7/2/2025

South Korea Corporate Law Reform Gains Bipartisan Support

Korea Economic Daily (07/02/25) Kang, Hyun-Woo; Lee, Sul-Gi

South Korea's ruling Democratic Party’s proposal to strengthen protections for minority investors and enhance board independence has secured the backing of the main opposition People Power Party (PPP), in rare bipartisan support for legislation aimed at delivering on President Lee Jae-myung's economic pledges. The conservative PPP on Wednesday agreed to expand the fiduciary duties of board members to act in the interests of not only companies, but also individual shareholders – the most contentious part of the reform, which drew strong opposition from the business community. The proposed bill is stricter than the Democratic Party’s earlier proposal, which the then-acting president vetoed in March. Its passage would mark a significant achievement for liberal President Lee Jae-myung, who took office early last month. A subcommittee of South Korea’s National Assembly Legislation and Judiciary Committee, which oversees corporate law revisions, approved the proposed overhaul of the Commercial Act on Wednesday. The bill is expected to advance to a full committee meeting on Thursday before heading to a plenary session for final approval. “I believe bipartisan agreement, rather than disagreement, can send a more positive message to the market,” said Jang Dong-hyuk, a lawmaker of the People Power Party and member of the judiciary subcommittee. Another contentious provision in the amended Commercial Act is the so-called 3% rule, which limits the voting power of top shareholders and related parties to 3% each when appointing outside directors. The ruling and opposition parties also agreed to replace the term "outside director” with “independent director" to underline the role's independence from internal directors and executives. Listed companies need to increase the proportion of independent directors to more than one-third of the board, up from more than one-fourth under the current law. The amended bill also makes it mandatory for listed companies with assets exceeding 2 trillion won ($1.5 billion) to offer electronic shareholder meetings in addition to in-person gatherings, enabling remote participation. The bill could have passed with the support of the ruling party alone, which holds a majority in the National Assembly. But the ruling party sought the backing of the opposition as a symbol of their support for the first legislation passed under Lee's administration. The amendment faced strong backlash from business leaders, who argue the bill could threaten management rights and limit decision-making flexibility. They said the stricter fiduciary duties would be nearly impossible to meet, as not every board decision can align with the interests of minority shareholders. They also warned that the tougher fiduciary standards could raise the risk of embezzlement accusations against directors. Meanwhile, the two parties decided to put on hold the introduction of a cumulative voting system designed to allow minority shareholders to concentrate their votes on specific board members in proxy fights. They also shelved an earlier proposal of applying the 3% voting cap when selecting auditors from among external board members. A separate proposal to raise the number of audit members elected separately from the board of directors to at least two from the current one was also put on hold. Amid pushback from the business community on the amended bill, the two parties said they will revisit the measure after the amended law takes effect.

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7/2/2025

Jack in the Box Adopts Poison Pill to Fend Off Activist Investor Sardar Biglari

QSR (07/02/25)

