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Elliott Steps Up Attack on Hyundai Motor Group
" Bloomberg (04/23/18) Kim, Sohee"

Elliott Management Corp. on Monday declared that Hyundai Motor Group's 10.6 trillion won ($9.9 billion) merger of two units would shortchange minority shareholders and lacks business sense.  Instead, Elliott suggested that Hyundai Motor Co. be merged with Hyundai Mobis Co. to form a holding company that would oversee the group.  The fund also said group units should return excess cash, boost dividends, and cancel treasury shares.  Hyundai Motor Group responded that it will "continuously communicate with shareholders and investors around the world including Elliott Management to explain the underlying goal and needs of the proposed restructuring plan."  Elliott revealed earlier this month it had acquired a stake of more than $1 billion in three group units, Hyundai Motor, Kia Motors Corp., and Mobis.  In late March, Hyundai Motor Group proposed a reorganization plan to streamline its complex ownership structure, which included the proposed multi-billion-dollar merger of part of Mobis's business with affiliate Hyundai Glovis Co.  Under Elliott's counter proposal, a merger between Hyundai Motor and Mobis would result in a more efficient structure, it said.  The fund also claims the current plan is inefficient and undervalues the spun-off business, and that the group failed to address the need to improve shareholder returns and governance.  In addition, Elliott criticized Kia's plan to sell its shares in Mobis to the founding family as lacking "a transparent process to realize fair value."  It also called for Hyundai Motor and Mobis to lower a combined 12 trillion won in excess cash, and demanded the group add three independent board members and introduce a measure to bring corporate governance in line with global standards.

Judge Ruling Delays Telecom Italia Board Seats Showdown to May
" Reuters (04/23/18) Flak, Agnieszka; Rebaudo, Stefano; D'Alessandro, Manuela"

A judge has ruled in favor of an appeal by Telecom Italia (TIM) and its top investor Vivendi to block a vote on some Elliott board nominees at an April 24 shareholders meeting.  The U.S. fund—which owns a 9% stake in TIM and is seeking to change the way Vivendi runs Italy's biggest phone group—was set to face off with the French investor for the first time at the Tuesday shareholder meeting.  TIM will still hold its AGM on Tuesday to approve financial results and confirm Amos Genish as CEO, but the battle over board seats will now be delayed to another shareholder meeting slated for May.  The fund had called for six Vivendi-nominated board members, including TIM Chairman and Vivendi CEO Arnaud de Puyfontaine, to be replaced with well-known Italian business leaders to help improve governance and strategy.  But following Elliott's move, eight board members nominated by Vivendi resigned, triggering a vote on a full board renewal at a separate shareholder meeting on May 4.  Despite the mass resignations, TIM's statutory auditors included Elliott's proposal on the agenda for this week's meeting, a decision TIM's board and Vivendi had challenged in court and which the judge suspended with its ruling.  Explaining the decision, the judge said the mass board resignations made it necessary for shareholders to elect an entire new board rather than vote on partial changes that would be temporary.

Elliott Stops Proxy Solicitation for T. Italia AGM Given Uncertainty Caused by Legal Action
" Reuters (04/23/18) Flak, Agnieszka"

Elliott said Monday it had stopped soliciting proxies for Telecom Italia's (TIM) April 24 shareholder meeting due to the uncertainty triggered by a judge's ruling on the investor's proposed additions to the AGM. Elliott, now TIM's second-largest investor with a 9% stake, is seeking to replace six board members nominated by Vivendi at a shareholder meeting on Tuesday. TIM's statutory auditors included Elliott's proposal in the agenda for the April meeting, a decision TIM's board is challenging in court.

