do more to address the threat of climate change.

Elliott Takes 5.6 Percent Stake in Swiss Duty-Free Retailer Dufry
" Reuters (12/20/17) Keidan, Maiya; Adinarayan, Thyagaraju"

Elliott Management has acquired a 5.6% ownership interest in Swiss duty-free retailer Dufry AG, according to a regulatory filing on Wednesday.  A source close to the hedge fund said Dufry's current price makes it a potential target for a deal.  "It could be attractive to the private equity universe," said the source.  "It's been owned by private equity before."  Dufry was previously backed by private equity firm Advent International, which divested its shares in 2013.  Although details about the seller were not included in the filing to Swiss exchange SIX, media reports suggested that an investment bank sold the shares as part of a derivatives options trade for China's HNA Group.  HNA Group, which is selling properties to diminish debt, owned a 21% stake in the Swiss company before the sale.  Dufry shares were up 3.2% at 0900 GMT after Elliott revealed its stake.

GAM to Cap Bonuses After Shareholder Revolt on Excessive Pay
" Portfolio Adviser (12/20/17) Hill, Louise"

GAM will introduce new caps on executive bonuses next year following a shareholder rebellion against excessive payouts.  Chairman Hugh Scott-Barrett announced a review of the company's compensation structure this spring following a contentious shareholder meeting which saw investors rebuff a plan to award $16.1 million in bonuses to upper management.  The eight-month review of its compensation structure has resulted in a framework "developed around four principles: pay for performance, alignment with shareholders' long-term interests, transparency, and the importance of sound risk management," GAM announced Wednesday.  Shareholders will now have to approve all future management bonuses, with the 2017 compensation plan slated for a vote next April.  If approved, CEO Alexander Friedman and CFO Richard McNamara will have their annual bonuses limited at 250% and 200% of their respective salaries, and their long-term incentive plan (LTIP) award capped at 200%.  Total annual bonuses and incentives for the eight members of GAM's group management board will be capped at 5% of the company's underlying pre-tax profit, with some exclusions.  Earlier this year, Institutional Shareholder Services cited "considerable doubts" over how appropriate decision-making was in relation to management payouts.  "The remuneration system appears to lack appropriate safeguards against inappropriate or excessive pay," it said.  The company has also vowed to improve transparency with a pledge to reveal the targets set for financial performance that are used to determine bonuses.

Arconic Appoints Dave Miller to Join Board of Directors
" PRNewswire (12/19/17)"

Arconic Inc.'s (ARNC) board of directors has appointed Dave Miller, a senior portfolio manager at Elliott Management, to join the board as a director, effective immediately. Miller replaces Patrice Merrin, who has voluntarily stepped down from the board. The board has also appointed Miller to serve on the Finance Committee. Miller joined Elliott in 2003 after working in M&A and financing advisory roles at Peter J. Solomon Co. He is currently a director of the Brazil American Automotive Group Inc., one of the largest automotive dealership groups in Latin America. Arconic Chairman John Plant said of Miller's appointment, "We see great value in having a substantial shareholder directly represented in the boardroom and are pleased to invite Dave Miller to join the board in this capacity."

Hedge Fund Knight Vinke Lifts Stake in M&A Target Uniper
" Reuters (12/20/17) Steitz, Christoph; Keidan, Maiya"

Knight Vinke has upped its stake in Germany's Uniper to just over 5% and declared it would not tender that stake to Finland's Fortum as part of an 8 billion euro ($9.5 billion) takeover offer. The hedge fund's increased holding comes one day after Elliott Management disclosed it had boosted its own stake in Uniper to 7.38%. Elliott has not revealed how it will respond to the takeover offer. Knight Vinke, which has been an Uniper shareholder since 2016, said it was not working with any other shareholder. A source noted that Knight Vinke was not under any legal obligation to declare that it was acting on its own, but did so for clarification to the market. "They've got their agenda, Elliott have their own agenda," the source said. The news comes ahead of plans by E.ON, Uniper's former parent, to tender its remaining 46.65% stake in Uniper to Fortum for a fixed price of 22 euros per share by Jan. 11, 2018, which is below the current share price of roughly 26 euros. The offer extends to all Uniper investors under German takeover rules and runs until Jan. 16.

Jack in the Box Deals Qdoba for $305M in Cash
" QSR Magazine (12/17) Klein, Danny"

Jack in the Box Inc. (JACK) has agreed to sell its ailing fast-casual restaurant brand, Qdoba, to an investment firm.  The company had announced months earlier that it was considering strategic options for the Mexican fast-casual brand, including a possible sale.  Funds led by publicly traded Apollo Global Management will pay about $305 million for the Qdoba chain, which is struggling with fast-casual competition as well as higher commodity costs and labor expenses.  Jack in the Box acquired Qdoba in 2003 when it had only 85 eateries in 15 states and $65 million in sales.  Qdoba has since grown into a national brand with more than 700 locations in 47 states and 2017 fiscal-year sales of over $820 million.  But the chain has stumbled in recent quarters. Jana Partners LLC's Barry Rosenstein and Jeff Smith's Starboard Value LP have owned stakes in the company.

Shareholders Revolt Against London Stock Exchange Chairman Donald Brydon
" The Times (London) (12/19/17) Wilson, Harry"

At the recent extraordinary general meeting, nearly 21% of London Stock Exchange (LSE) investors voted to oust Chairman Donald Brydon, and another 3.2% withheld their support. The vote follows complaints from the Children's Investment Fund (TCI), which owns a 5% stake in the LSE, that Brydon forced out CEO Xavier Rolet against his will. Christopher Hohn's TCI accounted for about 25% of the shares voting against Brydon. Egerton Capital, with about 3% of the shares, had indicated it would vote with TCI. Hohn said the result of the vote marked a "serious rebuke" of Brydon's handling of Rolet's departure, and that other large investors are mobilizing to demand a succession plan for the chairman. "This is a strong vote against a sitting chairman of a major FTSE 100 company. It demonstrates a clear view among a substantial part of the shareholder base that there has been a major corporate governance failure at the London Stock Exchange. The chairman must take responsibility," he said. Meanwhile, Interim LSE CEO David Warren has arranged to meet TCI next month.

Robust Support for Proxy Advisory Firm Reform Legislation
" NASDAQ (12/19/17)"

Nasdaq gathered almost 300 signatures for a letter sent Friday to the U.S. House of Representatives in support of H.R. 4015, Corporate Governance Reform and Transparency Act. The bill is slated for a vote on the floor of the House this week. "Reforming the proxy advisory industry is a topic important to many public companies and we see widespread industry support for our efforts," Nasdaq states. "While proxy advisory firms wield enormous influence over the corporate governance landscape, their methods are not transparent, and they are rife with conflicts of interest." Nasdaq says although its 2017 Nasdaq-Chamber Proxy Season Survey results demonstrate slight improvement in communication between companies, proxy advisors, and shareholders, problems still remain. As an advocate for all public companies, Nasdaq remains committed to advancing proxy advisory legislation through the process of becoming law, it states. "Nasdaq is proud to advance dialogue for reforms that provide for more robust, transparent and efficient markets for both issuers and investors."

Starboard Value Buys 9.9% Stake in
" Wall Street Journal (12/18/17) Benoit, David"

Starboard Value LP has purchased a 9.9% ownership interest in Inc. (CARS) on the belief the stock is undervalued by a market that is wagering heavily against it and dismissing the potential for a sale. Starboard sees potential for the online auto marketplace to improve margins when it no longer has to share a sizable portion of its sales with the media companies that once controlled it, according to Wall Street Journal sources. The hedge fund also sees potential for to be sold to a private-equity firm. Starboard is known for acquiring stakes and pushing for change at companies including Yahoo and Darden Restaurants Inc. (DRI).

Tenet to Explore Conifer Unit Sale Amid Investor Pressure
" Reuters (12/19/17) Grover, Divya"

Tenet Healthcare Corp. (THC) announced Tuesday it would consider a sale of its Conifer unit and expand the size of its plan to slash costs by $100 million by the end of next year. The hospital operator is under pressure from Glenview Capital Management, its largest shareholder, and the move to explore a sale of Conifer comes after the hedge fund removed its two representatives from the board in August citing "irreconcilable differences" over strategy. Tenet declared nearly two months ago it would lay off roughly 1,300 employees in order to save $150 million next year. The company now anticipates total cost cuts of $250 million by the end of 2018. Tenet—which has long-term debt of approximately $15 billion as of June 30—has been reducing costs and focusing on boosting hospital segment margins to revitalize its business. Tenet said Tuesday it expects an adjusted profit per share attributable to the company's investors at between $1.07 and $1.36 next year. Analysts on average were expecting a profit of $1.27 per share. The company also predicted net operating revenue at between $17.8 billion and $18.2 billion, missing analysts' estimate of $18.90 billion.

Activist Investors' Role Needs More Transparency, SEC Nominee Says
" Wall Street Journal (12/18/17) Michaels, Dave"

Robert Jackson, a Democratic nominee to join the Securities and Exchange Commission (SEC), wants the regulator to force more disclosure of activist investors' stakes and to get stricter on stock buybacks. Hedge funds have found legal routes to avoid or delay disclosure of positions they are building, Jackson wrote in a letter responding to questions from Sen. Tammy Baldwin (D., Wis.). Baldwin had objected to quick Senate consideration of Jackson and a Republican nominee to join the SEC, Hester Peirce, until they answered questions about hedge funds, stock buybacks, and executive compensation. A spokesman for Baldwin said Monday that she would now agree to expedite a full Senate vote on the nominees. Jackson's letter stated that activists may use derivatives to gain influence over a company without triggering rules—written with common stock in mind—that demand disclosure of a significant stake. Jackson's letter offers a more detailed picture of his regulatory views, after Baldwin questioned research he published in 2011 that protested stricter disclosure of hedge funds' holdings. Jackson wrote in his letter that big shareholders can still play an important role "in holding corporate managers' feet to the fire." CEOs may be too sensitive to short-term pay incentives, he added, but the SEC could force them to hold stock for longer periods. Meanwhile, Peirce—who has often criticized regulators and laws that seek to restrict financial risk-taking—wrote that "buybacks, if properly and legally used, can contribute to economic growth." The letters by Jackson and Peirce are dated Dec. 8 but were released by Baldwin on Monday.

Hedge Fund Manager Hohn Won't Attend LSE Vote—Source
" Reuters (12/18/17) Cohn, Carolyn; Keidan, Maiya"

A source says British hedge fund manager Christopher Hohn of TCI Fund Management will not attend a vote on the motion brought by his firm to oust London Stock Exchange (LSE) Chairman Donald Brydon over his handling of the succession of former CEO Xavier Rolet. TCI is expected to lose the vote at the general shareholder meeting being held in London on Dec. 19 after several shareholders came out in favor of Brydon.

Standard Life Aberdeen to Back LSE in TCI Tussle—Source
" Reuters (12/18/17) Cohn, Carolyn"

Sources said on Dec. 18 that Standard Life Aberdeen will vote against hedge fund TCI Fund Management's motion to remove London Stock Exchange (LSE) Chairman Donald Brydon from the board. Standard Life Aberdeen joins large LSE shareholders Qatar Investment Authority, BlackRock (BLK), and Aviva Investors in saying they will vote against the motion. Christopher Hohn's TCI is upset with Brydon's handling of the succession of former LSE CEO Xavier Rolet.

P&G Concedes Proxy Fight, Adds Nelson Peltz to Its Board
" Wall Street Journal (12/15/17) Terlep, Sharon; Benoit, David"

Procter & Gamble Co. (PG) announced Friday it would add Nelson Peltz to its board beginning March 1, after the biggest proxy battle in history essentially ended in a tie.  The company said an official vote tally showed its 11 directors were re-elected but Peltz won nearly 50% of the votes cast by shareholders.  Because the results were "extremely close" and because so many shareholders had supported Peltz, the company decided to add him to the board.  Peltz, whose Trian Fund Management has invested about $3.5 billion in P&G, had urged the company to end the battle over recent weeks and appoint him to its 11-person board.  In an interview, P&G CEO David Taylor said Peltz adopted a more cooperative tone following the proxy vote, which led P&G to end its opposition to his candidacy.  "I found him, in the conversations we've had in the last many weeks, to be constructive and forward-looking," Taylor said.  "We've both tried to find a way to build a bridge to move forward."  Strong shareholder support for Peltz was a major factor in adding him and adjusting executive compensation metrics, Taylor said.  "The shareholders did communicate a pretty strong message advocating for Nelson," he said.  P&G said it and Peltz have agreed the company would not take on excessive leverage, significantly slash R&D spending, or break up the company.  P&G also will change its stock performance program to give awards based on sales growth and shareholder returns so that incentives are based on the company's performance overall and not just compared to peers, something Peltz argued for during the fight.  P&G also said it would appoint Novartis AG (NVS) CEO Joseph Jimenez as a director, increasing the size of the board to 13 members.

