Media Center

Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.

New York Times Investor Reflects Media Shift From Growth to Profits
Litt Pushes for Sale of Aimco REIT
HSBC Oversold Risks of $35 Billion Asia Spin-Off, Investor Ping An Thinks: Source
Investindustrial to Pay $950 Million for TreeHouse Prep Unit
Manufacturers' Suit on Sidelined SEC Proxy Firm Rules Paused
Aviat Networks Issues Open Letter to Ceragon Networks Shareholders to Correct the Latest False Claims and Mischaracterizations From the Ceragon Board
New York Times Is Engaged as ValueAct Takes 7% Stake, Urges Changes
Pinterest's Plan to Better Compete With TikTok, Shopify, and Instagram
Reminder: Initial Board Diversity Matrix Now Required for NASDAQ Companies
Analysis: Antitrust Rules, Petro-Canada Profits May Hinder Suncor From Selling Unit
ISS Recommends Vote AGAINST All Aviat Director Nominees
PMI Extends Acceptance Period for Swedish Match Offer
Wall Street Watchdog Unveils Rule to Boost Quality of Private, Hedge Fund Disclosures
Glass Lewis Joins ISS in Recommending Rocky Mountain Chocolate Factory Stockholders Vote FOR AB Value-Radoff Group’s Highly Qualified Nominee
'Post-ESG' ETF Backed by Thiel Debuts to Encourage More Drilling
Citrix Systems Ticks Higher on Report About Debt Financing for Take Private
Liveperson Rises Even as Loop Capital Downgrades, Citing Need for Improved Execution
Richemont Chairman Says He Won't Give in to Shareholder
Musk Sells Tesla Stock Worth $6.9 Bln as Possibility of Forced Twitter Deal Rises
ISS Recognizes the Need for Board Change at Ceragon to Ensure a 'More Fulsome Evaluation of Strategic Alternatives'
Aviva Plans Further Capital Return in Boost to Shares
Toshiba Logs Surprise Quarterly Operating Loss on Higher Materials Costs
Analysis: Florida Governor's Bid for Conservative Pension Bloc Faces Hurdles
Parkland Would Consider Buying Suncor's Retail Assets: CEO
Corvex Management Advises Kindred Group PLC of 15% Ownership and Plan to Participate on Nomination Committee
Nearly Half of SPACs Are Likely to Liquidate if SEC Rules Are Adopted
Nielsen Postpones Court and Special Meetings of Shareholders to Permit Finalization of Preliminary Agreement Between Consortium and WindAcre
Indaba Issues Letter to Tabula Rasa’s Independent Directors Regarding Their Apparent Prioritization of the Knowltons’ Interests Over Shareholders’
This Shareholder Is Pushing Companies Like Starbucks and EssilorLuxottica to Empower Their Workers
U.S. Utility MDU Resources Backs Its Strategy After Meister's Corvex Takes Stake
Argo Group Hands Board Seat to Investment Firm Voce Capital
Richemont Requests Shareholders to Vote Against Investor Board Candidate
Bluebell Fights for Broader Representation at Richemont
Shareholders Vote to Oust Chair of Trian UK Investment Firm
Aviva Looks to Settle Investor Nerves After Share Price Slide
Could a Tough Macro Environment Speed Up Western Digital's Breakup?
Video: The Activist's Activists
MDU Resources Gains After Corvex Discloses Stake, Intends to Talk to Management
ValueAct Builds 8.7% Stake in Software Provider Trend Micro, Shares Surge
ISS Recommends Rocky Mountain Chocolate Factory Stockholders Vote FOR AB Value-Radoff Group's Nominee on the BLUE Proxy Card
Ben & Jerry's to Take on Owner in Court Hearing Over Israeli Business
Taiwanese Apple Supplier Battles Argyle Street Management Over $4 Billion Cash Pile
Malta Launches Corporate Governance Code for Authorised Entities
Suncor Energy Interim CEO Sees Mandate for Change After Safety Problems
Boardrooms Add Diversity as Washington Mulls Disclosure Rules
Tesla Shareholders Broadly Follow Board Recommendations at Annual Meeting
PayPal Earnings Packed in Much More Than Just Numbers
ISS and Glass Lewis Recommend Catalyst Stockholders Vote 'FOR' All of the Company’s Nominees on the WHITE Proxy Card
ISS Urges Monro Shareholders to Vote Against Board Members
PayPal Stock on 'Road To Recovery' With Elliott Management's Backing?
HSBC 'Had to Listen' to Shareholders but Analysts Doubt Ping An Can Force Separation
SPAC Market Hits a Wall as Issuance Dries Up and Valuation Bubble Bursts
Unilever Stops Paying Ben & Jerry’s Board Members in Israel Dispute
Southwest Gas Opts Against Company Sale After Icahn Deal
Rocky Mountain Chocolate Factory Comments on the Failure of AB Value and Bradley Radoff Group to Disclose to Stockholders the Current Employment Status of Their Remaining Nominee
Company Behind Australia's Most Advanced Vanadium Project Embroiled in Leadership Fight Amid Shareholder Engagement
AB Value-Radoff Group Reiterates Commitment to Reaching a Good Faith Settlement at Rocky Mountain Chocolate Factory
HSBC Investor Starts Group to Rally Support for Ping An Plan