Investor Sardar Biglari — who has attempted to take control of Cracker Barrel (CBRL) and El Pollo Loco (LOCO) within the past year — is now engaging Jack in the Box (JACK). Biglari Capital Corp., the owner of Steak ‘n Shake and Western Sizzlin’, privately informed Jack that it owns 9.9% of shares and that it plans to increase its stake. In response, the Jack in the Box Board of Directors unanimously adopted a limited-duration stockholder rights plan, effective immediately. The move, often referred to as a poison pill, is a defense mechanism used to prevent or discourage a hostile takeover. If an unwanted party accumulates a large percentage of shares, the plan triggers, allowing other shareholders to buy more shares at a discount. This dilutes the ownership of the acquiring party, making a takeover more expensive or impractical. In Jack’s case, the plan triggers when someone reaches share ownership of 12.5% or more. Biglari’s move comes amid the burger giant’s “JACK on Track” plan, which involves the closure of 150 to 200 underperforming restaurants, moving on from Del Taco, and selling real estate and suspending its dividend to pay down debt. “Jack in the Box’s Board is committed to protecting our stockholders and remains confident in management’s ability to execute the Company’s “JACK on Track” plan to improve long-term financial performance across its restaurant system, strengthen its balance sheet and transition to an asset-light business model,” David L. Goebel, Jack’s independent chairman, said in a statement. “The adoption of this Rights Plan is intended to provide the Company with adequate time to execute this plan and ensure stockholders are able to realize the full potential of their investment in the Company.” Jack’s same-store sales declined 4.4% in Q2, comprising a 4.5% decrease for franchises and a 4.4% dip for corporate restaurants. The result included a decrease in transactions and negative mix, partially offset by increases in menu price. Restaurant-level margin decreased to 19.6%, down from 23.6% a year ago, driven primarily by lower sales, continued inflation for commodities, wages, and utilities, as well as higher operating costs, partially offset by price increases and favorable beverage funding. Biglari is no stranger to controversy. Three months ago, Biglari Capital Corp. — which owned 15.1% of El Pollo Loco at the time — sent an unsolicited, non-binding indication of interest to buy the company. But that’s not where the relationship started. In 2023, similar to Jack in the Box, El Pollo Loco’s board unanimously adopted a limited-duration shareholder rights plan in direct response to Biglari’s growing stake in the company. At the time, Biglari Capital had acquired more than 12% of El Pollo Loco’s outstanding shares. Independent of Biglari, CapitalSpring announced a $14.7 million investment in El Pollo Loco in June, signaling that the fast casual may go in a different direction. Biglari has most notably fought for more influence with Cracker Barrel. He lost another attempt to gain a seat on the board last year. It was his seventh proxy contest in 13 years. Meanwhile, Biglari’s own restaurant concepts have struggled. Steak ‘n Shake has shed 200 units since its peak of 626 restaurants in 2018. Although same-store sales were positive in Q1, customer traffic was negative at company-operated stores. Western Sizzlin’s revenue fell 7.9% in the first quarter.

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7/2/2025

Japan Doubles Down on Cross-shareholding Disclosure amid Reforms

Nikkei Asia (07/02/25) Nagumo, Jada