Elliott Takes Stake in Akamai Tech, Says Shares Undervalued
" Reuters (12/15/17) Roumeliotis, Greg"

Elliott Management has acquired a 6.5% stake in Akamai Technologies (AKAM) and intends to talk to the company about numerous operational and strategic opportunities to boost shareholder value, according to a regulatory filing on Friday. The hedge fund said the Cambridge, Mass.-based company's $9.7 billion market value did not reflect the uses of its platform—which accelerates content delivery over the internet—and added it intended to speak with other shareholders including potential acquirers, service providers, and financing sources for Akamai. Sources said Elliott would seek to curb what it considers wasteful spending and faulty strategic planning when it comes to expanding to new markets. Shares of Akamai shot up 13.8% to $65.75 in after-market trading in New York on Friday following the news of Elliott's stake disclosure. Akamai's revenue growth has flagged, its margins have contracted, and its shares are down this year. The company's traditional media content delivery business is facing pressure as its big media customers—such as Apple Inc. (AAPL) and Inc. (AMZN)—develop in-house capabilities to manage their web traffic. "We appreciate the views of all our stockholders and we value constructive input toward the common goal of enhancing stockholder value," an Akamai spokesman said.

Hedge Funds Line Up Against Institutional Investors in Endgame to London Stock Exchange Chairman Battle
" City A.M. (12/17/17) Jolly, Jasper"

U.S. firm Lone Pine Capital—a top-five shareholder in the London Stock Exchange (LSE)—reportedly will back the resolution of Sir Chris Hohn, manager of The Children's Investment (TCI) fund, to oust Chairman Donald Brydon. The hedge fund is the second so far to support Hohn, along with Egerton Capital, ahead of a shareholder vote on Tuesday. However, major long-term institutional investors seeking to move past the dispute have thrown their support behind the LSE's board, with Standard Life Aberdeen the latest to add its backing, along with Blackrock, the Qatar Investment Authority, and Aviva. The disagreement highlights the investment community's split over whether to back Hohn's campaign, which was launched in November based on what he believed was an unfair removal of the former CEO, Xavier Rolet. The exchange has already conducted multiple interviews with prospective CEO candidates, in a sign that Brydon—who will retire in 2019—is moving ahead in re-establishing management. Meanwhile, shareholder advisors at the Pensions and Investment Research Consultants (Pirc) have accused Brydon of presiding over a "governance crisis," recommending an abstention in the vote. Hohn's campaign is widely expected to fail, with attention now turning to the size of the shareholder revolt against the board. A source said that while TCI may require 50% to win, it does not need 50% to send a clear message to the board about good corporate governance.

Icahn Steps Up Battle With SandRidge Over Bonanza Creek Transaction
" Financial Times (12/15/17) Badkar, Mamta"

In a Dec. 15 filing with the U.S. Securities and Exchange Commission, investor Carl Icahn urged shareholders of SandRidge Energy (SD) to vote against the company's proposed acquisition of Bonanza Creek (BCEI) for $746 million. He expressed concerns that the transaction is "overpriced" and a "significant dilution to SandRidge stockholders," and he argued that CEO James Bennett's remuneration is "significantly disproportionate" to the company's size and to what its peers pay. According to the filing, "Management has an incentive to support and seek out transactions, such as the proposed merger, that allow them to maintain their positions at a company with increased size, which may more easily justify the Company's compensation practices."

Italy's Mediaset Wins Approval for Board Changes, Squeezing Vivendi
" Reuters (12/15/17) Segreti, Giulia; Navach, Giancarlo"

Mediaset shareholders on Friday approved new governance rules which included a proposal to reduce the maximum number of board seats from 21 to 15 and to change the way its members are appointed. The move could limit the influence of France's Vivendi, the TV group's second-largest investor, by leaving minority shareholders with only two or three seats. The new rules are also expected to give the private Italian broadcaster's board greater stability as they strengthen Silvio Berlusconi's clout over the company. Mediaset is controlled by Berlusconi, Italy's former prime minister, whose family holding owns a 39.5% stake. The move escalates a spat between the two sides, who are now meeting in court after Vivendi's unexpected decision last year to pull out of a deal that would have given it control of Mediaset's pay-TV unit. Afterward, Vivendi rapidly amassed a 28.8% stake in Mediaset. The Italian government has expressed concern over the growing influence of Vivendi, which also owns a 24% stake in Telecom Italia (TIM). Fininvest had already said it voted for the new rules but proxy adviser Glass Lewis had recommended shareholders vote the other way "given the potential for the amendment to entrench Fininvest's control of the board." Amber Capital, which owns just over 2.5% of Mediaset, said it opposed the changes as they would have "a negative impact on the company and on the rights of minority shareholders." It added, "It is not acceptable that Vivendi's presence and conducts...are today the excuse to introduce a hidden poison pill which irreparably damages (the rights) of minority shareholders."

Herbalife's Business Model Draws Scrutiny From Senators in Italy
" Bloomberg (12/15/17) Townsend, Matthew; Vasarri, Chiara"

Six Italian senators are calling on the Economic Development Ministry to review Herbalife Ltd.'s (HLF) activities and that of its peers, comparing their multilevel-marketing operations to pyramid schemes. The lawmakers cited a report showing that over 84% of Herbalife's distributors in Italy have not made any money and argued that the company's tactics may be illegal. Five years ago, Pershing Square Capital Management's Bill Ackman called the company a pyramid scheme, bet $1 billion against the company's stock, and started a campaign against it. Since then, the hedge fund has converted its investment to put options. Herbalife settled an investigation by the U.S. Federal Trade Commission for $200 million in 2016.

Elliott Preps for Potential Fight With Hess, Seeking CEO Ouster
" Wall Street Journal (12/14/17) Benoit, David; Olson, Bradley"

Elliott Management Corp. is angling either to remove Hess Corp.'s (HES) chief executive John B. Hess or urge him to consider selling all or part of the energy company. Elliott, which owns a 6.7% stake in Hess, also wants the company to change its approach to shareholder returns, pressing for a dividend cut in favor of stock buybacks, sources said. This is the second time the hedge fund and oil-and-gas company have clashed, with a 2013 fight resulting in Hess giving up his role as chairman and adding Elliott nominees to the board. Since then, the stock has underperformed, including falling sharply this year. "As long-term shareholders in Hess, we are frustrated by the company's continuing underperformance," Elliott portfolio manager John Pike said. "Shareholders are getting impatient because the changes needed to remedy Hess's severe undervaluation are substantial and need to be announced without delay." A battle could depend on whether Hess maintains shareholder support amid growing impatience about the company's multibillion-dollar oil and gas projects. Hess executives recently said the company will not generate free cash flow through 2020 because of investment needs related to a massive oil discovery in 2015 off the coast of Guyana, a timeframe that has frustrated shareholders. Elliott has been working with investment bankers to gauge interest from potential buyers for the company or assets, such as its Asian offshore acreage or its U.S. shale plays, and has even proposed selling a stake in the Guyana asset, sources said. It has also hired recruiting firms to suggest candidates for CEO and the board, they added. Elliott has until March to launch a challenge for Hess's 2018 annual meeting.


Credit Suisse: There are 3 Reasons Why an Activist Investor Could Be Interested in Lowe's
" Markets Insider (01/16/18) Chin, Kimberly"

News that investor D.E. Shaw has acquired a larger stake in Lowe's (LOW) has sent its shares climbing, with sources saying the move could be part of its plans to agitate for changes to boost shareholder value. Seth Sigman, an analyst at Credit Suisse, cites three reasons why the company could be attractive to activist investors. "We see additional upside to LOW, on the back of a possible activist investment," Sigman wrote in a note. First, Sigman said that the company could be seen as a cheaper alternative to its competitor, Home Depot (HD). Sigman wrote that the company's valuations are at a 10-year-low, and the valuation gap between Lowe's and Home Depot has increased due to Lowe's inconsistent results and lower comparable same-store sales from the previous year compared to its rival. Home Depot is also considered a "survivor" stock because it has survived natural disasters and competition from Amazon, elevating its valuation more. In addition, the housing market is doing well, which should benefit Lowe's, Sigman said. Along with climbing home prices and demand, home retailers have gotten a boost from hurricanes last year because the people in affected areas will be seeking to repair or rebuild their homes. Finally, Sigman also considers the gap between Lowe's and Home Depot's sales and margins "addressable," in that it could be cyclical and strategic in nature, so that changes at Lowe's could shrink that gap.

BlackRock's Fink Wants CEOs to Say How They'll Use Tax Cash
" Bloomberg (01/16/18) Willmer, Sabrina; Jones, Sarah"

BlackRock Inc. (BLK) CEO Larry Fink is petitioning heads of the world's largest companies to say how they will spend extra money from the U.S. tax overhaul. "What will you do with increased after-tax cash flow, and how will you use it to create long-term value?" Fink wrote in his annual letter to CEOs on Tuesday. Companies have a responsibility to explain to shareholders how "major legislative and regulatory changes" will affect their long-term growth strategies, Fink said.  Companies including BlackRock are expected to benefit from changes in the U.S. tax plan.  The world's largest asset manager will see its effective tax rate decline to 23% from around 31%.  BlackRock intends to use the money potentially for share buybacks and to pay out dividends, the firm told shareholders on a Jan. 12 earnings call.  The company also said it would consider possible future investment opportunities, such as more aggressively seeding or co-investing in new products, as a result of the tax reform.  For years Fink has urged companies to explain their strategies for future growth.  In Tuesday's letter, he said that businesses should understand how structural trends, including slow wage growth and climate change, could impact their potential to expand over time.

The Morning Risk Report: Boards Must Grapple With Social Impact
" Wall Street Journal (01/11/18) Lemos Stein, Mara"

Boards of directors received a strong message this week when Jana Partners and California State Teachers' Retirement System (Calstrs) sent a letter to Apple Inc. (AAPL) pushing it to act on the negative effect of its products on young people. That message, governance specialists say, is to be prepared to defend your brand on social responsibility. The letter is "the strongest indication to date that the magnitude of assets under management focused on social good matters cannot be ignored," wrote Ethan Klingsberg, partner at law firm Cleary Gottlieb Steen & Hamilton LLP. In their campaign, Jana and Calstrs cited research pointing to the addictive nature of electronic devices. The investors—which own a $2 billion stake in Apple—suggested the company gather its own panel of experts to review the issue, launch new tools for managing time spent on devices, and assign a "high-level executive" to head the topic and issue annual progress reports. As a technology trailblazer, they said Apple should show it cares about the impact of its products, calling it "both good business and the right thing to do." The campaign likely will help Jana gather support from major investors when those investors are seeking leverage in their "economic activist campaigns," consultants at corporate advisory CamberView Partners wrote in a note to clients. With environment, social, and governance (ESG) matters becoming a growing focus for investors, some boards may need to improve their understanding of these issues, commented George Serafeim, the Jakurski Family associate professor of business administration at Harvard Business School.

Four Key Lessons From NACD's '2018 Governance Outlook' About Managing Cyber Risks
" Security Intelligence (01/11/18) Veltsos, Christophe"

The National Association of Corporate Directors (NACD) recently published its "2018 Governance Outlook: Projections on Emerging Board Matters" report, highlighting key areas of focus for board members in the new year. The report—and the underlying NACD Public Company Governance Survey—revealed that just 49% of board directors are confident about management's ability to appropriately deal with cyber risks. Meanwhile, 58% said it was "important" or "very important" for their boards to improve oversight of risk management in 2018.  The article's author details four takeaways for directors from the report.  One, get engaged with strategy and risk oversight.  Two, pay closer attention to cyber threats.  Three, work to improve organizational culture.  And, four, ask tough questions.  Boards should concentrate on what matters, which includes organizational strategy and execution, the way risks are managed, and keeping a close watch on cyber risks.

Investors Opposing Virtual Shareholder Meetings Notch Wins
" Bloomberg (01/09/18) Chasan, Emily"

Railroad operator Union Pacific (UNP) will hold an in-person annual meeting this year, after its 2017 virtual-only gathering drew a shareholder rebuke and a proposal to end the practice, according to a company lawyer in a recent letter to the Securities and Exchange Commission. Investor objections to ConocoPhillips' online meeting last year also led to backpedaling from the oil producer. About 163 U.S. companies held online-only gatherings last year, up from 122 in the 2016 season, according to a review by proxy adviser Glass Lewis. Firms say digital tools cut costs and make meetings accessible to more shareholders, but investors say they are eroding their ability to hold management accountable. New York City Comptroller Scott Stringer, who oversees $191 billion of pension assets, said last April that those funds will vote against directors at companies with virtual-only meetings. The Council of Institutional Investors, which represents managers who oversee more than $3 trillion combined, launched a campaign against virtual-only meetings last year. Broadridge Financial Solutions, which processes electronic voting for companies, expects to facilitate about 250 virtual annual meetings this year. About 20% will be hybrids, where companies hold both virtual and in-person meetings.

#MeToo in the Boardroom: It Takes More Than a 'Symbolic Gesture' to Change Corporate Culture
" NBC News (01/11/18) White, Martha C."

Experts believe a proposal by former Small Business Administration head Maria Contreras-Sweet to install a woman-led board of directors at The Weinstein Co. would be misguided. Contreras-Sweet is a front-runner in the bidding to purchase Harvey Weinstein's scandal-plagued company. Experts say having women in top management roles is a more effective way to change a misogynistic corporate culture. According to Harvard University sociology professor Frank Dobbin, "We know that when companies have plenty of women in middle and upper management, they have lower levels of harassment. Ironically, the problem with focusing on board diversity is it often takes attention away from what needs to be changed." Tel Aviv University associate sociology and anthropology professor Alexandra Kalev adds, "There is power in numbers, and the more women there are in male-dominated jobs, gender stereotypes will decline, cultures will change, and harassment will decline. In the long run, an all-women board is not a solution as it maintains the separation between genders." Charles Elson, a corporate governance professor at the University of Delaware, concurs, saying that concentrating on a single gender could send the wrong message, even if well intentioned. "Eliminating anybody because of an immutable characteristic is not a healthy thing," he said. "You look for board members who have a proven track record of being alert to issues affecting the integrity of the operation." Companies that want to end harassment and entrenched sexism need zero-tolerance harassment policies and the willingness to enforce them, emphasizes Bettina Deynes, chief diversity officer at the Society for Human Resource Management. "Senior management must be demonstrative in enforcing such policies," she says. "When unacceptable behavior comes to light and it appears that high-level managers or high producers are somehow excused from equitable disciplinary action, the policy is rendered useless. Creating a sensitivity to the problem will require more than a symbolic gesture at the top."