HSBC Seeks to Placate Hong Kong Investors After Rejecting Break-up Call
Pasithea Therapeutics Urges Stockholders to Reject Camac Group's Unjustified Campaign
Tesla Investors Urged to Vote Against Board Members, for Shareholder Proposals by Influential Advisory Services
HSBC Hard Sells Growth Plan to Disgruntled Investors After Rebuffing Breakup
Tesla Proxy Voting Will Focus on the E and S in ESG
Rocky Mountain Chocolate Factory Determines That a Settlement Involving Mary Bradley Joining Its Board Is Not in the Best Interests of the Company or Its Stockholders
HSBC Rebuffs Break-Up Calls and Pledges to Boost Dividends
Musk Sued by Twitter Investor Over Busted $44 Billion Deal
Einhorn's Greenlight Takes Stake in Twitter—Letter
EU Puts Key Plank of ESG Rulebook on Hold Amid Infighting
Pinterest Shares Surge After Elliott Discloses It Is the Largest Shareholder
Opinion: Elliott Snaps Up an Interest in PayPal. This Is What Could Be Next for the Payments Giant
Morgan Stanley SPAC Banker Bennett Schachter Exits for Elliott
The AFR Columnist and the Bare Knuckle Fight for TNG
UK Companies May Face 'Action' if They Downplay Climate Risk, Watchdogs Say
BlackRock Backs Lower Percentage of Proxy Proposals
Retirement Funds Are Ground Zero in Senate GOP Opposition to ESG
Indaba Capital Delivers Demand for Inspection of Books and Records of Tabula Rasa HealthCare, Pursuant to Section 220 of Delaware Law
Top U.S. Corporate Lobby Sues Wall Street Regulator Over Proxy Rules
Positive ESG Performance Improves Returns Globally, Research Shows
Labcorp to Spin Off Clinical-Development Business
Shareholder Activists Make Inroads
Having a Woman in the Boardroom or C-suite Drives Even Wider Diversity, Study Finds
PayPal Soars 8% on Reported Elliott Stake, BofA Not So Sure on Activist Value
Ron DeSantis Takes Aim at 'Woke CEOs'
Laughing Water Capital - Countryside Partnerships: Takeover Bid and Near-Term Problems
New GSK Takes Flight With Strong Quarter, Forecast Boost
Ingevity Announces Changes to Its Board of Directors
Elliott to Increase Swedish Match Stake Above 5% - Report
Florida CFO Issues Statement in Support of Governor's Fight Against ESG Ratings
Elliott Investment Holding Truce Talks With PayPal
Lionbridge Issues Open Letter to Alexander's Shareholders
Elliott Management Takes Stake in PayPal
U.S. Manufacturers Sue SEC Over Regulation of Proxy Advisory Firms
Companies Urged to Use Technology to Improve AGM Engagement
Opinion: Richemont's Governance Armour Is Hard to Pierce
Opinion: ESG Critics Could Be Leaving Money on the Table—and Missing an Opportunity to Make a Real Impact
Three Important ESG Factors Reviewed for the 2022 Proxy Season
Board Diversity Declines When Companies Face Financial Pressure
Term Limits Alone Won't Achieve Desired Board Turnover
Hidden Gems: Do Compensation Disclosures Reveal Performance Expectations?
Opinion: A Radical Plan to Curb the Lure of the U.K. Buyout
Letter: If Ever There Was a Case for Shareholder Activism...
Japan's Corporate Governance Reform in Limbo in Post-Abe Era
Companies Are Moving Away From Mandatory Director Retirement Policies and Pursuing Other Ways to Achieve Board Refreshment
Many Companies Aren't Prepared to Replace Underperforming CEOs
What's Wrong With ESG Ratings?
Opinion: Nasdaq's New Rule on Board Diversity Is a Good First Step, Not a Gold Standard
Back to Basics: Board Committees
Corporate Boards Aren't Ready for This Shift in Executive Pay
U.S. Companies Are Hoarding More and More Cash Overseas
Opinion: Pinterest and PayPal Problems Won't Be Fixed Overnight by Elliott
Letter: Governance, Not Code, Makes Business Better
SEC Proposes to Narrow Three Substantive Exclusions in the Shareholder Proposal Rule
North American Boards Lag on Executive Pay ESG Links, Survey Finds
Debate Looms Over SEC Shareholder Proposals Plan
U.S. Institutions Look for Answers as ESG Questions Mount—Schroders
Report Finds a Continued Lack of Diversity on Boards of Fortune 500 Companies
Investors Put Forward More Proposals, Dialing Up Pressure on Companies
Podcast: Getting Directors on Board to Tackle Climate Crisis
How Continuous Voting With UPC Will Change Proxy Contests
ESG, Cryptocurrency Discussed a Lot but Not Often Adopted
Proxy Rules Attain Consensus: No One's Entirely Happy
Regulatory Instability for Proxy Advisory Firms
Podcast: Jefferies LLC's Christopher Young Reviews ISS, M&A
First-Time Directors Face Social Pressures as Boards Diversify
Opinion: Don't Strengthen the UK Corporate Governance Code — Abolish It
Video: Nelson Peltz
Opinion: Elliott Management Going After PayPal: Is It Playing Matchmaker or Shotgun Wedding?
Opinion: The Corporate Citizenship Project Asks SEC to Regulate Proxy Advisors on ESG
The Next Big Threat to Corporate Diversity Success Is Here