Japan is taking steps to make sure companies are disclosing clear, honest and sufficient information about cross-shareholdings in a bid to further accelerate corporate governance reforms. The Financial Services Agency has tightened its screening of companies' disclosure of mutual-shareholdings, said Akira Nozaki, the director overseeing the watchdog's corporate accounting and disclosure division. Nozaki said that Japanese companies have made big progress in disclosing governance and other nonfinancial information in their securities reports, such as executive compensation and board activity. However, there is still room to improve, especially when it comes to cross-shareholdings. "We saw that quite a few companies were making misleading disclosures about their strategically held shares, calling them pure investments but without clear explanation," he said. "So starting from this year, we have tightened the rules." The FSA is now requiring companies that reclassify strategically held shares as being owned for investment purposes to explain why in their annual securities reports, as well as how they plan to eventually sell such stock — information that companies must continue to share for up to five years. "In our review of annual reports, we are checking such disclosure information thoroughly," noted Nozaki, who said that his department has also recently added new screening criteria. "We are now asking companies whether they have disclosed their annual securities reports before the annual general meetings (AGMs) and if they plan to do so next year and the following year." There has been increasing criticism and foreign investor demand for Japan Inc. to publish their securities reports before their AGMs. In response, Finance Minister Katsunobu Kato in March asked all listed companies to disclose information before their AGMs. Publishing them beforehand is crucial for improving governance, according to Nozaki, who said that there was a certain level of concern among Japanese companies where they felt like institutional investors were voting simply based on the recommendations of proxy advisers. "But actually it was difficult for investors to make their own analysis due to lack of information. By publishing the reports earlier, it can encourage investors and companies to make meaningful engagements," he said. "In Europe, annual reports are published at least two months before the AGM. There are discussions about pushing back Japan's June AGM season to around autumn. That way companies and investors both can have more time," he said. Board diversity is another key area where Japan hopes to make more progress, especially as investor pressure mounts. Nozaki argues that it is not only important to comprise boards with a diversity of people and opinions, but also to think about how to hold board meetings that are constructive and have lively discussions. One way is to make use of corporate secretaries, a role that is already in place for countries and regions like the U.K., Singapore and Hong Kong. "In the U.K. and some other jurisdictions, corporate secretaries are specialized professionals who can bolster the effectiveness of boards. As the first steps, the FSA is leading efforts to launch a consortium where companies can come together and share their skills and knowledge about how to run and manage fruitful board meetings," Nozaki said. The director also expressed hopes for Japan to lead in disclosures about human capital, an area that is yet to establish a global standard. "Japan has a culture of valuing people and a lot of workers stay with one company for a long time. Companies can show their corporate values by disclosing their human resource investments or turnover rates," Nozaki said. "If Japan can take a strategic lead in disclosing such information, that can help global investors recognize its strengths." The FSA is also working toward updating Japan's Corporate Governance Code. "Discussions will start soon and one of the main topics on the agenda will be fleshing out guidelines on the allocation of available resources," he said. Corporate cash and deposits rose after the Covid-19 pandemic in Japan and are still at a high level when compared to the U.S. or Europe. "We hope to support positive change by holding companies accountable for ensuring that cash is being used for necessary investments," said Nozaki, who was dispatched to the Organisation for Economic Co-operation and Development a decade ago and had a lot of opportunities to discuss Japan's corporate governance with global investors. "Ten years ago, many were critical of Japan but now, not just global investors but also domestic ones can tell how corporate governance reforms have made progress and that Japanese companies have also changed considerably," he said.