To Make More Money, CEOs Harm Company Value
" (01/09/18) McCann, David"

Two new research papers have established a link between the amount of a CEO's awarded equity—stock and stock options—that vests in a particular quarter, and corporate actions in that quarter that boost short-term stock prices but hurt long-term value. Such actions include revising guidance upward, reducing research and development and capital expenditures, buying back shares, and making acquisitions. According to one paper, periods of heavy vesting coincide with reduced investment in long-term projects. The paper shows that the structure of CEO compensation has a causal effect on corporate decisions. The other paper associates stock repurchases and acquisitions with higher short-term returns and lower long-term returns. For example, a one-standard-deviation increase in a CEO's vesting equity is associated with a 1.2% increase in a company's likelihood of conducting a share repurchase during the quarter. In dollar terms, the increase is $1.5 million for the average company. The papers are the first to closely examine the structure of CEO equity vesting schedules and correlate them to value-creating or value-destroying corporate activities, according to the Investor Responsibility Research Center Institute. Alex Edmans of London Business School, Vivian Fang of the University of Minnesota, and Katharina Lewellen of Dartmouth College authored the first paper, while Allen Huang of Hong Kong University of Science and Technology assisted Edmans and Fang with the second paper.

Singapore Listed Companies Poor in Disclosing Pay Practices: Study
" Business Times (Singapore) (01/11/18) Quah, Michelle"

Companies listed in Singapore are encouraged by the Code of Corporate Governance to disclose their remuneration practices, but the disclosures are uneven at best and inadequate at worst, according to a report by corporate governance advocate Mak Yuen Teen, a professor of accounting at NUS Business School; and MBA graduate and investor Chew Yi Hong. The report analyzes annual reports from 609 companies with a primary listing on the Singapore Exchange. The analysis uncovered that the disclosure of remuneration amounts paid out by companies is poor across all categories of directors and management. The disclosure often lacks the clarity to permit stakeholders to assess the pay structure or mix. Another important finding challenges the argument by companies that they withhold pay information out of concern their employees will be poached, Mak said. Rather, within the same market capitalization group, companies with higher pay tended to be less—rather than more—transparent in pay disclosures. "Companies often cite fear of poaching for not fully disclosing remuneration. Fear of poaching would imply that companies are paying below the market. Our findings do not support this. On the contrary, they are consistent with the argument that companies that disclose less may be trying to avoid drawing attention to relatively higher remuneration," he said.

2018 Has All the Makings of a Monster Year for Dealmakers
" Business Insider (01/11/18) Morrell, Alex"

2017 was a strong year for mergers and acquisitions (M&A)—with $3.7 trillion in deals—and 2018 could be even stronger. Global economic expansion and the new U.S. tax law will drive M&A this year, according to a report by Citigroup. However, a boost in activist investing could derail transactions. "The market reaction to [M&A] deals was positive in 2017, highlighting the benefits of accelerating growth, improving technological capabilities, and broader geographic reach," according to a client report by Citigroup's corporate-finance team. "These benefits will continue to drive M&A into 2018 with several evolving themes." Some of the factors likely to drive M&A this year include economic strength around the world. "In 2018, 75% of major economies are expected to generate more than 2% GDP growth, compared to only 57% in 2011," the report notes. "Aggregate corporate earnings are expected to rise by 10.1% in 2018, up from 7.0% in 2016." Furthermore, "rapid technological change is requiring companies to think unconventionally about the types of deals that are necessary to adapt to changing demographics, consumer behavior, and technological innovation." The report notes: "More firms are exploring transactions that blur traditional sector boundaries to create shareholder value." However, a significant spike in activist investing may hinder deals. Citi says approximately 8% of U.S. M&A deals and 4% of European M&A deals are opposed by activists. "Activist interference can be highly disruptive; almost one third of deals with activist interference were not completed," Citi wrote about last year's deals.

Columbia Business School Research Sheds Light on Management's Influence on Votes Cast by Shareholders
" PRNewswire (01/10/18)"

While public companies have noticed shareholders having a bigger impact on their governance and compensation packages over the past decade, Columbia Business School research indicates that corporate management continues to have extraordinary influence on voting outcomes. "Shareholder votes are becoming increasingly important," said Fabrizio Ferri, co-author of the study, and Regina Pitaro, associate professor of accounting at Columbia Business School. "While attention has been given, almost exclusively, to the influence of proxy advisors, our paper is the first to quantify management's influence on critical votes like those on executive compensation plans." The research focused on a sample of S&P 1500 firms and found that management recommendations for any given frequency are associated with 26% more voting support for that frequency by shareholders, suggesting that management controls about one-fourth of the votes cast by shareholders. "Many people have voiced concern over the excessive influence that proxy advisors have on shareholder voting, but our research shows that similar attention should be paid to the influence that management has on voting outcomes," said Ferri. "In other words, a large number of shareholders seem to mechanically follow either management's or proxy advisors' recommendations rather than casting informed votes."

Here's Why America's Biggest Boardrooms Still Cater to Men...for Now
" The Business Journals (01/09/18) Jeffrey, Jeff"

According to a Business Journals analysis of about 3,000 publicly traded companies with at least $100 million in market capitalization, the absence of female board directors was particularly pronounced among companies with relatively limited resources compared to larger firms and those run by male CEOs and board chairmen. The analysis found that male directors outnumbered their female peers by a six-to-one ratio at the end of 2017. Furthermore, 710 boards reported no women directors at all, and another 1,034 companies had only a single woman director at year's end. In contrast, the nation's 25 largest companies by stock market value averaged one female director for every four male directors and had an average of 3.2 women directors per board at the end of 2017. The Business Journals found that as a company's size dwindles, so does its likelihood of employing an above-average ratio of women directors. According to Celia Huber, a senior partner in McKinsey & Co.'s Silicon Valley office, companies often struggle to hire women directors because men outnumber women in the workforce and are promoted at a much faster rate than women. "Women fall behind early in their careers and continue to lose ground with every step, with women of color facing the most dramatic obstacles," Huber said. Meanwhile, it is apparent that gender diversity begets gender diversity, with women accounting for 24% of directors at companies chaired by women and 27% at companies with female CEOs and board chairs.

Top 10 Topics for Directors in 2018: Board Composition
" Mondaq (01/09/18) Walsh, Daniel G.; Pico, Jonathan Joel"

Board composition is considered one of the top 10 topics for board directors in 2018, especially as studies reveal that companies with greater board diversity outperform those with less diversity. Quotas and disclosure are the two main approaches taken by governments to promote board diversity. France, Spain, Norway, and Iceland are among the countries that have legislated board quotas, requiring public companies to have at least 40% female board representation. Meanwhile, the United Kingdom and the United States require companies to disclose certain information and allow investors to evaluate the disclosure and underlying policies. In the United States, certain Securities and Exchange Commission rules require public companies to describe the nominating committee's process for identifying and evaluating director nominees, including whether and how diversity is considered, and whether the company has a diversity policy for identifying nominees, including how the policy is implemented and how the effectiveness of the policy is assessed. Experts say the focus on board diversity likely will continue, and companies would be wise to review the applicable diversity-related obligations in their jurisdictions; assess their current board composition, director search and nomination process, board refreshment practices, and diversity policies; develop a framework for identifying appropriately diverse candidates; and prioritize good disclosure and transparency with investors.

Corporate Governance: Increasing Female Participation at the Top Will Benefit All
" Executive Magazine (Beirut) (01/09/18) Zeidan Maalouly, Zeina"

Flawed corporate governance in the Middle East and North Africa (MENA) is preventing companies from reaching their economic potential. One proven way to improve corporate governance is to add more female directors to corporate boards. However, the region has traditionally fallen short in this aspect. Globally, women make up just 12% of board seats among the world's biggest companies, according to data from MSCI. But in the Middle East, fewer than 2% of board members are women, according to Bloomberg figures. Studies by international accountancy groups Deloitte and EY show that shareholders increasingly see the value of gender balance in businesses and care about the gender composition of boards. A 2016 Organization for Economic Co-operation and Development (OECD) report, citing McKinsey, showed that companies with women on executive committees outperformed peers, bringing in an average of 47% more return on equity and 55% more earnings before interest and tax. Among family-owned businesses especially, a dual-track approach to corporate governance and boosting female leadership in the MENA should be encouraged. As the MENA region starts taking corporate governance more seriously, governments, regulators, and institutions should consider adopting the OECD "Recommendation on Gender Equality" to increase the number of women on boards.

Congress Should End Corporate Governance Conflicts for Investors
" The Hill (01/08/18) Bhagat, Sanjai"

Corporate governance took on a new urgency in the aftermath of Enron's collapse and a succession of accounting scandals. It became a topic of intense media and activist institutional investor interest, and the heightened attention increased the demand for third-party corporate governance-related services by institutional investors and corporations. However, the question has been raised whether the recommendations of corporate governance and proxy advisors enhance the shareholder value of the companies they are advising, writes Sanjai Bhagat, provost professor of finance at the University of Colorado and the author of "Financial Crisis, Corporate Governance, and Bank Capital." Several published papers in scholarly finance and law journals find no relation between governance ratings sold by governance and proxy advisors and company performance. Another question raised about governance and proxy advisors is their conflict of interest with the very shareholders of companies they are advising. The Corporate Governance Reform and Transparency Act, passed by the House in late December, would address the conflict of governance and proxy advisors providing governance consulting services to companies. It requires governance and proxy advisors to disclose to the Securities and Exchange Commission any conflict of interest they have when advising institutional investors on how to vote on various proxy items. "Passage of this bill will enhance corporate governance practices in the United States to the benefit of investors, corporate employees, and other stakeholders, and our capital markets," according to Bhagat.

Opinion: Share Buybacks: Who Really Benefits?
" (01/05/18) Schacht, Kurt; Rosov, Sviatoslav"

The issue of share buybacks by public companies is a complex one, encompassing questions of company growth and investment opportunities, interest-rate policy, macroeconomic dynamism and employment, management compensation—and even philosophical questions about a firm's purpose. Share buybacks stem from the assumption that the job of management is to maximize shareholder value, write Kurt Schacht, managing director of standards and advocacy at the CFA Institute, and Sviatoslav Rosov, an analyst in the institute's capital markets policy group. The real questions, though, are whether share buybacks are the best tool for returning capital, and whether they're sometimes used for the less-wholesome reasons of management entrenchment or enrichment. In some cases, management may feel that the company's share price is undervalued and fairly decide that the best return on investment would come from buying its own shares. The most commonly heard criticism of share buybacks is that, in practice, they are used mainly for improving reported earnings per share by reducing the number of shares outstanding. Share buybacks have become a concern for the broader economy as well. If the theoretical reason for buying back shares is a dearth of corporate investment opportunities, and share buybacks are occurring across a wide swath of publicly listed firms, then it is unclear where this liberated shareholder capital is being redeployed, according to Schacht and Rosov.

Cybersecurity Tops Boards' 2018 To-Do Lists
" (01/08/18) McCann, David"

The latest annual list of hot topics for boards of directors from law firm Akin Gump Strauss Hauer & Feld reveals that cybersecurity ranked No. 1, given the high-profile attacks that occurred in 2017; a recommendation from the U.S. Securities and Exchange Commission (SEC) that companies designate a committee responsible for overseeing cybersecurity risk and that boards have at least one cybersecurity expert or consultant; and the May 25, 2018, implementation of the European Union's General Data Protection Regulation. Other hot topics include corporate social responsibility, corporate strategy, board composition, shareholder activism (especially in the energy industry), internal investigations, SEC regulatory relief, SEC enforcement, and trade and sanctions.

Climate Change, Diversity Will Be on Agenda for 2018
" Pensions & Investments (01/08/18) Kilroy, Meaghan"

Pensions & Investments columnist Meaghan Kilroy expects board diversity and climate change will take center stage in the 2018 proxy season. While some institutional investors have for years been pushing for greater gender diversity on corporate boards, the push has become broader lately with investors looking for diversity in expertise and personal attributes like age and ethnicity. With regards to board diversity, the onus is expected to be on small-cap and midcap companies where all-male boards are more prevalent. Only three S&P 500 companies—Centene Corp. (CNC), Dentsply Sirona Inc. (XRAY), and TransDigm Group Inc. (TDG)—have all male boards currently. "Aside from board diversity and climate change," Kilroy concludes, "other issues expected to play a prominent role this proxy season are proxy access, director elections, gender pay equity, and executive compensation."