8/12/2022

New York Times Investor Reflects Media Shift From Growth to Profits

Bloomberg (08/12/22) Smith, Gerry; Deveau, Scott

ValueAct Capital Management said in a letter to investors that it has called on the New York Times Co. (NYT) to boost prices and profits from both its service lineup, including games, recipes, sports, and product reviews, and its flagship newspaper. ValueAct, which holds a 7% stake in the company, cited research indicating that 74% of customers who subscribe to the package are willing to pay more once the promotional rate expires, which means the company should be "increasing price in line with value delivered." This comes as investors at Netflix Inc. (NFLX) and Walt Disney Co. (DIS) shift their focus beyond subscriber growth. The New York Times has long been focused on customer growth, charging new subscribers as little as $1 per week for a year and setting a goal in February to hit 15 million subscribers by the end of 2027. Huber Research Partners analyst Douglas Arthur said, "We've entered a new phase where people accept that the 15 million digital subscriber goal is within reach. The question now is where are the profits?" According to ValueAct, NYT should double or triple its profit margins from current levels. Meanwhile, NYT CEO Meredith Kopit Levien said during an earnings call this month that the company will be pushing new subscribers to purchase bundles of subscriptions and existing subscribers to upgrade in the second half of the year.

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8/11/2022

HSBC Oversold Risks of $35 Billion Asia Spin-Off, Investor Ping An Thinks: Source

Reuters (08/11/22) Li, Selena; White, Lawrence; Daga, Anshuman

HSBC (HSBC) overstated the risks of spinning off its Asia unit when it rebuffed such a proposal by shareholder Ping An Insurance Group (PNGAY), an insider familiar with the Chinese insurer's thinking said, adding the move could unlock up to $35 billion in value. HSBC came under pressure from Ping An, its biggest shareholder with an 8.3% stake, in April to explore options including listing its mainstay Asia business to increase shareholder returns. The detailed rebuttal as described by the source represents the investor's most detailed pushback yet of HSBC's strategy, and signals Ping An's intention to continue the dispute. Details of Ping An's internal discussions come after HSBC on Aug. 1 itself pushed back against the investor's proposals while reporting its half-year earnings. HSBC said a break-up would mean a potential long-term hit to the bank's credit rating, tax bill, and operating costs, and bring immediate risks in executing any spinoff or merger. Ping An believes a spinoff would generate an extra $25-$35 billion in market value and release over $8 billion in capital, the source said, citing "external" analysis. Responding to HSBC's argument that spinning off its Asian business will hit global synergies, the source said HSBC would remain a major shareholder of the unit after the separation and both parties could enter into cooperation agreements. The spat between HSBC and Ping An shows the challenges facing the British bank, as it attempts to navigate geopolitical tensions between the United States, Britain, and China amid criticism from lawmakers in the West over the bank's activities in Hong Kong.

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8/11/2022

Aviat Networks Issues Open Letter to Ceragon Networks Shareholders to Correct the Latest False Claims and Mischaracterizations From the Ceragon Board

PRNewswire (08/11/22)

Wireless transport solutions specialist Aviat Networks Inc. (VVNW) issued an open letter to Ceragon Networks Ltd. (CRNT) shareholders, seeking to correct the newest false assertions and mischaracterizations from Ceragon's board. "Earlier this week, the Board rejected Aviat's revised proposal to acquire Ceragon for $3.08 per share in cash and stock, in another letter that distorts the record and which is replete with false claims and mischaracterizations," the letter reads. The missive states that the proposed deal would yield substantial value to investors in excess of what Ceragon can provide through its current strategy, and with a lower execution risk. Aviat contends that Ceragon's long-promised next-generation 28-nanometer chip will be beset with problems demanding a costly redesign, "which we fear could lead this entrenched Board to raise additional capital through a dilutive equity offering. The truth is that Ceragon is struggling on its own, and is not going to achieve outlandish price targets, or even its own projections." The letter continues that Ceragon's board has made every effort to block a potential transaction with Aviat or to maximize value for all investors, despite claims to the contrary. Citing a bloc of four directors led by Chairman Zohar Zisapel as the main obstruction, Aviat calls for their ouster. "A vote for all of Aviat's five director nominees on the gold proxy card is the path to creating board independence and greater shareholder value," the company writes.

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8/11/2022

New York Times Is Engaged as ValueAct Takes 7% Stake, Urges Changes

Bloomberg (08/11/22) Deveau, Scott

ValueAct Capital Management has built a new position in the New York Times Co., arguing the newspaper company could boost digital sales and margins through an aggressive rollout of its subscriber-only bundles. ValueAct stated in a letter to investors Aug. 11 that it now owns a 7% stake in the newspaper. It said the current valuation doesn't reflect the company's long-term growth prospects in almost any potential economic environment and that management has a number of opportunities to offset the macroeconomic headwinds the industry faces. A key to this growth will be a more aggressive rollout of all its subscriber-only products, ValueAct stated, including The Athletic, crosswords and games, cooking, and news. “Our research suggests that most current readers and subscribers are interested in the bundle and would pay a large premium for it but are not aware the offering even exists,” ValueAct stated in the letter. “This is an opportunity we believe management needs to drive with urgency, as it is the biggest lever to accelerate growth, deepen NYT’s competitive moat, and ensure the long-term strength and stability of the platform.” Over the long term, there is potential for the newspaper to see robust double-digit digital revenue growth and see margins expand by up to three times, ValueAct stated. The company’s shares advanced as much as 12% and were up 9.4% to $34.66 at 1:24 p.m. in New York trading, for a market value of approximately $5.8 billion. “A generational shift is underway where U.S. consumers prefer to consume high quality news digitally—across websites, social medial channels, mobile apps, podcasts, email newsletters, push alerts, and other surfaces—which can only be satisfied by a scaled franchise with a trusted brand like NYT,” ValueAct stated in the letter. “This shift creates tremendous competitive pressure,” it said. “While most of its fragmented competition is challenged for growth, NYT is building a bigger, more profitable, and more defensible business.”

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8/11/2022

Pinterest's Plan to Better Compete With TikTok, Shopify, and Instagram

CNBC (08/11/22) Collins, Leah

Pinterest (PINS) is faced with navigating not only declining users and a rocky e-commerce market, but the creator economy on platforms like TikTok, which allow content creators to directly engage with users, a model proving to be increasingly important to advertisers. In the past year, Pinterest has attempted to address core business issues, rolling out features that make the app more attractive and accessible to creators, brands, and advertisers. Pinterest also has made it easier for companies to upload their product catalogs, list their products as shoppable Pins, and add product tags. Pinterest's bid for reinvention was reinforced this June, when co-founder Ben Silbermann stepped down as the company's CEO and was replaced by Bill Ready, the previous leader of Google's commerce unit, a change in leadership that points to its continued post-pandemic effort to focus on e-commerce, online retail, and the creator economy. Earlier this month, Pinterest again posted disappointing financial results, missing estimates for both earnings and revenue. But the latest user data wasn't all bad. Despite global monthly active users declining by 5% from a year earlier to 433 million, Pinterest pointed to better than expected user retention. And the news that Elliott Management is now the largest shareholder caused Pinterest's stock to soar in early August by more than 21%. “As the market-leading platform at the intersection of social media, search, and commerce, Pinterest occupies a unique position in the advertising and shopping ecosystems” Elliott said. “And CEO Bill Ready is the right leader to oversee Pinterest's next phase of growth.”