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7/1/2025

Two New Advisory Firms Make Arguments For, Against Brookdale Senior Living Board Picks

Senior Housing News (07/01/25) Regan, Tim

Two advisory firms, Glass Lewis & Co. and Egan-Jones Ratings Co., have joined the discussion surrounding the proxy fight between Brookdale Senior Living (BKD) and Ortelius Advisors. On Tuesday, both Brookdale and Ortelius touted two reports from the independent advisory firms, with both declaring the dueling reports supported their bid in the proxy fight. Glass Lewis this week cited concerns with Ortelius’ plans to remake the company to unlock value, but urged shareholders to “withhold” votes on Brookdale directors Lee Wielansky and Victoria Freed. Meanwhile, Egan-Jones recommended that shareholders vote for all six of Ortelius’ nominees for the operator’s board of directors “to effectively execute a meaningful turnaround and unlock long-term value for shareholders.” Ortelius, which owns 1.3% of Brookdale’s stock, is pushing for “meaningful change” at Brookdale that would overhaul the company’s board of directors and unlock real estate value by selling underperforming senior living communities. The activist investor has called for eliminating Brookdale’s “poorly performing” 266-community leased portfolio, among other changes. Brookdale has repeatedly pushed back on Ortelius’ concerns, and company management noted last month that picking the activist investor’s board of director nominees “would significantly disrupt the execution of our strategy” and effectively mean the company has a new board and CEO during a “pivotal inflection point.” Brookdale is navigating in a period of change in 2025. Former Brookdale CEO Cindy Baier stepped down from her role in April, and the company is currently searching for a new top leader with Denise Warren currently working as interim CEO. Brookdale stock fell almost 1.7% Tuesday, ending the trading day at $6.85 per share. Advisory firm Glass Lewis was mixed on Ortelius and criticized a lack of information surrounding the activist investor's plans. Ortelius has not given investors necessary details, nor has it outlined a sufficient framework for enacting its plans, the advisory firm wrote. “We are concerned that the foregoing framework discards the observed near-term yield on Brookdale's existing efforts while offering investors comparatively poor visibility and functionally vacant benchmarking. We believe this contrasts poorly with an effort to secure six of eight seats on a board,” reads the Glass Lewis report that Brookdale cited Tuesday. The activist investor has not offered “a clear, persuasive and measurable framework for execution,” such as procedural architecture, anticipated timeframes or a valuation breakdown, Glass Lewis wrote. The advisory firm also weighed concern over the fact that Ortelius has not visited any of Brookdale's communities. “We are concerned these factors suggests there is substantially no codified standard by which investors would be positioned to hold Ortelius' nominees accountable, nor is there any indication the dissident is substantively familiar with Brookdale's owned properties (and thus the values which might be attributable to such properties in a sale process),” the report reads. Glass Lewis' concerns follow that of independent advisory firm Institutional Shareholder Services (ISS), which wrote in its own report in June that Ortelius has not outlined “what the expected timing of a sale process would be, what the expected proceeds of a sale would amount to, who the potential buyers are, whether higher occupancy assets need to be included in any portfolios that would be sold and how the dissident would negotiate with the company's lenders to sell assets that may be part of larger loan collateral pools.” But the advisory firm also urged shareholders to withhold votes from Wielansky and Freed, and noted that Ortelius board picks Steven Insoft and Steven Vick “offer valuable senior housing and real estate expertise at a critical juncture, with particular attention to Brookdale's ongoing portfolio optimization efforts. Their elections in place of Ms. Freed and Mr. Wielansky would further demonstrate board refreshment directly predicated on exercise of the shareholder franchise, rather than on deference to members of management,” the advisory firm wrote. While ISS recommended against giving the activist investor control of the Brookdale board of directors, it also recommend voting for two Ortelius board nominees, Vick and Lori Wittman, over current Brookdale board members Wielansky and Freed. In a press release Tuesday, a representative for Brookdale wrote that “while we agree with Glass Lewis and ISS that Ortelius should not have control of the Brookdale Board, we strongly disagree with the proxy advisory firms' suggestion that the Ortelius campaign for board representation warrants a vote for any one of the Ortelius nominees. “The skills offered by Ortelius' candidates are not additive or relevant to our business,” reads the company's press release. “If shareholders follow the proxy advisory firms' recommendation, and Mr. Wielansky and Ms. Freed are removed from the Brookdale board and any two of Ortelius' nominees are added, six of Brookdale's eight directors would have served on the board for approximately one year or less — putting the company at risk with minimal institutional experience at the board level.” While ISS and Glass Lewis advocated against giving control of the Brookdale board of directors to Ortelius, Egan-Jones recommended shareholders vote for all six of the company's nominees to Brookdale's board of directors. In its reasoning, the advisory firm wrote that it believes “the current management and the Ortelius nominees propose strategies that are diametrically opposed to each other.” Specifically, Egan-Jones wrote that “management is determined that they will be able to grow out of their debt — something that seems unlikely given multiple years in a row of extremely low operating margins.” The advisory firm added that, “on the other hand, Ortelius believes underperforming assets must be sold off to pay down debt and improve operating margins.” Egan-Jones' argument also hinged on the fact that Brookdale's total shareholder returns are “stagnant” despite “strong industry tailwinds, such as rising occupancy in senior housing and increasing demand due to changing demographics. The company's financial performance presents significant concerns, primarily due to high leverage and poor operational efficiency,” Egan-Jones wrote in its report. “With debt-to-enterprise value ratios consistently average over 90% over the past five years, BKD is heavily reliant on debt. Revenue growth is being offset by the company's persistently low operating margin. In our view, the company's weak balance sheet limits its financial flexibility and means to restore profitability.” Conversely, Egan-Jones believes that Ortelius' nominees “bring the right mix of skills and expertise across senior housing, REITs, finance, capital markets and operational turnarounds” to enact meaningful changes across the company's portfolio. Brookdale said in response that Egan-Jones “reached the wrong conclusion in failing to recommend that Brookdale shareholders elect all of the board's highly qualified director nominees.” Brookdale management said the company's “strategy to de-lever and create shareholder value is working, whereas Ortelius' strategy appears to be vague and untested.”