Sustainalytics Publishes New Research Report That Examines the Prevalence of ESG Incidents
" Globe Newswire (01/08/18)"

Sustainalytics, a global provider of environment, social, and governance (ESG) and corporate governance research, ratings, and analytics, has released a thematic research report titled, Understanding ESG Incidents: Key Lessons for Investors. Based on analysis of over 29,000 incidents that took place from 2014 to 2016, the report identifies prominent incident categories, where incidents are occurring, and which industries are most involved. The key findings from Sustainalytics' report are that quality and safety and business ethics are the two most common ESG incident types, accounting for 30% of all incidents; the banking industry accounts for 19% of all incidents, more than twice the amount of the next most exposed industry (food products); adjusting for differences in industry size, the automobile industry is the most incident prone, and real estate is the least; and over 40% of incidents occur in the United States, the highest concentration of any country. "Incidents can reveal policy gaps, weak enforcement mechanisms, and even vulnerabilities in corporate strategy," said Doug Morrow, director of thematic research at Sustainalytics. "The analytical framework we develop in our report can help investors assess their exposure to ESG incidents and apply this information in their portfolio decision-making and engagement processes." Sustainalytics' research found that high-impact incidents are associated with a 6% average decline in the market cap of affected companies. Additional analysis found that a portfolio of top incident performers outpaced the global equity market by 11% from 2014 to 2017, suggesting outperformance potential of incidents analysis.

Peltz May Go From Nice to Nasty at P&G
" NASDAQ (01/08/18) Laughlin, Lauren Silva"

Observers say now that Trian Management founder Nelson Peltz has won a seat on Proctor & Gamble's (PG) board, he can help the company sell its worst-performing businesses and raise revenue. Specifically, they indicate that Peltz could push the company to sell its grooming business, which accounts for 10% of total sales, given that its revenue is shrinking as customers choose cheaper or hipper brands. Observers believe that selling P&G's grooming business could bring in about $23 billion on Edgewell Personal Care's (EPC) multiple. Edgewell makes nearly two-thirds of its revenue from razor-related sales and trades at nearly 15 times year-forward earnings, below P&G's 21 times. Although the move would effectively undo P&G's 2005 acquisition of Gillette, observers say the company could use the cash to boost its digital advertising—something Peltz urged during his campaign—and acquire more growth-friendly small brands.

NYC Comptroller's Office Counts on Active Shareholder Engagement
" Wall Street Journal (01/08/18) Stein, Mara Lemos"

Michael Garland is assistant comptroller for corporate governance and responsible investing in the Office of the New York City Comptroller, which serves as investment adviser and custodian for five pension systems with holdings valued at $170 billion. The office is one of the most active asset owners in the United States, and Garland says the only way to protect the portfolio's value is to engage with companies for improved governance. In an interview with The Wall Street Journal, Garland discusses the value of proxy access, the lessons of Wells Fargo's (WFC) mishaps, and the limits of private ordering. The comptroller has been at the forefront of the push for proxy access in the United States, but Garland says he worries that long bylaws with all sorts of clauses included means that companies can easily change the rules of proxy access. Garland says proxy access matters because it is a fundamental right that investors have, can make boards more responsive, and sends a message to the market because it is linked to value creation. Board composition is a main focus of the New York comptroller's campaign for 2018, and Garland says the office is pushing companies to improve disclosure of gender and racial diversity so it can assess the board's skills, experience, and diversity. Garland does not believe greater requests for transparency are asking too much. When looking at corporate culture, the comptroller thinks about the tone at the top and human capital. "Wells Fargo was a failure of human capital management as much as a compliance failure," according to Garland.

Why Hong Kong Firms Need to Do Better on Environment, Social and Governance Risks Disclosure
" South China Morning Post (Hong Kong) (01/07/18) Ng, Eric"

According to a recent survey by KPMG, the quality of the first mandatory disclosure by Hong Kong listed firms on their environment, social, and governance (ESG) performance is far from sufficient to help investors make informed decisions. The survey showed a low regard for ESG risks as principal risks, unclear board engagement in ESG governance, and poor disclosure on whether and how companies identified risks that were most relevant to them. "Many have yet to demonstrate awareness of the significant ESG risks they are exposed to and the effective management of their impacts," said the survey of the annual and ESG reports of 366 firms. KPMG found only 16% had identified one or more ESG risks as principal risks in their business reviews. "The financial sector had the lowest rate of ESG risk disclosure...this is surprising given the growing environmental and social risks facing the clients [or] investees," the firm said. While 77% of companies reported on all 11 ESG aspects listed in the guidelines, only a third disclosed their methods for determining what risks mattered to their operation the most, which KPMG said could reflect the adoption of a "box-ticking approach" by some firms. According to Mary Leung Ka-yan, head of advocacy for Asia-Pacific at the CFA Institute, little policy harmonization has been seen globally, and investors and companies are often confused by the more than 300 financial disclosure policies worldwide.

Hain Celestial's Brand Overload Behind Grim Sale Prospects
" New York Post (01/05/18) Kosman, Josh"

The Hain Celestial Group (HAIN) is unable to find a buyer despite being informally for sale for about a year, sources said.  The $4.2 billion market-cap company reportedly is under pressure to explore a sale from Engaged Capital, which holds seats on the board.  Founder and CEO Irwin Simon built his organic-foods powerhouse to ultimately sell it, sources said, but failed to find a buyer because he expanded the company to include too many brands.  No one brand is large enough to attract a suitor to pay Simon's asking price, sources said.  Simon has been attempting to build certain brands to make Hain more mainstream.  "Maybe [the sale plan] will involve selling some of my more lower-margin businesses," Simon said.  In November, Nestle SA reportedly was in preliminary talks to purchase Hain.  Nestle has told Hain it is interested in buying the business if it first sells its chicken and turkey division, a source said.  "I've said this year we are looking at a strategic overview of all of our business, and some things may not fit," Simon said.  "We have not made any decisions" although the chicken and turkey division is a divestiture candidate.  Hain's goal, he says, is to improve sales for its most valuable brands to increase its trading multiple or to sell Hain to a big consumer foods company that is willing to pay a premium for the potential growth.

Radical Reform Needed to Shake Japan Inc Out of Its Complacency
" Financial Times (01/04/18) Lewis, Leo"

Japan's push for better corporate governance requires more radical reform, experts say.  Some are calling for a critical shift in thinking which could translate into a decisive action by the financial and market regulators.  This shift involves asking what feeds Japan Inc's sense of invulnerability to reform, and how it could be fixed. The answer, argue researchers, lies in ascribing greater culpability to "strategic shareholdings," the chunks of stock held by companies, banks, and securities houses for purposes other than investment that remain a powerful, complacency-fuelling presence on shareholder registers across Japan.  The pervasiveness of the holdings, they argue, means that managements can in effect rely on 50% of shareholders in terms of voting rights to support management.  Annual shareholder meetings are basically meaningless because management is protected by majority support.  As long as that structure exists, the corporate governance code in its current form cannot do much more than it already has.  One solution would be a revision of the code calling on companies to detail publicly how strategic shareholders vote on each resolution.  An even more drastic approach would be an attempt to restrict the overall power of strategic shareholdings by placing limits on the size of stakes held for reasons other than pure investment.  Put either of those measures in place—or even suggest the move is up for debate—and the market may start to believe that corporate governance improvement is here to stay.

Preparing for Proxy Season 2018: A Primer for General Counsel
" (01/05/18) Brown, Phil"

Companies are beginning to prepare for the 2018 proxy season and annual shareholder meetings, and general counsel should have several issues on their radar. These include the prospect of disclosing the company's CEO pay ratio, questions about how they are taking the impact of political uncertainty under the Trump administration into consideration as they make decisions, new accounting rules on revenue recognition and lease impairment, and concerns about cybersecurity and data breaches. General counsel also should be prepared to deal with activist investors, looking at how potential activists have behaved in the past at other companies, the issues that concern them, and the mechanisms used to place directors on boards. They should consistently monitor and enforce rules around filing deadlines, stock purchases, and related issues to ensure activist investors follow the proper procedures.

Investor vs Emojis: Font Group Faces War of Words With Starboard
" Financial Times (01/04/18) Fortado, Lindsay"

Starboard Value reportedly believes that Monotype (TYPE)—the owner of Times New Roman, Helvetica, and Arial—has shrouded the value of its stalwart fonts business with several unwise acquisitions.  Monotype has developed one of the most valuable collections of fonts in the world, but faced with lagging revenues in certain parts of its business, the company acquired Swyft, an emoji designer, and Olapic, a content creator for brands on social media.  Monotype says the moves will enable it to leverage the access it has to the biggest companies in the world through its font business to offer additional services.  Starboard, however, is unconvinced.  The hedge fund said in a regulatory filing that it may attempt to engage with management and the board regarding its ownership structure, board makeup, and potential mergers or spinoffs, and it might also offer recommendations for improving the business.  Starboard unveiled a 6.8% stake in the font group in October.  Monotype, which has a market cap of about $1 billion, said it is committed to gathering momentum in its font business, integrating Olapic, and stabilizing its printer business.  While declining to comment on the Starboard stake, it said it welcomes all views that will help accomplish these objectives.

Shareholder Value and Smart Acquisitions Are Priorities for This Health Care CEO
" Fortune (01/04/18) Gharib, Susie"

José Almeida, CEO of Baxter International (BAX), is starting his third year at the helm strong with a stock that is up nearly 70%, strong earnings and profits, and a strategic acquisition. In an interview with Fortune magazine, Almeida said the health care company is ready to do more acquisitions this year, and he is interested in "any company that is within our area of business." He noted that his acquisition strategy has the support of Third Point's Dan Loeb, who owns about 10% of Baxter. According to Almeida, "I think what Dan wants at the end of the day is that you create value for your shareholders."

A Proxy Season Guide to 2018
" National Law Review (01/03/18) Fenn, Marisa K.; Quinn, J. Eric; Zaunbrecher, Susan B."

A new proxy season is fast approaching, and there are new and anticipated changes that may impact reporting and disclosure requirements.  The Securities and Exchange Commission (SEC) now requires companies to settle securities transactions within two business days of the transaction date, rather than three; and the SEC's Division of Corporation Finance published guidance on Nov. 1, 2017, providing information and its views on shareholder proposals.  On Aug. 17, 2017, the SEC clarified its position and prior guidance regarding what financial information both EGCs and non-EGCs can omit from their draft registration statements submitted confidentially; and the "pay ratio" rules became effective for fiscal years beginning on or after Jan. 1, 2017.  Institutional Shareholder Services updated its Proxy Voting Guidelines Updates for 2018, with changes and modifications addressing matters such as director election on non-employee director compensation, gender pay gap shareholder proposals, and pay for performance quantitative methodology.  Glass Lewis also recently published its 2018 Proxy Paper Guidelines, with changes and modifications targeting matters such as board gender diversity, dual-class share structures, and virtual shareholder meetings.  Other securities law developments involve hyperlinking of exhibits, accounting and auditors, conflict minerals and resource extraction rules, and New York Stock Exchange dividend notification requirements.  There are fewer new rules to deal with in 2018, but change seems to be accelerating, in part because of the efforts of shareholders and investors to fill in what they perceive as a regulatory void.

Congress Could Impose New Rules for Proxy Advisory Firms
" Compliance Week (01/03/18) Mont, Joe"

The House has passed a bill that could lead to big changes for proxy advisory firms. The Corporate Governance Reform and Transparency Act of 2017 requires proxy advisory firms to register with the Securities and Exchange Commission, disclose potential conflicts of interest and codes of ethics, and make publicly available their methodologies for formulating proxy recommendations and analyses. Rep. Sean Duffy (R-Wis.) reintroduced the bill, which was passed by the House on Dec. 20, 2017, by a 238-182 vote. "Investors ... across America expect and deserve certainty that their rights as shareholders won't be compromised by advisors issuing conflicting recommendations and executing votes," said Duffy. The bill "will foster greater accountability, transparency, responsiveness, and competition in the proxy advisory firm industry." Financial Services Committee Chairman Jeb Hensarling (R-Texas), a champion of the bill, added that given the importance of proxy advisory firms to institutional investors and the dominance of two firms in the proxy system, greater transparency is necessary to protect shareholders. ISS and Glass Lewis account for approximately 97% of the proxy advisory industry and can control a significant percentage of shareholder votes in corporate elections. The bill still must be approved by the Senate.

Skyrocketing Executive Pay Packages Are About to Become More Costly for Corporate America
" Washington Post (01/03/18) Merle, Renae"

A provision in the tax overhaul Congress passed in late December attempts to place new curbs on executive pay; companies that give millions in performance bonuses to top executives could face a bigger tax bill. Netflix (NFLX) has responded by hiking the salaries of several top executives and scrapping a program that tied their pay to company performance. According to executive compensation experts, corporate boards nationwide are considering whether to do the same. The new law eliminates the deduction for performance-based pay, potentially steering over $9 billion to federal coffers over the next decade, the Joint Committee on Taxation calculates. Compensation experts, though, say the change in tax law is not likely to reverse years of upward pressure on executive pay. In fact, businesses are likely to make such pay less dependent on performance-based bonuses and give execs a higher salary.