Whitbread Boss Believes Costa Coffee Split Inevitable: Report
" Reuters (04/22/18) James, Williams"

Whitbread CEO Alison Brittain reportedly believes that a separation of the company's hotel and coffee shop businesses is inevitable, after shareholders including Elliott Advisors have pushed for such a change.  Last week, Elliott Advisors became the second investor to urge Whitbread to split its Premier Inn hotel chain from the Costa Coffee businesses, sending the company's shares higher.  Brittain is expected to present her position on Wednesday, when she is slated to announce the company's annual results.  She is not "philosophically opposed" to a split, according to sources, and considers such a move as a case of "when, not if."  The group said in January it had an open mind about its future structure.  Whitbread has in recent years sold off its brewing business and some pubs to focus mainly on Costa, as well as Premier Inn hotels, the Beefeater restaurant brand, and the Brewers Fayre pub restaurant chain.  Elliott believes that splitting Whitbread into two listed entities would enable the market to value it properly, a source said last week.  Fellow shareholder Sachem Head has also been angling for a breakup.

Elaine Wynn Launches Campaign to Remove Director From Casino's Board
" Wall Street Journal (04/23/18) O'Keeffe, Kate; Kirkham, Chris"

Elaine Wynn, Wynn Resorts Ltd.'s (WYNN) biggest shareholder, is hoping to remove one of three board directors investigating sexual-misconduct allegations against her ex-husband, former CEO Steve Wynn. Elaine Wynn said in a Securities and Exchange Commission filing April 23 that shareholders shouldn't vote to re-elect director John Hagenbuch to the board at the company's May 16 annual meeting based on what she characterizes as close ties to Wynn. She also mentioned as an issue the director's involvement in determining executive pay, which has been an ongoing subject of criticism from corporate governance experts. The filing came after the casino operator last week rebuffed Elaine Wynn's calls to the board—on which she previously served—to revamp its membership to comprise mostly new directors. The company instead chose to add three women to its board, for a total of four women and seven men.

Macquarie Infrastructure Corp. Battle Heats Up
" Australian Financial Review (04/22/18) Kehoe, John"

At least eight institutional and wealthy individual shareholders in Macquarie Infrastructure Corp. (MIC) are backing Moab Capital Partners' campaign to remove six board members and end a contract paying lucrative fees to Australia's Macquarie Group.  The U.S. shareholders say they have lost trust in the company and want the board overhauled and the company potentially liquidated after it recently suffered a more than 40% stock slump.  Nine-year MIC investor Overbrook Management "fully supports the Moab effort," said CEO Andrew Goffe.  "The board has lost all credibility and the best outcome for shareholders is for the company to be sold because we don't think there is a path forward as a public company," he said.  Goffee blasted Macquarie for extracting roughly $750 million in management and performance fees in exchange for overseeing MIC's U.S. infrastructure assets over the last five years, according to his calculations.  Another shareholder, the $7 billion New York investment manager Levin Capital Strategies, argues questions need to be fully answered by MIC's directors.  "They should call a new shareholder meeting, change the board to include additional independent directors, and modify the management contract," said the firm's head, John Levin.

De La Rue Has Become Bid Target, Says Richard Bernstein of Crystal Amber
" London Times (04/23/18) Hurley, James"

Crystal Amber, which has more than a 2% stake in De La Rue, says the banknote and passport printer has made itself a takeover mark due to the weak handling of issues such as the award of the U.K. passports contract to an overseas rival. Richard Bernstein, founder of Crystal Amber, said the management of the passport contract had been "farcical" and was part of a broader trend of "poor messaging" by De La Rue and CEO Martin Sutherland. Bernstein said this was damaging De La Rue's share price, thereby making it a softer mark for a potential takeover. "Worryingly, I'm not getting the sense from De La Rue that it is marshaling its defenses. The French and Germans may be coming and you couldn't blame them: De La Rue is a terrific asset," Bernstein said.

Antitrust Chief Calls Hyundai Motor's Governance Restructuring 'Right Direction'
" Yonhap News Agency (04/20/18)"

Korea Fair Trade Commission Chairman Kim Sang-jo on Friday applauded Hyundai Motor Group for its latest plan to streamline its complicated governance structure through business spin-offs and mergers. In a meeting with foreign correspondents in Seoul, the head of South Korea's antitrust regulator said, "Unexpectedly, Hyundai Motor Group opted to pay 1 trillion won (US$935 million) in transfer tax for future stock transactions of the group's large shareholders—[in the process of simplifying the group's governance structure]—instead of choosing a holding company structure that would help tighten the large shareholders' grip on the group." Earlier in April, Hyundai's streamlining plan was welcomed by Elliott Advisors Ltd. In a statement, Elliott called for a detailed roadmap to further enhance the South Korean auto giant's corporate governance and optimize its balance sheets.