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8/11/2022

Analysis: Antitrust Rules, Petro-Canada Profits May Hinder Suncor From Selling Unit

Reuters (08/11/22) Rajagopal, Divya; Nickel, Rod

Suncor Energy (SU) could reap over $8 billion and boost returns to shareholders if it sells its Petro-Canada gas station business, but Canadian antitrust rules and the need for the unit's steady profits could deter that move, analysts and shareholders said. Suncor's poor safety record and lackluster stock performance prompted a demand for changes from Elliott Investment Management. The oil producer responded by replacing its CEO in July and agreeing to review its retail fuel unit by the end of this year. Analysts estimate the unit could be worth C$5 billion to C$11 billion, but it could be hard to actually get that price, since potential buyers are aware of the pressure that Suncor management is under. "The way they are going about the sale, they won't get a good price," said Rafi Tahmazian, director and senior portfolio manager of Canoe Financial LP, a Suncor shareholder. "They are telling the world they are stressed." Shedding the retail business would mean Suncor loses a stable cash-generating business to hedge against volatile oil prices, said Mike Archibald, vice-president and portfolio manager at AGF Investments, another Suncor investor. Suncor's retail and wholesale business generated C$800 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) last year, not counting corporate overhead, 7% of Suncor's total EBITDA, according to Elliott.

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8/10/2022

Wall Street Watchdog Unveils Rule to Boost Quality of Private, Hedge Fund Disclosures

Reuters (08/10/22) Johnson, Katanga

The U.S. Securities and Exchange Commission (SEC) on Aug. 10 proposed a rule to boost the quality of disclosures it receives from big hedge funds about their investment strategies and leverage. The rule, which was proposed in conjunction with the Commodity Futures Trading Commission, is part of a wider regulatory effort to boost transparency of private funds amid concerns the industry is a growing source of systemic risk. It would broaden reporting requirements for advisers and big hedge funds with a net asset value of at least $500 million when filing Form PF with the SEC. Form PF is the main method used by private funds to disclose confidentially to the SEC purchases and sales of securities. The new rule would mandate that funds offer more details on their investment strategy and exposure, including borrowing and financing arrangements, open positions, and certain big positions. It would also mandate that big hedge funds report their cryptocurrency exposure. "We've tried to take a measured approach, but add to the detail in the context of systemic risk," SEC Chair Gary Gensler told reporters. Regulators became worried about risk in the private fund industry after hedge fund de-leveraging contributed to turmoil in the U.S. Treasuries market in March 2020. Hedge funds also played a role in last year's meme stock frenzy involving GameStop Corp. (GME) and other companies. Critics say that while the sector grew following the 2007-2009 financial crisis, regulatory scrutiny of private funds—which are big users of borrowed financing—has not kept up. The International Organization of Securities Commissions stated in a January report that some private fund leverage is being kept hidden. SEC Commissioner Hester Peirce criticized the new proposal, saying the information is unnecessary and that private fund investors—insurance companies, endowments, pension funds, and others—are capable of assessing their own risks. The Alternative Investment Management Association and the Managed Funds Association said the proposed changes are burdensome and could duplicate existing reports.

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8/10/2022

Glass Lewis Joins ISS in Recommending Rocky Mountain Chocolate Factory Stockholders Vote FOR AB Value-Radoff Group’s Highly Qualified Nominee

Business Wire (08/10/22)

AB Value Management LLC and Bradley L. Radoff, who own approximately 17.6% of the outstanding shares of Rocky Mountain Chocolate Factory Inc. (RMCF), have announced that Glass, Lewis & Co. LLC has recommended the company’s stockholders vote on the BLUE proxy card to elect the AB Value-Radoff Group’s independent nominee. The recommendation from Glass Lewis follows Institutional Shareholder Services Inc. recently recommending stockholders vote for change on the BLUE proxy card. In its full report, Glass Lewis affirmed the AB Value-Radoff Group’s case for boardroom change at Rocky Mountain, saying, “[…] there appears to be valid cause for ongoing shareholder concern from a corporate governance perspective.” Furthermore, Glass Lewis says, “as the Dissidents highlight in their materials, RMCF's total shareholder returns have been meaningfully negative during [Brett Seabert’s] tenure on the board.” “While [Mr. Seabert’s] service on RMCF's audit committee is notable, given his lack of relevant industry experience outside of RMCF and his limited public company board experience, as well as his personal ties to RMCF's former CEO, who only recently left the Company, we believe the Company could be overstating his importance and we further question whether he is the best fit for the board at this time amid the other board and management changes.” With respect to the AB Value-Radoff Group’s nominee and proposed mutually agreed upon director candidate, Glass Lewis noted: “…[I]t would seem to us that Ms. Sutton's experience in the food industry, with franchising, and in terms of corporate governance would more than adequately fulfill the board's stated prerequisites for a seventh director joining the board.” “In all cases, we believe the election or negotiated addition of another director who has applicable industry experience (most likely being either Ms. Bradley or Ms. Sutton) will help the Company formulate and execute a turnaround plan and growth strategy with the objective of improving RMCF's performance, governance, and shareholder returns.” The AB Value-Radoff Group commented: "We do not believe Brett Seabert should continue serving as a director of the Company given his lack of relevant experience, track record of overseeing significant value destruction, and ties to the failed founder-led era. Although Rocky Mountain seems intent on stonewalling negotiations, we want stockholders to know that we will continue our efforts to reach a good faith settlement with the Company. Adding a highly qualified female director to the Board – as Glass Lewis notes – would help Rocky Mountain execute a turnaround plan to improve the Company’s abysmal corporate governance and persistent financial underperformance.”