The Morning Risk Report: SEC Hard to Read on Shareholder Proposal Exclusions
" Wall Street Journal (01/03/18) Lemos Stein, Mara"

November guidance from the Securities and Exchange Commission (SEC) indicated the agency would be gentler on companies angling to exclude shareholder proposals from their proxy materials, but a rejection of such a request by Apple (AAPL) now suggests that expectation may have been premature. Specifically, the guidance stated boards were better equipped to determine the relevance to the company's business operations of any policy issue raised in the proposal. Thus Apple tried to exclude a proposal asking the company to establish a human rights committee at the board level to enhance its policies and practices in this area. In its request to the SEC, Apple cited discussions about the shareholder proposal with the board and its other efforts to ensure human rights are protected in its global supply chain. Nevertheless, it failed to convince the SEC the proposal was not relevant to its business. In its denial of Apple's request, the SEC even quoted the company's discussion of its board's approach to human rights policy to argue that Apple itself believes issues raised in the proposal are significant to its business operations. The response creates some uncertainty for companies, said attorneys at Cleary Gottlieb Steen & Hamilton. In a Dec. 27 client note, the firm wrote: "Under what circumstances, if any, could a company argue that ESG issues are ordinary course and permeate operational decisions…and also argue that they are not…related to substantial business operations?" The note added: "The [SEC]'s response to the Apple request indicates that the citation of board process and an involvement of the board in an assessment of a shareholder proposal will not give rise to an automatic pass with the [SEC]."

Governing by the Spirit
" BusinessWorld (India) (01/03/18) Rosling, Alan"

India has made progress in enhancing board composition in recent years, in part because of a tightened Clause 49 of the Listing Agreement and new standards under the Companies Act 2013. The leadership advisory firm Spencer Stuart reports that the Sensex constituents now have boards with an average of 10 members, with non-executive directors accounting for 68%, and female directors now accounting for 12% of board strength. In contrast, boards in the United States have boards that comprise 85% non-executive members and 22% female, while boards in the United Kingdom have boards that comprise 61% non-executive directors and 26% female. However, most larger company boards in India still attract members from similar circles, backgrounds, and age groups. On average, Sensex 30 boards have 8% of members who are non-Indian, compared with 32% of foreigners on U.K. boards. Meanwhile, of the Sensex 30, only five companies have a non-executive chair, which is an expectation in the United Kingdom to encourage the right balance and separation between management and board.

So Women Reach the Top of Companies. What Happens After That?
" Indian Express (01/03/18)"

An analysis of the NIFTY 500 maintained by Prime Database reveals that women comprised 14% of all board members for the NIFTY 500, but they accounted for only 3% of chairperson or co-chairperson positions, 4% of managing directors, 6% of directors, and 7% of executive directors. Prime Database managing director Pranav Haldea says, "When it comes to voting power, there is no difference based on position. Chairpersons and managing directors, however, do drive the boards." Although more women are entering the corporate boardroom, they are not achieving influential positions in similar numbers. According to Harpreet Kaur, deputy director at Ashoka University's Genpact Centre for Women's Leadership, "Firstly, the number of women on the table is drastically out of proportion as compared to men. It becomes difficult to rise in this paradigm. A factor that plays a very important role when you reach the top but are just a level under, is the kind of networking and sponsorship support that you have access to. Men and women experience these networks very differently. Even though male and female networks may be similar in size, their composition is very different. Often, there are more men in men's networks—and there are more men in leadership positions. So, the networks pushing them upwards are much stronger." Of the more than 11,189 members of 3,329 committees at NIFTY 500 companies, women accounted for only 11%, or 1,209 committee seats.

Hong Kong Plan for Dual-Class Listings Draws Investor Ire
" Institutional Investor (01/02/18) Cheng, Allen T."

Hong Kong Exchanges and Clearing's (HKEX) move to permit companies with dual-class shares to list in 2018 is being criticized by David Webb, an adviser to Hong Kong's top market regulator, the Securities and Futures Commission. "This policy is about racing to the bottom, attracting any [weak] company we can by dismantling shareholder rights," Webb stated in an email. "It makes us look more like the Wild East, a sunny place for shady companies. No quarterly reporting, no accountability, and no class action system, prohibiting access to legal remedies." Furthermore, "It simply isn't true that we need to reduce shareholder protections to attract 'innovative' companies," Webb said. "A recent wave of tech listings including Razer and China Literature prove otherwise." HKEX is hoping to win the business of leading Chinese technology companies operated by entrepreneurs, after losing the initial public offering of Alibaba Group Holding to the New York Stock Exchange (NYSE) in September 2014. In late 2013, Alibaba executives had considered whether to go public in Hong Kong or New York, choosing the NYSE, where there was more flexibility around management voting rights. HKEX CEO Charles Li views the exchange operator's effort to expand its listing pool as a progressive way to earn business. "The Hong Kong market has decided to take a big step forward and secure our relevancy as a premier global capital formation center," Li wrote in a Dec. 15 blog post. "Following an extensive market consultation, we have reached a clear consensus that Hong Kong must broaden its listing regime and proactively embrace the new economy." Despite the controversy, some observers support HKEX's decision to accept dual-class listings. PricewaterhouseCoopers, for example, stated on Jan. 2 that the new policy could help turn Hong Kong into the world's biggest initial public offering (IPO) market this year, potentially raising as much as HK$250 billion ($32 billion). Hong Kong ranked No. 2 globally in IPO volume in 2017, behind the NYSE, according to Dealogic.

Activists' Guide to 2018: The Best Defense Is a Good Offense
" New York Times (01/02/18) Laughlin, Lauren Silva"

Activist investors agitating for new strategies or management shakeups are not going anywhere. In fact, the proxy fight this year at Procter & Gamble (PG) led by Nelson Peltz—whose Trian Partners gained a board seat after a 10-month campaign—will encourage others to take up similar action. Resistance is not futile, but it needs to be more carefully considered, and companies need to soften their pride. From General Motors (GM) to Whole Foods (WFM), no company was off limits in 2017. Activists waged campaigns at more large companies than the previous year, a trend that can be expected to continue in 2018. For companies, the best defense is a good offense. GM's Mary Barra fended off David Einhorn's attempt to split the stock, having already begun to address the stock's discount by selling off the automaker's European brands before Einhorn launched his campaign, and by carefully outlining the company's long-term strategy. Automatic Data Processing (ADP) fended off Bill Ackman by citing its efforts to transform its technology and the hedge-fund manager's comparatively poor performance. For activists, good instincts and finely honed demands hold the key to success. Peltz made clear he was not trying to break up P&G and sought a single board seat to push for new management and greater emphasis on new products and M&A. The 10-month defense by CEO David Taylor seemed disproportionate to Peltz's request and undermined Taylor's credibility. Look for more executives to behave like General Electric's John Flannery, who made Peltz an ally by giving Trian a board seat without a proxy fight.

Shareholder Activism in 2018: Pumping Up the Volume
" IR Magazine (01/02/18) Goldfarb, Bruce"

Activist investors are likely to be more aggressive in 2018, writes Bruce Goldfarb, president and CEO of Okapi Partners, a proxy solicitation and investor response firm based in New York. Activists are emboldened by past successes, empowered by new technologies, and encouraged to drive valuations higher in an already lofty equity market. The activists that settled for board seats and strategic reviews in the past are now likely to push for more dramatic changes, such as replacing the CEO or management, while new activists may demand more drastic action to enhance shareholder value, according to Goldfarb. Trian's contest against Procter & Gamble (PG) is likely a foreshadowing of more expensive retail-oriented campaigns to come. Activists will likely be more focused on operational "fixes" intended to make companies more efficient, more profitable, faster growing, and thus more valuable, rather than on looking to put entire companies up for sale. Investors like BlackRock (BLK), Vanguard, and State Street (STT) have become increasingly vocal in supporting environmental, social, and corporate governance-related (ESG) proxy proposals, so there will be more momentum behind efforts to hold public company boards and management teams accountable to higher ESG standards. Also, more companies will get better at honing their messages to shareholders, and will work to solidify their relationship with investors by holding more regular conversations about corporate strategy, stock performance, executive compensation, and ESG issues, adds Goldfarb.

10 New Year's Resolutions for Your Firm's Corporate Governance
" IT World Canada (01/02/18) Atkins, Betsy"

There are 10 things boards of directors should do to start the New Year: perform an inside/out activist review of the company; rethink board committees, understanding that companies cannot keep up without a dedicated board tech committee on innovation, digital transformation, and cyber; accelerate board refreshment and diversity; address Environmental, Social, and Governance issues; formulate a crisis management plan, with a specific plan for each of the company's top 10 risks; make cyber and data breach policies a top priority; establish customized development plans for each future leader, with an eye on CEO succession; prepare for individual ISS director scorecards; reconfirm the company's policy against sexual harassment and ensure strong compliance training; and know the ratio between CEO and median employee pay.

The Morning Risk Report: Ruling Points to More Attention for Director Compensation
" Wall Street Journal (01/02/18) DiPietro, Ben"

A December ruling by the Delaware Supreme Court could affect companies where the board sets pay for directors. The decision reversed a lower-court ruling that upheld equity awards given to board members at Investors Bancorp (ISBC). The ruling means boards no longer will be able to depend on the business judgment rule protection to justify such equity awards; instead, board compensation will be judged by the more narrow "entire fairness" standard, explained Steven M. Haas, a partner at law firm Hunton & Williams. "This ruling will likely cause companies to rethink the terms of future equity plans," Haas wrote in a client note. "For boards making discretionary director compensation decisions, they should work closely with outside advisors to help establish the fairness of the compensation." Previously, courts developed a test that when board directors paid themselves equity under a stockholder-approved plan, the compensation decision was protected by the business judgment rule that said as long as a plan has meaningful limits the courts would take a deferential approach, according to Haas. That left open the question of what constitutes a meaningful limit. "Now, boards must demonstrate a fairness of the compensation," if shareholders did not approve the grants or a self-executing plan, he said. Haas expects companies to change the terms of their equity-compensation plans, but not until the life cycle of their current compensation plans end. He does not anticipate a flood of lawsuits challenging director compensation, "as most director plans are reasonable" and the costs to bring such actions may not be worth the return.

Breakingviews - Icahn Wins SandRidge Battle but War Isn't Over
" Reuters (12/29/17) Laughlin, Lauren Silva"

SandRidge Energy (SD) has cancelled its $746 million bid for competitor Bonanza Creek Energy (BCEI), marking a win for Carl Icahn and other shareholders. However, the oil driller's poison pill—which prevents Icahn from raising his stake and makes a takeover more difficult—remains in place. SandRidge dropped its bid just six weeks after announcing the agreed offer for Bonanza, highlighting the degree of shareholder opposition. Fir Tree Partners—the company's third-largest shareholder—was the first to oppose the deal, and Icahn joined soon after. Guggenheim Partners Investment Management later backed both investors, making all three top shareholders outspoken dissidents. However, the shareholders still have challenges ahead. After Icahn acquired his stake, the company installed a poison pill that effectively dilutes any shareholder if they take significant holdings. These types of rights plans can repel potential bidders as well. SandRidge stock trades at just 2.4 times estimated EBITDA for 2018, according to Eikon, less than half the multiples of most competitors. That could make the company a prime candidate for a takeover. Shareholders will be able to vote on the rights plan at the next annual meeting, but the date has not been set yet and last year's meeting did not occur until June. That leaves months for SandRidge's management to spurn interested bidders. Icahn should keep up the pressure and see this battle through to the end.

How Shareholders Can Rein in Obscene Pay Packages
" Financial Times (12/29/17) Webb, Merryn Somerset"

The chairman of Persimmon recently resigned amid investor backlash after approving a remuneration package to pay the CEO a whopping £107 million by the middle of next year. While he should have insisted on a cap on the bonus structure, there is a problem with blaming just the board and executive greed for this type of issue, writes Merryn Somerset Webb, the Editor-in-Chief of MoneyWeek. We also must ask how shareholders let such deals go through, she says. To get to the answer, we need to examine the ownership structure of shares in listed companies today. Today, the number of listed shares in the U.K. held directly by individuals has dwindled to 10%: most people hold what equities they have via the fund management business. And even those who do hold individual shares do so via a platform of some kind. This is all very convenient, but it also has several unfortunate side effects, Webb writes. The first is a lack of connection between the final beneficial investor and the corporate world. The second is the one we see in action with ridiculous pay policies. It is that fund managers do not necessarily see things as small shareholders might, writes Webb. It might be better to bypass fund managers in the decision-making process, she says. "Forty years ago, the beneficial owners of shares were the ones voting at AGMs. Why not change the structure of the investing world and make that happen again?"

More Investors Consider Nonfinancial Factors in Decisions
" Japan Times (01/01/18) Nagata, Kazuaki"

Environment, social, and governance (ESG) investment finally began picking up steam in Japan during 2017. Hiromichi Mizuno, chief investment officer at the Government Pension Investment Fund (GPIF), wants to take it to the next level in the new year so that Japan can catch up with other nations and potentially pull ahead of them. To accomplish that, he emphasizes that the domestic corporate sector will need to ramp up its efforts to share more data on how they are contributing to the environment and social sustainability. Mizuno, a master of ESG initiatives in Japan, remarks, "Two or three years ago, every time GPIF mentioned ESG, we really didn't get very positive reactions from Japanese corporate leaders. But now, I think we're getting much more supportive reactions. I think they started realizing that our push for ESG helps them communicate with foreign investors."