Xerox and Fujifilm Said to Be in 'Active Talks' About Renegotiating Deal
" CNBC (04/20/18) Faber, David; Moyer, Liz"

According to lawyers for Xerox (XRX) and Fujifilm Holdings at a court hearing on April 19, the companies are in "active talks" to renegotiate a $6.1 billion deal they had struck in January that would combine Xerox into an existing joint venture with Fuji. However, it remains uncertain whether the companies will be able to reach a new deal. Darwin Deason, Xerox's biggest individual shareholder, sued in New York state court to stop the deal, arguing that it undervalues the company. Fellow investor Carl Icahn has joined Deason in fighting the deal.

Honeywell CEO Proves Loeb Wrong as Aerospace Boosts Profit
" Bloomberg (04/20/18) Black, Thomas"

Honeywell International's (HON) aerospace business helped drive first-quarter earnings higher than analysts expected. Sales in the unit rose 12% to $3.98 billion, compared with a 4.3% decline a year earlier when the outlook was still bleak. The aerospace business was a drag on Honeywell's earnings as recently as last year. Daniel Loeb's Third Point announced a stake in Honeywell less than a month after Darius Adamczyk had taken over as chief executive officer and immediately urged him to sell the aerospace business. However, Adamczyk ignored the pressure to dump the business, and instead decided to spin off its automobile turbocharger unit and the home-products segment. The aerospace business has taken off on higher demand for commercial aircraft parts and service, increased defense spending, and a nascent rebound for business aircraft. Honeywell has raised its 2018 earnings target to a range of $7.85 to $8.05 a share, up from $7.75 to $8, as well as its annual sales forecast to as much as $43.5 billion from a top figure of $42.5 billion.

South Korea's Antitrust Chief Says Expects Change in Samsung Governance 'in Near Future'
" Reuters (04/20/18) Lee, Joyce"

Samsung Group's decision to sell a stake in affiliate Samsung C&T to ease cross-shareholding ties and recognize the union of certain temporary workers at a Samsung Electronics unit are "enormous changes" for the powerful family-controlled conglomerate, or chaebol, according to South Korea's antitrust chief. "Samsung Group has been busy announcing various measures," changing the way it does business, Kim Sang-jo, head of the Korea Fair Trade Commission, recently told foreign media. He expects Samsung Group to unravel its governance structure in the near future. The government and investors have called for reform of the powerful chaebol. "I think Samsung's most crucial task is to resolve ties between Samsung Life and Samsung Electronics," said Kim. Samsung Life Insurance is at the heart of a cross-shareholding structure in which it owns about 8% of Samsung Electronics. Chaebols have come under criticism for their complicated cross-shareholding structures, which Kim has said are aimed at cementing family control. Scrutiny of chaebols has intensified since the arrest last year of Samsung Group heir Jay Y. Lee, who denies wrongdoing, on charges of bribery and embezzlement.

Netherlands Leads Morningstar List of Countries With Strong ESG Companies
" Pensions & Investments (04/19/18) Kilroy, Meaghan"

Dutch companies are the world's sustainability leaders, according to a recent report from Morningstar. In an analysis of 46 country indexes and their constituents on environmental, social, and governance factors, Morningstar found the Netherlands index took the top spot with a score of 60.54, helped by high-scoring companies like ASML Holding (ASML), ING Group (ING), Philips (PHG), and Ahold Delhaize. (Scores are calculated on a scale of 0-100). The next highest scoring country based on sustainability criteria was Denmark at 60.47, followed by Finland at 60.2.