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8/10/2022

'Post-ESG' ETF Backed by Thiel Debuts to Encourage More Drilling

Bloomberg (08/10/22) Greifeld, Katherine

Strive's U.S. Energy exchange-traded fund (DRLL), which launched Tuesday and counts Peter Thiel and Bill Ackman as backers, aims to build enough assets for Strive to influence the boardroom, according to co-founder Vivek Ramaswamy. Strive was founded as a rebuke against "woke" ETFs that support environmental, social, and governance (ESG) principles. With an expense ratio of 41 basis points, Strive is positioning itself against BlackRock's (BLK) $2 billion iShares U.S. Energy ETF (IYE), which assesses the same fee. Ramaswamy said DRLL's attraction is that Strive would wield its shareholder-voting power to encourage oil companies to "drill more and frack more." He contended that "U.S. energy stocks have tremendous potential if they're unshackled from the shareholder-imposed ESG mandates." About $27 million traded in DRLL on Tuesday, which Bloomberg Intelligence senior ETF analyst Eric Balchunas called an impressive one-day showing for an "indie ETF." ESG funds have faced headwinds lately, having accumulated about $4 billion so far this year, following two straight years of over $30 billion in inflows. "Principle-based ETFs have historically had a really tough time gathering assets, so it is definitely helpful to have a nice start like this," Balchunas said. "Now comes the hard part though of finding other investors outside of the friends and family."

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8/10/2022

Richemont Chairman Says He Won't Give in to Shareholder

Reuters (08/10/22) Revill, John

Richemont (CFRUY) Chairman Johann Rupert told Swiss newspaper Finanz und Wirtschaft that he will not cave to shareholder Bluebell Capital Partners' push to overhaul the boardroom. On Monday the company advised shareholders to oppose appointing Bluebell candidate Francesco Trapani as a board member representing investors holding A category shares, instead presenting one of its existing independent directors. Rupert controls all the non-listed category B shares in Richemont, representing 9.1% of the capital, along with half of the voting rights. He said there was no reason to refresh the board "either legally or morally." He noted, "Our board may be slower and more conservative than others. But its openness and collegiality are exactly its advantage. I will not be blackmailed." Bluebell wants Richemont to focus on its jewelry and watches business, claiming it could double its share price in the medium term. Rupert said the board weighed the interests of all shareholders, whether they owned listed A or unlisted B shares. "I can assure you of one thing: I will not change our capital structure," he stated. Bluebell co-founder Giuseppe Bivona said the fund's campaign would continue as Richemont's board was not representing those who assume the most economic risk. Rupert assured that the company was well-positioned to weather the economic slump and had a robust balance sheet. "We've benefited from being prudent. It is extremely beneficial to have been conservative in the good times," he said, adding that Richemont's family-governed structure helped it plan ahead. Richemont posted 12% higher sales in the three months to June, as a 37% drop in mainland China was offset by strong U.S. and European demand.

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8/10/2022

Musk Sells Tesla Stock Worth $6.9 Bln as Possibility of Forced Twitter Deal Rises

Reuters (08/10/22) Jin, Hyunjoo; Sharma, Akriti

Tesla (TSLA) CEO Elon Musk has sold $6.9 billion worth of shares in his electric auto company, asserting that the funds may potentially be used to fund a Twitter (TWTR) deal if he loses a legal fight with the social media platform. Reuters estimates that Musk sold approximately 7.92 million shares between Aug. 5 and Aug. 9, and now owns just under 15% of the automaker. The latest sales bring overall Tesla stock sales by Musk to about $32 billion in less than one year. Musk tweeted on Tuesday: "In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don't come through, it is important to avoid an emergency sale of Tesla stock." Twitter shares increased by 3.5% to $44.35 in early trading, but were still significantly below Musk's offer price of $54.20 per share. Tesla shares rose by nearly 4% at $882. After Musk backed away in July from his April 25 agreement to purchase Twitter for $44 billion, the social media firm sued him to compel the completion of the transaction. The two parties now are scheduled for an Oct. 17 trial. On Tuesday, Musk also said he was finished with selling Tesla stock, but would repurchase it if the Twitter deal collapses. Mark Taylor, a sales trader at Mirabaud Securities, said: "The removal of the 'firesale' risk, the fact Musk has already raised cash in case of a Twitter decision going against him, and the comment that he'll buy back stock if [the] Twitter deal gets dropped all builds into a positive bias for Tesla." Gary Black, managing partner of Future Fund LLC, said in a tweet: "Elon's sale of (Tesla shares) over the past three days significantly increases odds the (Twitter) deal gets done, albeit at a slightly lower price $50-$51/share." Wedbush analyst Dan Ives said the likelihood of Twitter receiving a settlement of $5 billion to $10 billion from Musk was starting to be factored into the social media company's stock.