Africa: Corporate Boardrooms - Where Are the Women?
" (12/28/17) Oyaro, Kwamboka"

As of the 2015 study by the African Development Bank titled "Where Are the Women? Inclusive Boardrooms in Africa's Top-Listed Companies," women at the top 307 African companies comprised just 14% of total board membership, or one woman out of every seven board members. One-third of the boards had no women at all, the study found. African nations with the highest percentage of women board members are Kenya (19.8%), Ghana (17.7%), South Africa (17.4%), Botswana (16.9%), and Zambia (16.9%). Companies with a high percentage of women on the board include the Kenya-based East African Breweries Ltd. (45.5% women), followed by South Africa's Impala Platinum Holdings Ltd. (38.5%) and Woolworths Holdings Ltd. (30.8%). The African nations with the lowest percentage of women on boards include Côte d'Ivoire (5.1%), Morocco (5.9%), Tunisia (7.9%), and Egypt (8.2%). "The earnings before interest and taxes margin of those with at least a quarter share of women on their boards was on average 20% higher than the industry average," notes "Women Matter Africa," a report by U.S.-based consulting firm McKinsey & Co. The African continent does rank first in female board membership among emerging regions. Africa, at 14.4%, places substantially higher than Asia-Pacific at 9.8%, Latin America at 5.6%, and the Middle East at 1%. McKinsey & Co. suggests four goals including making gender diversity a top board and CEO priority; making a compelling case for gender diversity; confronting limiting attitudes toward women in the workplace; and implementing a fact-based gender diversity strategy—using metrics and data to understand women's contributions within a company.

Working Women in Japan Aim High, but Bosses Aren't Listening
" Nikkei Asian Review (12/28/17) Moriyasu, Ken"

Many Japanese female professionals aspire to corporate board service, according to a survey by professional recruitment firm Hays.  However, too few of their male bosses provide support for such advancement.  According to the Hays survey of five Asian economies, 42% of Japanese female professionals said, "My line manager does not know my career ambition"—more than four times higher than the share who said the same in Hong Kong, and notably higher than in China, Malaysia, and Singapore.  When asked in the Hays survey if they would like to reach the director level, 13% of Japanese female professionals said they hoped to do so within three years, 30% set a seven-year time frame, and 25% said their target was 10 years.

Governance Is the Next Target for Abenomics
" Wall Street Journal (12/28/17) Trivedi, Anjani"

Corporate scandals and persistently weak inflation in Japan have renewed pressure to improve the way the country's companies are managed.  Prime Minister Shinzo Abe's economic-revival program—which has helped bolster the economy and make Japan's stock market vastly more competitive—has affected corporate governance as well.  Shareholder returns in the form of buybacks and dividends are at record highs, while independent directors now make up at least one-third of the board at 30% of listed Japanese companies.  The networks of cross-shareholdings that limited minority shareholders' rights in the past have declined as a percentage of companies' market capitalizations for eight straight years, and are now down to 15%.  Some activist investors have driven change at large Japanese companies in 2017.  However, while scandals at companies from Nissan to Toray Industries represent progress and awareness, by international standards, companies were not held to such a high standard in the first place.  Now, there is a growing belief that stronger corporate governance could help cure low inflation and wage growth, two of the biggest drags on the Japanese economy.  The idea is that strengthening corporate boards will make executives prioritize profits, productivity, and pay.  Hopes are pinned on a revised corporate governance code that is expected this summer, which will be an indicator of Abe's intentions.  Japan requires more than stimulus from the central bank and the government to keep the economy growing.  If better governance can improve wages and inflation, it could make Japan's recovery more sustainable.

Icahn's Bet on Copper Miner Is Paying Off After Two-Year Wait
" Bloomberg (12/28/17) Kochkodin, Brandon"

Freeport-McMoRan Inc.'s (FCX) stock has skyrocketed more than 30% in the past month on top of a record rally in copper prices. Carl Icahn unveiled an 8.5% stake in stock and options in Freeport in the third quarter of 2015, and called for a review of the miner's "capital expenditures, executive compensation practices, and capital structure," as well as an end to "high-cost production operations." A filing at the time showed Icahn paid roughly $14 a share, spending approximately $1.23 billion. Freeport closed Wednesday at $18.69, putting the return on Icahn's initial investment on par with the 35% return of the S&P 500 Index over the same period. On the same day that Icahn reported his stake, Freeport announced that it would lower capital expenditures, curb copper sales, and slash production by 20%. Shares jumped 28% that day. In October 2015, Freeport agreed to appoint two of Icahn's representatives as directors, after reducing the board from 16 to nine members. Shares increased as much as 14% on the news. Icahn lowered his stake in 2016 and 2017 as copper prices languished and Freeport negotiated the sale of the massive Grasberg copper and gold mine in Indonesia. Since Icahn first bought into Freeport, proceeds from divesting oil and gas units have helped the company pay down some of its debt and reduce its leverage ratio by more than half. With copper's rally, the value of Icahn's remaining 5.3% stake has increased by $369 million this month.

P&G's 2017 by the Numbers
" Cincinnati Business Courier (12/28/17) Brunsman, Barrett J."

Procter & Gamble Co. (PG) purchased the Native deodorant brand in November, its first acquisition of a competitor in eight years. The transaction could signal a new strategy for the Cincinnati-based maker of consumer goods to increase revenue. The company is under pressure from Trian Fund Management's Nelson Peltz—who will join the P&G board on March 1—to make mergers and acquisitions. Peltz supports acquiring or organically building fresh brands, indicating that the well-established brands favored by P&G are losing market share.

Bad Buybacks Can Destroy Shareholder Value
" Forbes (12/26/17) Trainer, David"

Columnist David Trainer writes that executives are consistently "incentivized" to hit targets related to metrics that "are easily manipulated and have little connection to long-term shareholder value."  He states that there is a much better way to incentivize the right kind of behavior from executives. Return on invested capital (ROIC) has a proven link to shareholder value, Trainer states, and cannot be gamed or manipulated in the same way. Relatively few firms tie executive pay to ROIC, though, because ROIC is difficult to accurately calculate in a way that is comparable across companies; ROIC targets are much more difficult to hit than other, more easily manipulated metrics; and compensation committees too often lack the expertise, independence, or engagement necessary to safeguard shareholder's interests.

Cevian Says Brexit Offers Rich Pickings
" Financial Times (12/27/17) Milne, Richard"

Swedish investor Cevian Capital says Brexit is making the U.K. more appealing to investors by lowering valuations. The fund is off a fresh success from selling its 8% stake in truckmaker Volvo Group to Chinese company Zhejiang Geely for €3.25 billion, the sector's biggest-ever exit. The fund's co-founder, Christer Gardell, says the firm would be aiming to reinvest the €2 billion in profits it made either in new companies in northern Europe or in existing holdings that include companies such as steelmaker ThyssenKrupp, engineering firm ABB, and U.K. insurer RSA. "We really like the U.K. market. We like the corporate governance, the rational behavior of corporate boards. For us, Brexit is probably more a positive than a negative. Investors tend to exaggerate the threat," he said. The Volvo Group stake sale is a vindication of the long-term strategy of Cevian, which typically owns stakes of 5-20% for five to seven years. The investor owned Volvo Group for 11 years and made much of its money in the past 18 months due to a turnaround launched by a new CEO. Gardell said of the deal: "It's an important transaction for our business. It shows the value of a large minority position as well. It's good to show we can do a transaction like this after so many years." Cevian predicts that its return from its Volvo Group investment is more than double the market return over the past 11 years.

Role of Conglomerates' Outside Directors Minimal: Report
" Yonhap News (12/27/17)"

South Korea's Fair Trade Commission issued a report on Dec. 27 indicating that outside directors at the country's major conglomerates play an insignificant role in corporate decisions, as their agenda disapproval rate is very low. Of the 4,361 motions forwarded for approval by the board of 169 listed companies—which belong to 26 conglomerates—in the one-year period from April 2016, only 17 were rejected, altered, or pigeonholed, amounting to just 0.39% of the total, according to the report. Only four agenda items were voted down. Given the low disapproval rate, independent directors at family-controlled conglomerates are thought to just rubber-stamp key decisions to serve the interests of the largest shareholders or management over small investors. Meanwhile, during the period covered by the report, the percentage of outside directors at the companies rose from 50.2% to 50.6%.

Growing Activist Focus on Europe Adds Urgency to Avoid Campaigns
" Bloomberg (11/27/17) Pham, Lisa; Baigorri, Manuel"

After a big year for activist investors agitating European companies, experts say firms are becoming more anxious to address shareholder concerns before they escalate into public campaigns.  "Activism has pushed boards to look hard at every source of shareholder value creation and get in front of any active investor campaign," according to Hernan Cristerna, global co-head of M&A at JPMorgan Chase & Co. in London. Activists spent $45 billion by the third quarter this year, almost double the amount as all of last year, according to Lazard Ltd.  European companies gathered more than 20% of this, compared to about 10% in previous years, the adviser said.  According to Cristerna, companies could announce more buybacks, special dividends, and asset sales next year, even before activists come calling.  Addressing another major long-term concern, the U.K.'s biggest companies have recently seen fewer fights with investors over executive pay after responding to demands to curb excess, according to the Investment Association.  Europe also has many family-controlled businesses that have capital structures permitting certain shareholders to get more votes than others.  With benchmark-index providers S&P Dow Jones Indices and FTSE Russell saying they will block multi-class shares from some of their indexes, companies are also approaching shareholders about the topic.  Sectors expected to see activist pressure in 2018 include consumer goods, technology, energy, and chemicals.

Sexual-Harassment Scandals Are Reshaping CEO Searches
" Wall Street Journal (12/27/17) Lublin, Joann S."

Corporate boards have started taking a stronger stance in vetting CEO candidates out of concern that the recent surge of sexual-harassment scandals may reach the C-Suite. Some directors—for the first time—say they would fire their company's CEO if past offensive behavior came to light during his or her tenure. Other corporate boards are broadening their reference checks of CEO candidates or seeking a top executive who can shake up a toxic culture that previously ignored harassment. Allergan PLC (AGN) CEO Brent Saunders, a Cisco Systems (CSCO) director, says, "As board members, we have to put our own elbow grease and time into thoroughly checking out the character of any CEO we hire." Another veteran director who asked not to be identified expects boards will soon ask CEO prospects to divulge more about themselves because directors will insist they accept employment contracts that punish prior sexual harassment or other misbehavior that surfaces later.

Why Activists are Cheerleaders for Corporate Social Responsibility
" Financial Times (12/26/17) Fortado, Lindsay"

Activist hedge funds are increasingly paying attention to environmental, social, and governance (ESG) issues. Funds like Trian Partners, Blue Harbour, Red Mountain Capital, and ValueAct are all emphasizing ESG as they seek to improve company performance and as their own investors call for managers to demonstrate their dedication to ESG concerns. "It is hugely important for us, and we put it on the same scale as other things we look at—a company's cash flow, its market share, its management," said Cliff Robbins, the founder of Blue Harbour. "Anything we can do to reduce risk is smart." These funds say that improvements in common ESG concerns—such as board diversity, employee retention, or environmental policies—can drive earnings and mitigate the risks of expensive litigation or run-ins with regulators. Brian Schorr, chief legal counsel at Trian, said the company did thorough due diligence checks on DuPont's environmental policies before taking a stake in order to assess "what their existing litigation and environmental exposure was." The issues for every company are different, said Robbins. In Blue Harbour's recent investment in WebMD, the priorities were ensuring the company's data privacy and security were strong, and advancing more women in the company. Most of the website's users were female, he said, but women were still in the minority as employees. Meanwhile, 60% of investors say they plan to increase their allocations to responsible investments over the next three years, according to a survey by Create-Research. "I'd say we're at a tipping point where there's a lot more interest and concern," said Robbins.

Japan Inc. Learning to Live With Activist Shareholders
" Nikkei Asian Review (12/25/17) Yuasa, Kensuke"

Japanese companies are facing rising pressure from activist investors. The growing presence of aggressive shareholders was highlighted by the takeover of Kuroda Electric by Asian private equity firm MBK Partners completed on Dec. 15, following pressure on Kuroda from a group led by Yoshiaki Murakami. Other assertive shareholders active in Japan include Elliot Management, which has upped its bid price for Hitachi Kokusai Electric, and Oasis Management, which is calling Alps Electric to raise its acquisition price for Alpine Electronics. Japanese investment firm Strategic Capital has also made shareholder proposals, including dividend increases, at more than one shareholder meetings this year. Yoshifumi Aratake of Mitsubishi UFJ Morgan Stanley Securities anticipates that amid increased activity by activist investors, the number of shareholder proposals at next year's annual meetings will surpass even this year's record level. In the 2000s when the Japanese became more aware of the presence of activist investors, such funds often made drastic demands, such as a total management overhaul, sharply antagonizing companies and other shareholders. Today's activist investors, however, "make soft proposals like enhancing shareholder returns," said Aratake. A request to raise a takeover bid price can also lead to bigger benefits for small shareholders. The revised stewardship code, which emphasizes the fiduciary responsibility of asset managers, makes it hard for institutional investors to disregard requests by activist investors if the requests are rational. "True, some assertive shareholders attach a greater importance to short-term capital gain than to improvement in corporate value," noted Shingo Ide, chief financial engineer of NLI Research Institute. Companies and investors need to foster the ability to work out the true intentions of activists behind their assertions.