Jana Takes Pinnacle Foods Stake, May Push for Sale
" Bloomberg (04/19/18) Deveau, Scott"

Jana Partners disclosed a 9.5% stake in Pinnacle Foods Inc. (PF) and is pushing the packaged food manufacturer to explore a sale or other transactions in the frozen food space, according to a regulatory filing Thursday. Jana believes the company is in a good position to consider consolidation given its strong standing in the frozen foods industry. The hedge fund said it may also discuss other issues with the company, including its cost structure, operations, and board makeup. Jana has partnered on the investment with former Unilever (UN) executive James Lawrence, Lululemon Athletica Inc. (LULU) Chairman Glenn Murphy, and Rodan & Fields LLC CEO Diane Dietz. A Pinnacle spokesman said Friday the company was aware of Jana's investment, adding that Pinnacle's board of directors and management welcome shareholder input. Jana already has a track record in the food sector, including having acquired a stake in Whole Foods Market Inc. last year before it was purchased by Amazon.com Inc. (AMZN). Jana has also agitated for changes at Conagra Brands Inc. (CAG) and more recently at Bloomin' Brands Inc. (BLMN), where it won a board seat this year. The possibility that Conagra, where Jana is still invested, could acquire Pinnacle remains one of the most likely transactions in the sector, according to David Palmer, a New York based analyst with RBC Capital Markets. Merging the companies would create the highest gross margin and profit upside of any transaction in his coverage space, Palmer said. He added that Conagra's management already has an "intimate knowledge of Pinnacle's business" from a previous deal that fell through.

ISS Backs Cation Capital's Two Nominations to Crescent Point Board
" Reuters (04/19/18) Vengattil, Munsif"

Institutional Shareholder Services (ISS) on Thursday advised Crescent Point Energy Corp (CPG) shareholders to vote for Cation Capital's two nominees to the company's board. Cation Capital, which owns a 0.3% stake in the Calgary-based oil and gas producer, last week revealed its intention to nominate four candidates to Crescent's board at a shareholders meeting in May. ISS recommended shareholders vote for Cation nominees Dallas Howe and Herbert Pinder, and "withhold" votes for the other two nominations. The proxy advisory firm said Cation—a private investment firm led by the former deputy head of global oil and gas at Macquarie Group—has made a "reasonably compelling case" for a board shakeup, including to improve profitability and to ensure proper alignment of executive pay. "Although a number of positive developments were undertaken by the company during the last year they seemed to be overshadowed by significant underperformance that was not reflected in the CEO's total compensation," ISS said.

Auris Dissidents Claim Win in Bitter Boardroom Spill
" West Australian (04/20/18) McKinnon, Stuart"

Auris Minerals chairwoman Bronwyn Barnes and director Susan Vearncombe have been removed from the explorer's board following a battle between rival shareholder groups. The pair were formally voted out at a shareholder meeting Friday after a removal notice was filed in late February by a dissident shareholder group led by Westgold and Metals X chairman Peter "Talky" Newton. The group was pitted against Michael Fotios and his private company Investmet and associates, who backed Barnes and Vearncombe. Incumbent director Rob Martin will remain on the board after a rival removal notice against him by Fotios was voted down. The motions were decided by proxies with most resolutions in favor of the victors by roughly 58% to 42%. The dissident group are long-time shareholders of Auris who have been frustrated with the way the company was being run. The group reportedly was jolted into action after the company reached a $1.2 million deal with Sandfire Resources for the right to earn into Auris' Morck's Well East and Doolgunna projects. They had preferred a more expansive $15 million deal with Sandfire that was spurned by Auris' board last year.

Xerox Says CEO Had Authority on Fujifilm Deal Talks
" Wall Street Journal (04/19/18) Benoit, David"