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8/10/2022

ISS Recognizes the Need for Board Change at Ceragon to Ensure a 'More Fulsome Evaluation of Strategic Alternatives'

PRNewswire (08/10/22)

Wireless transport solutions provider Aviat Networks (AVNW) on Wednesday announced that Institutional Shareholder Services (ISS) has recommended that shareholders of Ceragon Networks (CRNT) vote FOR the removal of two members of Ceragon's board of directors, Yael Langer and Ira Palti, at the upcoming Extraordinary General Meeting of shareholders on Aug. 23. Aviat continues to believe that shareholders should also vote for the removal of David Ripstein and FOR the election of all five of Aviat's director nominees. "We are pleased that ISS recognizes the need for boardroom change at Ceragon, to ensure an independent evaluation of strategic alternatives, including Aviat's acquisition proposal," said Aviat President and CEO Peter Smith. "We believe, however, that the fastest path to a premium transaction lies in not just removing two of Ceragon's entrenched directors, but also removing ALL THREE of the targeted directors, and electing our highly qualified director nominees to independently consider value creation opportunities." In its report, ISS critiqued the board's refusal to engage in negotiations with Aviat regarding a potential transaction. "It is questionable to what extent the board has been open to negotiating a deal; the board was apparently more concerned with issues that would be secondary to price, like firm financing commitment or a high level of breakup fees." ISS continued, "The target board does not appear to have engaged in detailed discussions, and, leaving aside the potential for a deal, does not appear to inspire confidence in investors in addressing the strategic challenges the company faces. The apparent standalone execution risks and governance concerns lead to the conclusion that some board change is warranted to ensure a more fulsome evaluation of strategic alternatives." In its report, ISS also questioned the independence of certain board members from Ceragon Chair Zohar Zisapel, as well as Zisapel's own sale of Ceragon stock at a price far in excess of where the stock trades today. "The targeted directors are (or were for a long time) related to the RAD group and investors may question to what extent they would challenge the company's chair/co-founder; the founder and the three directors represent a majority of the board." Aviat's Smith, meanwhile, said, "Aviat's revised premium proposal announced on August 2 to acquire Ceragon for $3.08 per share – including $2.80 per share in cash and $0.28 in equity consideration of Aviat stock – represents a tremendous premium of 47% to the closing price of Ceragon shares on June 27, 2022, and provides a balance of immediate and long-term value, allowing shareholders of both Aviat and Ceragon to benefit from the significant upside of the combined company. Based on Ceragon Board's refusal to date to work towards a negotiated transaction, we fear that shareholders stand to lose this premium offer if ALL FIVE of the Aviat nominees are not elected."

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8/10/2022

Analysis: Florida Governor's Bid for Conservative Pension Bloc Faces Hurdles

Reuters (08/10/22) Kerber, Ross

Florida Gov. Ron DeSantis wants pension plans in conservative U.S. states to fight shareholder environmental, social, and governance (ESG) resolutions at corporate shareholder meetings. State and local defined-benefit pension plans have more than $5.7 trillion in assets under management. Forming a bloc of such plans is difficult, as Republican-controlled state retirement systems have voted differently on the same issue and have oversight structures that limit efforts to influence voting. Public funds also rarely invest the most in U.S. companies. Although DeSantis' office has said he intends to propose legislation to counter ESG factors in investing, no details on how that might impact proxy votes are forthcoming. Past voting patterns suggest the governor's theory has credence, with Insightia noting Florida's State Board of Administration (SBA) and Texas' Teacher Retirement System were less likely to support ESG shareholder resolutions versus funds in some Democrat-led states. Yet both systems nevertheless supported the bulk of ESG resolutions this year. Most shareholder ESG proposals are not binding, but some have attracted considerable interest at corporate annual meetings. Both the Florida and Texas pension funds sided with ESG-supportive investors in urging Costco Wholesale Corp. (COST) to establish emission-reduction targets and asking McDonald's Corp. (MCD) to review its effects on issues like racial inequality. Conversely, SBA supported and Texas opposed a resolution requesting Nextera Energy Inc. (NEE) publish directors' gender and race or ethnicity. Richard Fields at Reynolds Associates says such divergence indicates the funds would have to radically change their approach to proxy voting to support DeSantis' agenda. "Part of the challenge is pension funds are managed a little bit differently in different places," adds New York City Comptroller Brad Lander.

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8/9/2022

Nearly Half of SPACs Are Likely to Liquidate if SEC Rules Are Adopted

Institutional Investor (08/09/22) Celarier, Michelle

A new report from SPAC Insider indicates that nearly half of special purpose acquisition companies (SPACs) still seeking a merger partner could be forced into liquidation under proposed rules from the U.S. Securities and Exchange Commission (SEC). The SEC rules would require a SPAC to announce a deal within 18 months from the date of its IPO and close within 24 months to avoid falling under the Investment Company Act of 1940. "As investment companies, their activities would be severely restricted and subject to very burdensome compliance requirements," said Kristi Marvin, founder of SPAC Insider and author of the report. "Those requirements can get quite expensive, and most SPACs do not have the funds available to pay for it." She noted that "liquidating would be the most palatable and likely solution in that situation." SPAC Insider says there are 141 SPACs that have been searching for a partner for 18 months, and that figure will jump to 256, or 44% of the 576 SPACs seeking a merger partner, by September. Ten SPACs that went public in 2020 and 2021 have been liquidated so far, with the biggest being Bill Ackman's Pershing Square Tontine Holdings. Ackman cited the uncertainty around the SEC's proposal as one of the reasons for the liquidation. With $80.6 billion in capital up for potential liquidation, Marvin said, "It's hard to say how much of a risk this rule is to SPACs, but it's still a risk with consequences. Either way, we're at the top of the ferris wheel right now and it's either going to be a pleasant ride down or shut the eyes and hold on tight."

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8/9/2022

Nielsen Postpones Court and Special Meetings of Shareholders to Permit Finalization of Preliminary Agreement Between Consortium and WindAcre

PRNewswire (08/09/22)

Nielsen Holdings plc (NLSN) has announced that the court meeting and the special meeting of its shareholders due to be held today have been postponed. The purpose of the meetings was to consider and vote on proposals to give effect to the transaction contemplated by the previously announced definitive agreement for the company to be acquired by a private equity consortium composed of Evergreen Coast Capital Corp., an affiliate of Elliott Investment Management L.P., and Brookfield Business Partners L.P. together with other institutional partners. The meetings have been postponed to allow the consortium to seek to finalize a preliminary agreement with The WindAcre Partnership LLC, the beneficial owner of approximately 27% of Nielsen's ordinary shares. Under the preliminary agreement, WindAcre would join the consortium with respect to a portion of its shares and would receive $28 per share—the same price to be paid to all other shareholders—for its remaining shares. Although there can be no assurance that the preliminary agreement will be finalized, assuming it is finalized, the company will supplement its proxy statement to reflect the terms of the agreement between the consortium and WindAcre and will present the transaction to shareholders for approval as expeditiously as possible. Nielsen and the consortium remain bound by the terms of the definitive agreement to give effect to the proposed transaction, and Nielsen's board of directors has made no change to its recommendation that its shareholders vote in favor of all of the proposals at the meetings to approve and give effect to the proposed transaction.