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7/1/2025

Barington Asks Casket Maker Matthews for Board Seats, Warns of Second Battle

Reuters (07/01/25) Herbst-Bayliss, Svea

Barington Capital Group on Tuesday urged casket maker Matthews International (MATW) to fix its business and immediately invite the activist investor onto its board, or possibly face another clash with the group next year. Barington criticized Matthews' business portfolio, capital allocation, lagging stock price, and long-serving CEO in a letter seen by Reuters. The investor heaped fresh pressure on Matthews by underscoring the same issues that formed the backbone of its high-profile fight for three seats, which it lost, earlier this year. Barington wants the company, a conglomerate which has technology-focused businesses plus products for burying the dead, to add its director candidates to the board now and not "wait for the 2026 annual meeting." Matthews stock price dropped 12% in the first six months of the year, the letter says, when the broader S&P 500 index gained 4.4% and Matthews' peers gained 3.3% on average. Barington chief executive James Mitarotonda blamed Matthews CEO Joe Bartolacci "for this persistent pattern of underperformance" and wrote that he and other Barington board candidates could help fix the company now. "Our participation is essential to execute the fundamental changes necessary to create long-term value," the letter said, warning if no board seats are offered "we remain prepared to pursue all available alternatives to protect our investment." This suggests Barington may launch a second campaign for change at Matthews next year after shareholders in February blocked the activist by re-electing all company directors. Barington, which had support from three proxy advisory firms that guide how shareholders vote, bought more Matthews stock after its defeat, raising its stake in the company to roughly 3% from 2%.

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7/1/2025

Korean Stocks Gain on Renewed Optimism Over Corporate Reforms

Bloomberg (07/01/25) Cheng, John

South Korean stocks advanced Tuesday, as shares of holding companies rallied on hopes that revisions to the Commercial Act will be approved by the parliament this week. The benchmark Kospi rose as much as 2% before it trimmed gains to close 0.6% higher. Bullish sentiment grew after reports that the main opposition shifted its stance to consider supporting revisions sought by the ruling party that will alter corporate-governance policy in the country. That decision reflects changes in market conditions and recent cases of shareholder-rights violations by some companies, floor leader Song Eon-seog said on Monday. Quarter-end selling pressure that weighed on the Kospi in the past few days cleared up, with expectations that passage of the revisions to the Commercial Act will drive renewed buying momentum, said Shawn Oh, an equities trader at NH Investment & Securities Co. in Seoul. That “will be key for enforcing corporate governance and shareholder returns.” The ruling Democratic Party of Korea, under President Lee Jae Myung’s leadership, has been seeking to amend the Commercial Act to expand the fiduciary duty of board members to all shareholders. Lee has also vowed to lift corporate governance standards and improve stock-market returns. That’s fueled optimism among global investors that the so-called “Korea discount” will start to narrow. The government is also considering including separate taxation on dividend income in annual tax revision proposal which will be announced at the end of July, the Korea Economic Daily reported, citing unidentified sources. The Kospi is up 29% year to date on optimism about corporate-governance reforms, compared with a gain of about 12% for MSCI’s Asia-Pacific index.

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6/30/2025

Elliott’s Banca CF+ Launches Takeover Bid for Banca Sistema

Bloomberg (06/30/25) Sirletti, Sonia; Vanuzzo, Antonio

Banca CF+, an Italian financial services firm controlled by Elliott Management Corp., is seeking to buy Banca Sistema SpA (BSTA), according to a statement on Monday. The firm is offering a combination of cash and shares worth €1.80 ($2.11) for each Banca Sistema share, a discount of around 8% compared to Banca Sistema’s Friday close. The offer currently values the bank at around €145 million, according to Bloomberg calculations. The deal represents the latest in a series of potential M&A transactions that have turned the Italian financial services sector into a hotbed of activity in recent months. Bloomberg reported on Sunday that Banca CF+ was planning to make a bid for Banca Sistema. Banca Sistema shares fell as much as 8.6% in Milan trading on Monday. The offer includes €1.382 in cash and €0.42 through the allocation of 21 shares of Banca Sistema unit Kruso Kapital SpA (KK), subject to a split of Kruso Kapital’s shares on the basis of a 1:98 ratio for each share tendered. Banca Sistema focuses on financing and managing trade receivables owed by Italian local governments, mainly through factoring and credit management services. It also offers salary and pension backed loans, as well as pawnbroking. Shareholders Gianluca Garbi, SGBS S.r.l. and Garbifin S.r.l. agreed on June 29 to tender a 24.86% stake to Banca CF+ in the offer, the same statement said. “Banca CF+ will benefit from the full financial support of funds advised by Elliott Investment Management LP as major shareholder, to support growth and development plans resulting from the completion of the offer,” it said in the statement. UniCredit is acting as financial adviser to Banca Sistema, while law firm Chiomenti as legal adviser. CF+, controlled by Elliott investment management’s funds, specializes in financing solutions for companies and offers factoring services, tax-credit purchases and short- and medium-term financing.