Energy CEOs Facing Squeeze as Proxy Giant Roots out the Overpaid
" Gulf Times (Qatar) (12/24/17)"

Institutional Shareholder Services Inc. (ISS) next year will add new metrics to a screening process it uses to identify companies that overpay executives who under-deliver for investors, a move that could heap more pressure on U.S. drillers. Instead of just focusing on total shareholder returns, companies now will be evaluated on their return on invested capital as well as their assets and earnings growth. The move intensifies investor-led efforts to force financial discipline on an industry that overspent on production growth before the 2014 oil rout, and now is struggling to provide meaningful investor returns. The top 15 oil companies paid their executives $2.8 billion in the past decade, while delivering less of a return to shareholders than other industries. Their average annual return over the period was 2.7%, compared with 8.7% for companies on the S&P 500. The gap has continued this year with the S&P 500 Energy Index underperforming the main gauge by 24%, even as oil prices climbed. In response to shareholder demands, various companies have already announced changes to their compensation models. EQT Corp. (EQT), which is in the midst of a $6.7 billion takeover of Rice Energy Inc. (RICE), adjusted the way it will base executive pay to focus on returns, not just growth. Range Resources Corp. (RRC) also listened to shareholder warnings and added the drilling rate of return to compensation metrics, meaning part of how much executives is paid will be linked to how many molecules actually flow out of wells compared with how much money was spent on it.

Activists Look to Governance Issues in 2018
" Wall Street Journal (12/22/17) DiPietro, Ben"

Some 30 institutional and activist investors told executive search firm Russell Reynolds Associates that investors will be paying more attention in 2018 to cybersecurity, climate-change, risk, and corporate culture issues. Top trends will include boosted emphasis on encouraging strong corporate governance; improving the quality and composition of boards; additional scrutiny of executive compensation; and a growing concern about cybersecurity. "This may require boards to revisit their approaches to risk oversight, including broadening their perspectives on what constitutes risk management and is therefore within the scope of a board's oversight responsibilities," the report said. "U.S. boards can anticipate continuing pressure from investors to enhance disclosures regarding board composition, climate change risk, and cybersecurity."

Corporate Year in Review 2017
" Financial Times (12/22/17) Fortado, Lindsay"

Shareholder activism this year was characterized by unusual campaigns and U.S. investors going to Europe in search of undervalued companies. Nelson Peltz's fight at Procter & Gamble (PG) was only settled recently, with the company granting him a board seat after two months of deliberation after the shareholder vote. Meanwhile, Sir Christopher Hohn's TCI fund was arguably the most high-profile in Europe this year. The fund led one of the more unusual campaigns to keep the London Stock Exchange's departing CEO, Xavier Rolet, rather than the other way around. Another unusual moment was the oddly threatening letter from former Arconic (ARNC) CEO Klaus Kleinfeld to Elliott Management founder Paul Singer, after Kleinfeld appeared to be winning in a battle over the company. After the ill-advised letter emerged, Kleinfeld resigned, and Arconic settled a month later with an offer of board representation. Elliott was very active in 2017, from engaging Akzo Nobel to BHP Billiton (BBL). The fund waged eight campaigns in the first half of the year—twice as many as any other fund—and spent nearly twice as much on stakes as the second-most active fund, according to data compiled by investment bank Lazard. Other U.S. investors also had a presence in Europe, including Dan Loeb's Third Point, Keith Meister's Corvex, and Scott Ferguson's Sachem Head. U.S. activists spent $9.9 billion on new campaigns on the continent, up from $2 billion in 2016. Activists spent big globally this year: by the end of the third quarter, activist positions totaled $45 billion for the year—almost twice the $24.7 billion invested in all of 2016. With activists' track record this year—the funds are up roughly 12% for the year, according to Prequin data—and with growing behind-the-scenes support from passive equity funds, that success is unlikely to diminish anytime soon.

Oil Shareholders Try Capping Sorry Governance Well
" Reuters (12/21/17) Laughlin, Lauren Silva"

Shareholders are pushing the oil industry to improve its governance, although they may need to step up their efforts. Carl Icahn has gathered investor support against SandRidge Energy's (SD) poison pill after criticism of its $746 million offer for Bonanza Creek (BCEI), Hess (HES) faces a second battle with Elliott Management, and Exxon Mobil (XOM) is slowly beginning to address shareholders' concerns. Investor demands are not outlandish, focused on issues such as problematic compensation structures. The reaction against the poison pill SandRidge installed last month is hardly surprising, but the company used a lower-than-normal trigger point and included a clause preventing shareholders from working together. The company later amended the provision to say shareholders were allowed to meet, but only after Icahn attacked the company. Exxon, meanwhile, took months to respond to a shareholder vote demanding more disclosure on climate change risks. It is also only now making it easier for owners to meet with the board. Finally, Hess's poor stock performance has driven Elliott Management to prepare another campaign, even though two of its nominees from the 2013 fight are still on the board. Unfortunately, such pressure may only bring energy companies' corporate governance up to date with current basic practice. That means many in the sector are fighting past battles rather than ensuring their governance is prepared for the uncertain future climate change will bring. That requires ensuring everything from board composition to executive pay to transparency about asset risks is in line, argues Cornerstone Capital. The recent pushback by shareholders is good, but they need to escalate it further.

Pushy Investors on Board for 2018 Pacific Cruise
" Reuters (12/21/17) Webb, Quentin"

The Asia-Pacific region is due for greater shareholder activism in 2018, with a market that offers attractive targets, shareholder-friendly rules, and potentially supportive fund managers.  Setting the stage for greater activity includes a recent campaign by Elliott Management at miner BHP and a battle between a local billionaire and Australian department-store chain Myer.  There are several reasons to suspect shareholder activism will increase in the region.  First, there are good candidates, primarily cheap-looking stocks that could streamline their portfolios and return cash to shareholders.  Credit Suisse strategist Hasan Tevfik has singled out AMP, Caltex, CSR, Fletcher Building, Lendlease, and News Corp, among others.  Second, shareholders have reasonable clout.  The battle between Australian billionaire Solomon Lew and $500 million Myer last month highlights a particularly tough "two strikes" rule on pay.  More than 29% of votes cast opposed the company's remuneration report at the annual meeting last month.  If next year's report is also opposed by at least 25% of shareholders, Myer's directors could be at risk under Australia's two-strikes rule.  For that to happen, a simple majority of votes cast would need to support a "board spill" motion, which would force all directors to stand for re-election at a follow-on meeting held within 90 days.  Finally, a strong campaign from afar could find local backing.  Australia's directors often serve on multiple boards, while the country also has a financial press that can amplify attacks on bad practices.  In addition, stock ownership is dominated by institutional money, particularly local pension funds, which should be open to value-creating proposals.  All of that gives activists a reason to move in.

How Boards Can Reduce Corporate Misbehavior
" Harvard Business Review (12/21/17) Bagley, Constance E.; Cova, Bruno; Augsburger, Lee D."

Constance E. Bagley, a senior research fellow at Yale School of Management and the CEO of the Bagley Strategic Consulting Group LLC; Bruno Cova, chairman of the Milan office of international law firm Paul Hastings; and Lee D. Augsburger, senior vice president and chief ethics and compliance officer for Prudential Financial Inc., have created a comprehensive 10-step program to help boards reduce the risks of illegal behavior, reinforce ethical conduct as a core value, and enhance the company's reputation in the eyes of regulators and stakeholders as a good corporate citizen. These 10 steps are: create an ethics committee of the board; appoint a high-ranking chief ethics and compliance officer to take day-to-day operational responsibility for the company's global ethics and compliance program; establish and post online ethical and compliance standards and procedures to prevent, detect, and remedy illegal or unethical conduct; promote quality and safety with clear escalation policies; develop measurable integrity performance indicators, reward good behavior, and do not create misaligned incentives; use due care in hiring C-suite executives; mandate interactive training to communicate the ethical and compliance standards to all employees and members of the board; make sure employees are not retaliated against for speaking up; apply the rules evenly across the entire organization; and be prepared for compliance failures.

Hitachi Kokusai Deal Is a Victory for the Hedge Fund Manager That Lost
" Nikkei Asian Review (12/21/17) Oku, Takashi"

Kohlberg Kravis Roberts (KKR) has finally succeeded in buying a substantial stake in Hitachi Kokusai Electric, ending a monthslong takeover fight with Elliott Management—but it may be the hedge fund that emerges as the ultimate winner. Elliott built a stake in Hitachi Kokusai to just under 8.59%, which it used to pressure KKR into boosting its offer price twice. Ultimately, however, Elliott agreed to sell its stake in Hitachi Kokusai to KKR at an offer price of 3,132 yen per share, which is lower than the stock's last traded price of 3,155 yen. Elliott pocketed a 14% profit from the sale, but the real motive behind Elliott's move appeared to be a battle with Hitachi Kokusai's parent Hitachi over an Italian company. Elliott held a meeting with Hitachi the day before the offer deadline of Dec. 8, asking to settle a fight in Italy, and in return, Elliott would sell its Hitachi Kokusai shares to KKR, according to sources. In 2015, Hitachi purchased a 40% interest in Ansaldo STS from Italian group Finmeccanica. Hitachi then raised its stake to 51% by buying in the market, with the ultimate goal of taking over Ansaldo completely. But Elliott stepped in and accused Hitachi and Finmeccanica of colluding to artificially depress the purchase price of Ansaldo. The Italian Securities Exchange Commission ruled that Hitachi and Finmeccanica had colluded and ordered Hitachi to increase its purchase price. But Hitachi filed a countersuit. The case has been brought to the European Court of Justice and a decision is expected to take years. Elliott apparently agreed to sell its stake in Hitachi Kokusai to KKR in return for Hitachi's cooperation in the Ansaldo STS case. This appears to be the real reason behind Elliott's relatively subdued response to KKR's offer for Hitachi Kokusai: Its ultimate goal was to win Hitachi over in the Italian case.

Breakingviews - Activists Are at the Back Door of Fortress Luxury
" Reuters (12/21/17) Ryan, Carol"

High-end fashion brands are often under family control—allowing them to stockpile cash and live with poor governance—but assertive investors are becoming more willing to initiate fights, while some companies are more vulnerable than they seem.  Investors in the U.S. have already agitated jeweler Tiffany & Co. (TIF) and handbag purveyor Kate Spade, while in Europe, Albert Frere's Groupe Bruxelles Lambert recently became Burberry's top shareholder with a 6% stake.  Burberry is one of the few European players without a dominant shareholder, making activism a more feasible option.  The luxury sector could certainly benefit from activist scrutiny: Richemont, for one, is sitting on nearly 6 billion euros of cash.  And dealmaking has not always been disciplined.  The high price paid by LVMH for Bulgari, for instance, means that returns on the investment still are not reaching the group's cost of capital six years later, according to HSBC.  Meanwhile, governance issues abound, with the chairman and CEO roles still combined at several luxury groups.  One tool that could give activists a way in at some of these companies is an Italian law that awards minority shareholders the right to appoint directors.  Prada, too, is exposed despite its Hong Kong listing and an 80% family holding.  There are plenty complaints shareholders could make: for example, the 12.4 million euros paid last year to each of Prada's co-CEOs amounted to 9% of net income.  Activists have fewer options at French giants LVMH and Kering, for example, where outsized voting rights can shut out dissidents.  Still, all luxury brands are worried about their reputations, so a high-profile activist campaign could affect even powerful families.

UBS Sees Good Year for Swiss IPOs in 2018
" Reuters (12/20/17) Gruber, Angelika"

Activist shareholders will continue to have an impact across Europe next year, according to UBS. In particular, activist shareholders will make a mark in Switzerland, says Philipp Beck, UBS investment banking's M&A head for Germany, Austria, and Switzerland. Nestle, Clariant, Credit Suisse, and GAM Holding are among the Swiss groups that have faced shareholder activism of late. "The threshold to launch a new campaign sinks with every success that activists are able to book in Europe," according to Beck. "They jump on undervalued companies when there are windows to correct the undervaluation and the chance to win a majority vote at shareholder meetings." Switzerland's biggest bank also expects 2018 to be a good year for Swiss initial public offerings. A favorable market environment amid low interest rates and solid investor demand is poised to attract listings, says Martin Kesselring, head of UBS's corporate client solutions business.

Dealing With Activist Investors Hinges on Understanding What Kind They Are
" Financial Executives International Daily (12/20/17) Berkman, Olivia"

Long-term activist investors act in a company's best interest and can provide a much-needed check on management, according to industry observers. However, activists who are long-term shareholders are the minority of activists today, said David Katz, partner, Wachtell, Lipton, Rosen & Katz at the recent IIEF 2017 Global Shareholder Activism Conference. He noted that there is a big difference between established firms and so-called "alumni" or "ankle-bitters," which try to make a lot of noise with a focus on raising more capital. Smaller companies are more vulnerable to these types of activists because they may not have access to general counsel or the advisors that larger companies have. What matters to these types of activists is winning a proxy fight, which is much easier to do at a smaller company, added Katz. Jeffrey Sonnenfeld, assistant dean, Yale School of Management, made the case that governance activism has been distorted and a lack of public companies has pushed activists to target healthy corporations like PepsiCo (PEP) and ADP (ADP). J. B. Heaton III, founder of Conjecture and J.B. Heaton, said there are certainly activist investors in it for the short term, but there are even more poorly governed companies that could benefit from a long-term activist investor.