Xerox Corp. (XRX) is defending CEO Jeff Jacobson against accusations from shareholder Darwin Deason, saying Jacobson had appropriate board authority to negotiate a deal with Fujifilm Holdings Inc. Deason has alleged in a lawsuit that Jacobson's goal was to retain his job in rushing to finalize a transaction with Fujifilm in January. The suit references documents and board communications that it says reveal Jacobson was on the verge of being fired when he entered into the deal that would keep him in his job. The suit cites documents showing Jacobson had been told in November to halt negotiations because the board was considering replacing him. Xerox doesn't dispute that, but says Chairman Robert Keegan and lead independent director Ann Reese subsequently endorsed his efforts to keep working on the deal after the November discussion. Deason and Carl Icahn, Xerox's largest investor, want to block the deal and overthrow the board. They are working with an executive, John Visentin, whom Xerox almost hired to succeed Jacobson. "The transaction was thoroughly negotiated, fully vetted, and unanimously approved by the Xerox board of Directors…as the best available alternative to create value for Xerox shareholders," Xerox said in a court filing. "This fabricated narrative is preposterous." Deason countered, saying the company is redacting information "as big as Texas." Xerox's legal response alleges Icahn had told Jacobson, while hosting the executive for dinner at his apartment, that he wanted to see Xerox sold or he would push for Jacobson to be removed.

Macerich Is Close to Announcing Plans for CEO Retirement
" Bloomberg (04/19/18) Hammond, Ed"

Macerich Co. (MAC) announced Thursday CEO and Chairman Arthur Coppola will retire at the end of the year. The company has begun searching for a replacement for Coppola—who led the company for 25 years—and named Steven Hash, an independent member of the board since 2015, as chairman as of the upcoming annual meeting. The U.S. mall owner is under pressure from Starboard Value, which acquired a stake in Macerich and nominated a majority slate of directors to its board, a source said this month. Third Point also disclosed a stake in Macerich in November. Mall owners such as Macerich are battling to stay relevant as brick-and-mortar retailers shutter stores at a record pace, amid the rise of Amazon.com Inc. (AMZN) and other online competitors. Last month, U.S. mall operator GGP Inc. (GGP) agreed to be acquired by a unit of Toronto-based Brookfield Asset Management Inc. (BAM) in a deal valued at roughly $15 billion. Brookfield has said it intends to unlock the value of the land GGP's malls are built on and redevelop them with its expertise in multifamily residences, offices, and hotels. Macerich owns 48 regional shopping centers across the country.

Hong Kong Targets Tech IPOs With New Listing Rules, Including Dual-Class Share Structures
" Financial Times (04/20/18) Dunkley, Emma"

Hong Kong's stock exchange will publish final rules next week that will permit "innovative" companies including biotech firms and technology companies to list on the venue. Hong Kong Exchanges and Clearing will disclose its new listing protocol on April 25, following weeks of consultation with market participants including investors, the stock exchange said. The new rules likely will enable biotech firms that have yet to generate a revenue to list on the exchange for the first time. The rules are also set to permit companies deemed innovative to list with dual-class share structures, which give founders of companies greater voting rights over ordinary shareholders.

Powerful Investors Are Pushing for More Women on Corporate Boards
" Yahoo! Finance (04/19/18) La Roche, Julia"

Gender diversity in boardrooms was a hot topic at the recent 13D Monitor Active-Passive Investors Summit in New York. Pershing Square Capital Management's Bill Ackman said, "I actually have wanted to run a proxy contest with an all-female, diverse ethnic slate. First of all, I think it sends an incredible message and I think we would win hands down. I really mean that." He pointed out that it is difficult for him to recruit directors, particularly women, in the activist context. "I think as more women serve on activist slates, it will make other women more comfortable on activist slates. If you're a diverse candidate, whether it's gender, ethnic, or otherwise, and you're interested in serving in an activist context, get in touch with us," Ackman said. "What the shareholders can do is...make clear the fact that someone who hasn't served on a board before shouldn't disqualify them from being a credible candidate for a board. One way to make it difficult for people to break the glass board ceiling is to say one of the qualifications for serving for winning on an activist slate is that you have to have already served on a board. That kind of stuff creates barriers that are problematic." Meanwhile, Blue Harbour CEO Cliff Robbins noted that "when I'm sitting down now with a CEO before I invest...I'm asking them a bunch of questions—'Tell me what you think about gender pay equality. Are there opportunities for women and minorities in your company? Do you have a diverse board?'" He emphasized the importance of investors holding those companies accountable. He added, "When I'm calling up my CEO three months after we made the investment, in addition to saying, 'Where are we on this spinout? Where are we on the balance sheet? Where are we on the margins?' I'm saying, 'Where are we on that commitment you made to me to make the board more diverse?'"