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8/9/2022

Indaba Issues Letter to Tabula Rasa’s Independent Directors Regarding Their Apparent Prioritization of the Knowltons’ Interests Over Shareholders’

Business Wire (08/09/22)

Indaba Capital Management L.P., which is the largest shareholder of Tabula Rasa HealthCare Inc. (TRHC) with an ownership interest of approximately 25% of the company’s outstanding shares, today issued an open letter to the independent members of the company’s board of directors: Samira K. Beckwith, Jan Berger, MD, MJ, Dennis K. Helling, PharmD, ScD, Kathy O’Brien, Michael Purcell, and Rear Admiral Pamela Schweitzer, PharmD (retired). The letter states: "As you know, Indaba is Tabula Rasa’s largest shareholder by a significant margin and holds more than seven times the number of shares owned by the current Board. While we prefer to have a constructive, private dialogue with you, your apparent disregard for sound corporate governance and unwillingness to substantively engage with us forces us to once again make our concerns public. Today, we are writing to demand answers to the following questions: Why are you refusing to directly engage with us despite our substantial shareholdings, valid concerns, and willingness to collaborate on a necessary Board refresh? Why did you feel it was appropriate to dilute shareholders in order to issue more equity to Chief Executive Officer and Chairman Dr. Calvin H. Knowlton, President and Director Dr. Orsula V. Knowlton and their relatives—especially given shareholders’ resounding 'withhold' votes against the Knowltons and opposition to the executive compensation proposal at the 2022 Annual Meeting of Shareholders? Why are you unwilling to reduce the boardroom influence of the husband-and-wife management team by demanding the resignations of the Knowltons from the Board? You approved a term sheet from Indaba that provided for their resignations earlier in the summer. While Mr. Tunstall’s and Ms. Beckwith’s apparent intransigence can be explained by their conflicts and historical interlocks to the Knowltons, we cannot understand why the rest of you continue to ignore the highly problematic governance issues plaguing the Company today." The letter goes on to question the board members' independence.

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8/9/2022

U.S. Utility MDU Resources Backs Its Strategy After Meister's Corvex Takes Stake

Reuters (08/09/22) French, David; Herbst-Bayliss, Svea

MDU Resources Group (MDU) is confident in its current strategy, the company said on Tuesday, after Corvex Management unveiled a nearly 5% stake in the U.S. utility. Corvex, which is controlled by Keith Meister, said in a regulatory filing late on Monday that it bought shares in MDU as it believes the stock is undervalued. Corvex also wants to discuss strategic options with the board and management and other measures to improve the company's valuation. Last week, MDU said it would separate its construction materials unit, Knife River Corporation, into a separate public company, with shares in the new entity to be distributed to MDU shareholders. The company's stock price has dropped 10% in the last 52 weeks but investors reacted positively to news of the planned separation. In the Monday filing, Corvex called the plan to spin off Knife River a "positive first step." But Corvex also said it plans to engage with the company about additional strategic alternatives at MDU to enhance the earnings potential of the company. An MDU spokesperson said the company was aware of Corvex's recent investment in the company and while it welcomed engagement from shareholders, it was confident in its current strategic direction. Corvex has been a regular investor in U.S. utilities in recent years. In October 2020, Corvex pushed Exelon Corp. (EXC) to separate its regulated and unregulated power businesses, a move Exelon completed in February.

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8/8/2022

Could a Tough Macro Environment Speed Up Western Digital's Breakup?

MarketWatch (08/08/22) Rogers, James

Western Digital Corp. (WDC) is mulling a breakup of its hard disk drive (HDD) and flash businesses in the midst of a volatile macroeconomic environment. The company recently posted lower fourth-quarter sales and profit compared with the same period last year, due to a decline in its HDD business. Western Digital's sales and adjusted earnings guidance came up short of analysts' expectations, although shares rebounded 1.9% Monday after closing down 5.7% at $47.09 on Friday. The stock has decreased 26.4% this year, versus the S&P 500 index's 12.2% decline. Earlier this year Western Digital announced it would consider a breakup as part of a settlement with Elliott Management Corp., while in June the company said it is weighing potential strategic alternatives such as splitting its flash and HDD businesses. Prior to the issuance of Western Digital's fourth-quarter report, Stifel (SF) said turbulence could expedite the breakup, which the investment bank and Elliott view as beneficial. Stifel reiterated this in a note following the company's results, adding that Western Digital's outlook was more depressed than it had anticipated. "In both HDD and flash, the problems are primarily in the Client and Consumer segments, and we think it will take a few quarters before a correction is complete," wrote Stifel analyst Patrick Ho. Stifel downgraded its Western Digital price target to $70 from $77 but maintained its buy rating. During a conference call to discuss quarterly results, Western Digital CEO David Goeckeler said the company would not be answering any questions on its strategic review, raising the "ongoing nature and confidentiality" of the process, adding that it will provide updates in the future, "as appropriate." Mizuho Securities (MFG) underscored headwinds around NAND flash, noting that a breakup of Western Digital would be a positive. "Despite SIGNIFICANT idiosyncratic NAND headwinds, we believe there is potential to unlock value via an activist shareholder and NAND separation," wrote Mizuho Securities analyst Vijay Rakesh.