Stocks Soar, Mergers Slump, Activist Investors Wield Power
" Wall Street Journal (12/19/17) Simons, John"

This year saw stock indexes break multiple records as activist investors agitated CEOs—further eroding their power—and as corporate mergers slowed. Influential outsiders like Nelson Peltz are challenging the identity of a CEO as chief decision maker and lead strategist. Peltz, founding partner of Trian Fund Management, fought for a seat on the board of Procter & Gamble Co. (PG), the largest company to ever face a proxy fight. He accused management of running a company burdened by excessive costs and bureaucracy and moving too slowly to improve sales and profit. Meanwhile, Elliott Management Corp. waged a battle at Arconic Inc. (ARNC), which awarded the hedge fund several board seats in May. Investors are even angling to install their own handpicked leaders. Railroad veteran Hunter Harrison worked with investor Paul Hilal this year in an effort to overhaul management at railroad CSX Corp. (CSX), and Harrison took over as CEO. Harrison, 73 years old, died Saturday, raising questions about the move to hire him. In Europe, Dutch paint company Akzo Nobel NV and BHP Billiton PLC (BBL) faced battles with dissident shareholders. A shareholder rebellion also scuttled a $15 billion merger between Swiss chemicals company Clariant AG and U.S.-based Huntsman Corp. (HUN). Daniel Loeb, founder of Third Point LLC, became one of Nestlé SA's top shareholders in 2017 and pressured the Swiss food company's leadership to make strategic changes. The company began adjusting its portfolio, boosting leverage to return capital to shareholders and setting a formal profit margin target. Finally, as the year ended, Carl Icahn indicated renewed interest in Xerox Corp. (XRX) by announcing plans to launch a board fight to shake up management.

U.K. Shareholder Revolts Snag More Than a Fifth of Companies
" Bloomberg (12/18/17) Hellier, David"

More than 20% of the United Kingdom's publicly listed companies had to deal with significant shareholder rebellions in 2017, according to data from an investors lobby group looking to curb corporate governance conflicts. Of the more than 640 companies on the FTSE All-Share index, 22% were placed on the Investment Association's new public register, meaning that a shareholders meeting this past year had at least one resolution that was either withdrawn or received 20% dissenting votes. Issues related to board elections and executive compensation led the list of disputes. Investment Association CEO Chris Cummings said in a statement: "One-third of companies on the public register have responded by publishing a statement on how they are addressing their shareholders' concerns. ...We hope more will follow."

Death of CSX CEO Harrison Renews Debate on Health Disclosures
" Bloomberg (12/17/17) Voreacos, David; Black, Thomas"

The death of CSX Corp. (CSX) CEO E. Hunter Harrison on Saturday just two days after the railroad announced his medical leave resurrects questions about how much companies should disclose regarding the health of their top executives.  Securities and Exchange Commission (SEC) rules do not require companies to disclose serious health problems in the C-suite, notes Northwestern University law professor Allan Horwich.  Problems arise when a company issues half-truths or lies about an ill executive.  "The most important thing is whether there were statements made by the company since he was hired that were inconsistent with the true state of his health at the time and whether the company knew that," said Horwich.  Disclosure rules for an executive must also weigh that individual's right to privacy.  Charles Elson, director of the University of Delaware's John L. Weinberg Center for Corporate Governance, concludes, "This is the classic example of when an individual's health is tied dramatically to the success of a company, it becomes a matter of disclosure."

United States: Top 10 Topics for Directors in 2018
" Mondaq (12/14/17)"

Shareholder activism is among the top 10 topics for directors in 2018. There is an increased emphasis by prominent investors on challenging transactions, corporate strategy, and traditional corporate governance concerns, such as board composition and staggered boards. Securities and Exchange Commission (SEC) co-directors of enforcement Stephanie Avakian and Steven Peikin have warned, "The greatest threat to our markets right now is the cyber threat," so boards should learn from others' misfortunes and focus on governance, crisis management, and recommended best practices relating to cyber issues. Board composition remains a critical topic, which means companies should assess their current board composition, director search and nomination process, board refreshment practices, and diversity policies. With regard to corporate strategy, boards should expect to face conflicting pressures, because shareholders will expect companies to invest in both long-term growth opportunities and short-term stock enhancement measures, including the deployment of excess cash for stock buybacks. The Trump administration and the Republican-led Congress will look to advance reforms in 2018 designed to encourage companies toward public ownership and to facilitate capital formation in both public and private markets. Other key topics include corporate social responsibility, managing five generations of employees, internal investigations, SEC enforcement, and trade and sanctions. A special bonus topic is tax reform, a top priority for the administration and Republicans.

Callan's 2017 Survey of Institutional Investors Reveals ESG Adoption Trends
" GlobeNewswire (12/14/17)"

According to the institutional investment consulting firm Callan LLC, 37% of the 105 plan sponsors the group polled incorporated environmental, social, and governance (ESG) factors into their investment decision-making process this year. The top-line percentage is unchanged from 2016, but the percentage of plans with greater than $20 billion in assets incorporating ESG factors into investment decisions surged 136% from 2013 to 2017. Across all plan sizes, ESG adoption has rise 68% since 2013, with foundations having the highest adoption rate.

Gender Pay Gap Data Altered by Companies
" Financial Times (12/14/17) Ehrenberg-Shannon, Billy; Wisniewska, Aleksandra"

Four U.K. companies have made changes to their gender pay gap numbers since first submitting them to the government, following a Financial Times investigation last week. The four were among 16 companies that initially reported that, on average, there was no gap between what they paid their male and female employees, measured by both the mean and the median, a result which is statistically unlikely. Hugo Boss U.K., Dana U.K. Axle, Eastgate Care Group, and Age U.K. North Tyneside have all changed their numbers at least once, with Hugo Boss changing its submission three times. Hugo Boss initially reported that there was no gap between what it paid its male and female staff, but then changed the mean and median gap to 32.6% and 76.5% after the Financial Times questioned the original data submission. Following the publication of the Financial Time's analysis on Dec. 7, the data were changed again to a mean pay gap of 7.2% and a median of 4.7%. The Department of Education, which administers the gender pay gap portal, said that employers were legally liable for the accuracy of the 14 data points required by the government. Published data must be signed off at a senior level by companies, but the government does not verify the information.

More Than Half of Hong Kong-Listed Companies Do Not Meet Corporate Governance Requirements
" South China Morning Post (Hong Kong) (12/15/17) He, Laura"

A recent report on corporate governance says more than 50% of Hong Kong's biggest listed companies failed to meet some aspects of the government's voluntary standards, although the rate is an improvement over last year. Forty-six percent of the Hang Seng Composite Index constituent companies are now in full compliance with the corporate governance standards issued by the Hong Kong Exchanges and Clearing in January 2005, according to Grant Thornton Hong Kong's 2017 Corporate Governance Review. "That ratio has improved from last year, when 41% of companies were found to have met the requirements fully, so companies have enhanced their disclosure on information about code compliance, internal controls, and risk management," said Mian Wong, director for advisory at Grant Thornton Hong Kong.

Automatic Data Processing (ADP) Is Undervalued: Pershing Square
" Insider Monkey (12/14/17) Nadeem, M."

Pershing Square called Automatic Data Processing (ADP) a "classic investment" in its third quarter investor letter. The hedge fund had sought three seats on the company's board to play a role in boosting performance. Pershing Square wrote, "ADP is a simple, predictable, free-cash-flow generative business that has significantly underperformed its potential. As a conservatively financed, high-quality business in a sector with substantial positive growth, we believe it has modest downside. If it is able to achieve its potential, we believe it offers substantial upside...We have taken an active approach to our investment in the company to highlight the opportunity to drive significant value for all stakeholders. While we strongly preferred to work collaboratively with ADP's board and management to unlock the company's potential, as we have successfully done in nearly all of our prior active investments, they were unwilling to do so. Consequently, we were forced to run a proxy contest to highlight ADP's underperformance and potential for improvement to help effectuate the necessary change...We received substantial minority support no matter how the votes are counted. Putting aside the percentage outcome, we believe that the substantial majority of shareholders who did not support us were convinced that the message we delivered was heard 'loud and clear' by the company. These shareholders were willing to give the board and management another year to demonstrate progress on the opportunities that we had identified."

Steinhoff's Sleepy Board Needs Clearing Out
"Wall Street Journal (12/13/17) Wilmot, Stephen"

Steinhoff International—the owner of the Mattress Firm and Sleepy's brands—has watched its market value plummet this month in the wake of an accounting scandal. So far just one individual has resigned: longtime CEO Markus Jooste. The company said there was "no evidence" that CFO Ben La Grange was involved; however, he had responsibility for the group's finances since 2013. If La Grange was unaware of these missing assets, this should be reason enough for him to go. The same can be said for the entire supervisory board. Although the company announced Monday that it had bolstered independent governance, the only news was that three nonexecutive board members had formed a subcommittee. One of these, Steve Booysen, has chaired Steinhoff's risk and audit committee since at least 2015. That puts him in the position of attempting to fix a failure that he himself oversaw. Steinhoff's board has failed in its duty to oversee the company's management on behalf of shareholders. Thus, most of the board should be replaced if Steinhoff is to regain its credibility. Complicating an overhaul is the presence of a major shareholder on Steinhoff's board. Chairman Christo Wiese, who owns 23% of Steinhoff's stock, has stepped in as executive chairman. However, Wiese has known Jooste for decades and been on the Steinhoff board since 2013. Independent shareholders and creditors require a genuinely independent investigation, with an outside pair of hands directing the cleanup. A major accounting scandal cannot be resolved by the individuals who failed to spot it.

BlackRock's 2018 Focus: Board Diversity, Climate Risk
"Wall Street Journal (12/14/17) Stein, Mara Lemos"

Michelle Edkins, BlackRock’s global head of investment stewardship, discusses in this interview her priorities for next year, balancing clients’ concerns against delivering long-term returns, and the importance of engaging boards on cyberrisk, among other topics. Edkins noted that the goal for investor engagement is usually about building mutual understanding. “If we see a company with a board structure or level of disclosure…we think is not aligned with our expectations, we will engage, state our views and will listen to what the company tells us,” she said. Boards and management are typically very open to feedback, she said, adding it is better to hear concerns privately. Asked about hot topics for 2018, Edkins said: “In those markets that haven’t made much progress on board diversity, particularly gender diversity, we will be engaging. If we have engaged in prior years, we will be voting against the reelection of members of the governance committee unless there’s a very credible explanation for the lack of progress. Climate-risk disclosure will be an issue but one we don’t really see as a voting issue, simply because in most markets there isn’t a vote.” Regarding cyberrisk, Edkins noted the importance of a response protocol in case of a serious breach. “The purpose of our engagement is to understand how the board is overseeing the management approach to cyberrisk, and the extent to which certain members of the board have specific background or expertise,” she explained. While there is not necessarily a need for a cyber director, “it is important the board knows about the overall approach in protecting the company from a cyberattack and the risk of data loss, about the training of employees on information security.”

Vietnamese Women Crack the Corporate Glass Ceiling
"Bloomberg (12/13/17) Chia, Krystal"

A recent report indicates Vietnam has a higher representation of women serving as board directors and chief executive officers than Malaysia, Singapore, and Indonesia. Some 25% of CEOs or board directors in Vietnam are women, according to September data from the Boston Consulting Group (BCG). Women hold 14% of CEO or board level positions in Malaysia, 10% in Singapore, and 6% in Indonesia. More women in Vietnam—compared with Singapore and Malaysia—are also hoping to be promoted, the BCG report found based on surveying more than 2,000 employees.

Fenwick Releases 2017 Trends in Corporate Governance, Comparing Silicon Valley 150 and S&P 100
" Marketwired (12/13/17)"

Fenwick & West has released its Corporate Governance Survey for the 2017 proxy season, providing insight into the management, leadership, and governance of technology and life sciences companies in Silicon Valley. The survey covers more than a decade of governance trends, comparing companies in the S&P 100 and their smaller and younger counterparts in the Silicon Valley 150 (SV 150), highlighting similarities and differences over time. The latest survey shows that longtime trends in the S&P 100 and SV 150 continued in the 2017 proxy season with a few exceptions, notably in the areas of dual-class stock structures and classified boards, where SV 150 companies are going their own way, in many cases to maximize protections against the vagaries of short-term market pressures—but also in board leadership where separation of chair and CEO roles is substantially more common. Adoption of dual-class voting stock structures has emerged as a recent clear trend among Silicon Valley technology companies-among the mid-to-larger SV 150 companies—though it is still a small percentage of companies. Historically, dual-class voting stock structures have been significantly more common among S&P 100 companies than among SV 150 companies, though the frequency in the SV 150 (11.3% in 2016 to 10.9% in 2017) has surpassed the S&P 100 (9.0% in both 2016 and 2017) in recent years. Classified boards are now significantly more common among SV 150 companies than among S&P 100 companies. Compared to the prior year, classified boards remained fairly consistent, holding steady at 6.7% for the top 15 companies in the SV 150 while the S&P 100 has been at 4.0% since 2016. The rate of implementation of some form of majority voting has risen substantially over the period of this survey. The increase has been particularly dramatic among S&P 100 companies, rising from 10% to 97% between the 2004 and 2017 proxy seasons. Among SV 150 companies, the rate has risen from zero in the 2005 proxy season to 59.9% in the 2017 proxy season. The prevalence of stock ownership guidelines has generally increased over time in both groups, but the SV 150 only recently surpassed the level of the S&P 100. 2017 continued the long-term trend in the SV 150 of increasing numbers of women directors and declining numbers of boards without women members. The rate of increase in women directors for SV 150 overall continues to be higher than among S&P 100 companies . When measured as a percentage of the total number of directors, the top 15 of the SV 150 now slightly exceed their S&P 100 peers (the top 15 averaged 25.4% women directors in the 2017 proxy season, compared to 23.9% in the S&P 100).

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