'Rogue Executive' Led Xerox Into Fuji Deal, Complaint Claims
" Bloomberg (04/19/18) Hammond, Ed; Dolmetsch, Chris"

An amended complaint, filed in state court in Manhattan on April 19 by investor Darwin Deason, details a breakdown of corporate governance at Xerox Corp. (XRX) as it raced to sell itself to Japanese rival Fujifilm Holding Inc. The new court filings contain portions of correspondence, some previously redacted, among Xerox board members, executives, their counterparts at Fuji, and their advisers. The complaint centers on Deason's accusation that Xerox CEO Jeffery Jacobson acted without authorization to forge a deal with Fujifilm that preserved his job at the expense of shareholder value. The complaint includes text from what is reportedly a Dec. 7, 2017, letter from Xerox director Cheryl Krongard to Chairman Robert Keegan in which she, among other things, called Jacobson a "rogue executive" who disobeyed the board to secretly negotiate with the Japanese firm. Other communications show that Jacobson allegedly called investor Carl Icahn—who has partnered with Deason to block the merger and push for changes at Xerox—"crazy" and a "mutual enemy." The deal, announced in January, would involve Xerox first merging with a joint venture that the company operates with Fujifilm in Asia. Xerox shareholders will receive a cash dividend of $9.80 per share, and Fujifilm ultimately will own 50.1% of the combined entity, which expands the joint venture to include all of Xerox's operations.

RELEVANT ARTICLES

New SEC Policy Seen as Threat to Proxy Votes
" CFO (04/18) Heller, Matthew"

An S&P analysis indicates that companies are reaping the benefits of guidance released by the Securities and Exchange Commission (SEC) in November that allows them to reject a shareholder vote on a resolution that "deals with a matter relating to the company's ordinary business operations," unless the proposal focuses on "sufficiently significant" policy issues. The guidance signaled that staff would be deferential to corporate boards in deciding whether the exception applies to a proposal. According to the S&P analysis, SEC staff have rejected only one of 11 company requests to use the "ordinary business" exception to block votes on environmental proposals. Beneficiaries of the guidance include Amazon (AMZN), PayPal (PYPL), and Dunkin' Brands (DNKN). "I think the options are being significantly limited," said Christine Jantz, founder and president of Jantz Management, which submitted shareholder resolutions for the current proxy season.

Shareholder Votes Could Be the Next Phase in #MeToo
" Barron's (04/20/18) Norton, Leslie P."

Over 5% of the shareholder proposals filed in 2018 so far are gender-related, up from 3.3% in 2017, according to Institutional Shareholder Services (ISS).  Among other things, they seek improved reporting on gender pay gaps or better efforts to halt gender-based discrimination.  This trend is due in part to the #MeToo movement.  "We have been asking for more diversity in the workforce, and asking about issues that MeToo has brought up," Elizabeth Levy, senior vice president with Trillium Asset Management, said at a gender-lens investing panel Friday.  MeToo's launch in October gave investors just a few weeks to put together campaigns, which makes the increased percentage of gender-related proposals somewhat impressive.  "I don't think we've seen the full scope of the shareholder proponents' response and dedication to this issue," said John Roe, head of ISS Analytics.  Many of the proposals were filed by Arjuna Capital, which this year has pushed American Express (AXP), JPMorgan Chase (JPM), MasterCard (MA), Bank of America (BAC), Wells Fargo (WFC), Bank of New York Mellon (BK) and Citigroup (C) to address gender pay equity.  Elliott Management has also criticized management strategy and the lack of board diversity at Commvault Systems (CVLT), where there is only one female board member.  Increased representation by women in management and boards can help boost equal pay and improve workplace safety, which are important to recruiting and retaining talent.  And according to McKinsey, companies in the top quartile for gender diversity on their executive teams are 21% more likely to experience above-average profitability than companies in the fourth quartile.