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6/30/2025

U.S. Supreme Court to Decide on Controlling-Investor Challenges

Bloomberg (06/30/25) Feeley, Jef; Stohr, Greg

The U.S. Supreme Court will consider whether activist investors can use an 85-year-old law to challenge corporate moves bolstering controlling shareholders, in a case being closely watched by some of Wall Street’s biggest investment funds. In a setback to hedge fund manager Boaz Weinstein, the court agreed to review a decision allowing a lawsuit against closed-end fund provider FS Credit Opportunities Corp. (FSCO) and others, including BlackRock Inc., (BLK) the world’s largest asset manager. The case comes to the justices after Weinstein’s Saba Capital Master Fund successfully argued that the Investment Company Act of 1940 allowed it to sue the big funds to defeat shareholder rights plans, known as poison pills, that stave off activist investors like Saba. Saba’s win was upheld by an appeals court, whose ruling will now face the high court’s scrutiny. Activist investors typically accumulate stakes in companies and then push for change by trying to gain seats on the board, often clashing with controlling shareholders like BlackRock and FS. The Investment Company Act, which Congress adopted to promote transparency in the securities market, includes protections for investors against the power of controlling shareholders. Saba said the big funds had improperly used a Maryland law to thwart a provision of the 1940 act that gives investors a right to sue, and made it harder to gain more control of a company. FS argued in its Supreme Court appeal that the 2024 trial court decision favoring Saba wrongly allows activist investors to base lawsuits over shareholder rights on the Investment Company Act. BlackRock didn’t join the appeal but reserved its right to participate in the case at the high court. The Supreme Court agreed to take the case after the Trump administration argued that leaving the lower-court rulings intact would interfere with government regulators’ enforcement powers and unfairly inject unpredictability into the funds’ operations and contract rights. The justices had asked the administration, which isn’t a party to the case, to weigh in on it. The government contended that investors have no right to challenge contracts that allegedly violate the 1940 statute. The case is FS Credit Opportunities Corp. v. Saba Capital Master Fund, 24-345.

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6/30/2025

Lantronix Enters Into Cooperation Agreement With Investor Group Led by Chain of Lakes Investment Fund LLC

Globe Newswire (06/30/25)

Lantronix Inc. (LTRX), a global leader in compute and connectivity IoT solutions enabling Edge AI intelligence, today announced that it has entered into a cooperation agreement with Lantronix stockholders Chain of Lakes Investment Fund LLC, Haluk L. Bayraktar, and Emre Aciksoz. Under the terms of the agreement, James (Jim) C. Auker will be appointed to the Lantronix Board of Directors and will be nominated for election at the Company’s 2025 Annual Meeting of Stockholders. The date of the Annual Meeting has not yet been announced. “Lantronix is committed to maximizing value for all Lantronix shareholders,” said Saleel Awsare, CEO and president of Lantronix. “We appreciate the constructive discussions with Chain of Lakes and are pleased to welcome Jim Auker to our Board. His perspective and experience will be valuable as we continue to execute on our strategic priorities.” “We value the collaborative approach taken by Saleel and the Lantronix Board to reach a positive outcome for the benefit of all Lantronix shareholders,” said Tim O’Connell, chief investment officer of Chain of Lakes. “We believe Jim Auker will be a strong addition to the Board and are confident his contributions will help guide Lantronix in its efforts to explore opportunities to enhance shareholder value.” Pursuant to their agreement with the Company, Chain of Lakes, Mr. Bayraktar and Mr. Aciksoz have agreed to customary standstill and voting commitments, among other provisions. The full agreement and required information in connection with the election of Mr. Auker to the Board will be filed with the SEC.

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