HomeStreet Secures Court Win in Proxy Tussle
" IR Magazine (04/18/18) Maiden, Ben"

The Superior Court of King County, Wash., has ruled in favor of HomeStreet (HMST) in its proxy battle with Blue Lion Capital, a hedge fund seeking to place two director candidates on the ballot ahead of the financial services firm's annual general meeting (AGM) in May. HomeStreet rejected Blue Lion's notice of proposals and nominations for the company's AGM as invalid because it contained "at least 32 instances of failures to satisfy the requirements set forth in the bylaws," prompting the lawsuit from the hedge fund. Judge Timothy Bradshaw agreed that advance notice bylaws "like the one at issue in this case are common" and that the hedge fund failed to comply with the bylaw's requirements. Kai Liekefett, an attorney at Sidley Austin who represented HomeStreet, called it a "landmark case," describing it as "the first time a court applying Delaware law has ruled that there has been a failure to comply with disclosure requirements and therefore precluded [an investor motion] from a proxy contest." In a statement issued the day of the decision, Blue Lion said HomeStreet directors "have seized upon technicalities" and that it remains fully committed to pursuing much-needed changes at the company. In a filing last week with the Securities and Exchange Commission, HomeStreet said it received a letter stating that Blue Lion would not solicit for its nominees or shareholder proposals, but would solicit votes against the election of director candidates nominated by the issuer.

Companies Are Diversifying Their Boards
" Bloomberg (04/18/18) Green, Jeff"

A growing number of companies, ranging from Tyson Foods (TSN) and Republic Services (RSG) to Best Buy (BBY) and Foot Locker (FL), are eschewing traditional board candidates and opting for diverse members. Many of them are first-timers with no experience.  In 2017, 45% of appointees to the boards of S&P 500 companies were novice directors, the most since recruiter Spencer Stuart began tracking the matter in 2006. In addition, last year was the first time a majority of the incoming board members were either female or minority candidates. Changing a board's demographics and traditions, though, comes with risks. David Larcker, a professor at Stanford's Graduate School of Business, advises, "The board [still] needs to function well to perform its oversight. It's not just a check box."

Japanese Companies Cannot Ignore Advance of Activist Shareholders
" Nikkei Asian Review (04/18/18) Kobayashi, Nobuko"

Nobuko Kobayashi, a partner at A.T. Kearney in Tokyo, argues in this opinion piece that activist shareholders are turning their attention back to Japan, and in response, "Japanese managers must do what most don't want to do—and have very rarely done before—think like activists." Specifically, she says, "They should focus on their core strengths and cut away functions and operations that destroy value. In a land where many company presidents still love to run conglomerates this will not be easy." According to Kobayashi, 28 companies headquartered in Japan were publicly engaged by activist investors in 2017, up from 20 in 2016. "The renewed interest is fueled by the combination of ample risk money, cheap valuations in the Japanese stock market and by the side-effects of the policies of the government of Prime Minister Shinzo Abe to boost corporate transparency," she says. "The easiest targets for activists are complacent managements with no explicit growth strategy which do little to boost a lackluster stock price." Kobayashi argues that not "all companies should be single-sector businesses. But most should rationalize down to a few core businesses. This in my view is the single most important task for Japanese management today. It is not just a matter of satisfying hostile shareholders or raising financial returns, though these matter. It is about defining the identity of the corporation in a globalizing world...Deconstruction should be a creative process pursued at a time of a company's choosing. It will never be as enjoyable when done in response to activist shareholders."

Stock Awards Behind Most CEO Pay Hikes
" Pensions & Investments (04/16/18) Baert, Rick"

More CEOs at big money managers or banks with large asset management units received total compensation increases in 2017 compared with the previous year. In addition, most increases came via stock awards—a practice that sources said would continue as managers tie CEO pay to long-term performance.  A Pensions & Investments analysis of proxy filings determined that seven of the nine firms that filed shareholder proxy reports as of this past Friday upped overall compensation for their CEOs last year. In 2016, CEOs at eight of 11 firms reviewed by P&I received a decrease in total pay. "Firms that increased CEO compensation cited improved earnings, assets under management and net revenue as reasons for the 2017 pay hikes," according to the proxies.


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