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8/8/2022

ISS Recommends Rocky Mountain Chocolate Factory Stockholders Vote FOR AB Value-Radoff Group's Nominee on the BLUE Proxy Card

Business Wire (08/08/22)

AB Value Management LLC and Bradley L. Radoff, who own approximately 17.6% of the outstanding shares of Rocky Mountain Chocolate Factory (RMCF), have announced that Institutional Shareholder Services (ISS) has recommended the company's stockholders vote on the BLUE proxy card to elect the AB Value-Radoff Group's independent nominee. In a report, ISS affirmed the case for additional boardroom change at Rocky Mountain and agreed with the AB Value-Radoff Group's concerns regarding the incumbent board's recent behavior. ISS stated in the report, among other things, “The board's backhanded endorsement of the dissident's recommendation that it add a female director with franchising experience, along with the fact that the company still has some way to go to overcome the operational issues that led to last year's contest, underscore that change is preferable to the status quo.” It added, “In choosing to expand the board and appoint a seventh board member after the meeting, the board is depriving shareholders of the opportunity to vote on a director's candidacy in a contested election.” The AB Value-Radoff Group commented: “We are pleased that ISS has recognized the need for change in Rocky Mountain's boardroom following continued financial underperformance and abysmal corporate governance. .... We strongly believe the best path to preserving and maximizing stockholder value at Rocky Mountain is by adding one of our proposed candidates to the board. As we have publicly reiterated already, we remain willing to work with the board to reach a good faith settlement despite its recent unprofessional behavior.”

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8/6/2022

Taiwanese Apple Supplier Battles Argyle Street Management Over $4 Billion Cash Pile

Financial Times (08/06/22) Kinder, Tabby

Taiwan-based Apple (AAPL) supplier Catcher Technology (2474) is fighting international investor Argyle Street Management over its $4.2 billion cash reserves. Sources say Hong Kong-based Argyle is pushing the company to improve its governance and return some of its cash pile to investors. Argyle owns about 1% of Catcher's shares and joins a number of foreign institutional shareholders. Global investor interest in Taiwan has grown in recent years, with foreign direct investment rising 275% to a 15-year peak of $8 billion in the first half of this year. Yet the island nation's tech-reliant stock market has suffered following a sell-off by global funds and concerns of a recession in the U.S. Two people said Argyle has claimed Catcher's management has been "hoarding cash" in order to support a "bloated" executive hierarchy. The company has a market capitalization of around $4 billion on Taiwan's stock exchange, and is run by three brothers of the Hung family, who are also board directors. Argyle alleges that, despite Catcher's divestment of one of its primary revenue generators in 2020, the company has paid a "low" dividend of NT$10-NT$12 per share for the past five years, totaling NT$42.95 billion ($1.43 billion), with plans to maintain that dividend level for the next three years. The Hung family owns about 15% of Catcher shares, while foreign institutions control about 43%. Catcher said it was "currently in the stage of business transformation" and was diversifying into manufacturing automotive parts and medical technology. "The cash position we kept is mainly for investment opportunities," the company said. "We pay at least 50% of earnings as cash dividends. The cash dividends we've paid each year over the past five years is literally equivalent to our paid-in capital, essentially above market average." Members of Catcher's research and development team were part of a group that Taiwan prosecutors charged with breach of trust and taking commercial secrets for use overseas in July. At the time, Catcher stated that it "co-operates with the investigation and follows judicial procedures and judgments."

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8/5/2022

Suncor Energy Interim CEO Sees Mandate for Change After Safety Problems

Reuters (08/05/22) Nickel, Rod

Kris Smith, interim CEO of Canada's Suncor Energy (SU), announced a mandate to remedy the oil-producing company's poor safety and operating performance, even as the board seeks a permanent CEO. On a quarterly conference call, he mentioned plans to revamp the company's processes, noting, "We can't stand still. I have the full support of the board to drive the changes necessary." Former CEO Mark Little resigned after the latest in a series of deaths at Suncor sites, on top of operational problems dogging production. Smith said Suncor had already evaluated the problems at its oil sands mining sites, and is concentrating on risks including contact between vehicles and work around water. "We're clear on what we need to do to improve our safety performance," he explained. "We do not need more diagnosis, but what we do need to do is execute." Suncor reached a deal with shareholder Elliott Investment Management last month, appointing three new independent directors and initiating a review of its fuel retail business. Company shares inched up, but trailed bigger gains by competitors. According to Smith, Suncor will engage more with front-line employees about the necessary changes. The company has previously said it would invest in technology to prevent collisions of mobile equipment and better deal with worker fatigue. Meanwhile, Suncor lowered its full-year production guidance on Thursday, and Smith said operational problems at Base Plant are persisting into the current third quarter. Still, the company saw its second-quarter profit more than quadruple on Thursday, thanks to a rebound in commodity prices.

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8/3/2022

PayPal Earnings Packed in Much More Than Just Numbers

MarketWatch (08/03/22) Bary, Emily

PayPal Holdings (PYPL) delivered a packed earnings report Tuesday, announcing a new chief financial officer, buyback authorization, and cost-savings program, while also confirming that Elliott Management Corp. has taken a stake in the company. Additionally, the company topped expectations with its second-quarter financial results while delivering a mixed update on guidance for the full year. PayPal shares jumped 11% in after-hours trading Tuesday, after rocketing to their best day in two years last week amid reports that Elliott had taken a stake in the business. Elliott confirmed the involvement in Tuesday's report, just as the investor did Monday with Pinterest (PINS) as it reported earnings. “As one of PayPal's largest investors, with an approximately $2 billion investment, Elliott strongly believes in the value proposition at PayPal,” Elliott Managing Partner Jesse Cohn said in a statement included in PayPal's release. “PayPal has an unmatched and industry-leading footprint across its payments businesses and a right to win over the near and long term.” He added that PayPal's report “highlights a number of steps that have been underway and are being initiated to help realize the significant value opportunity” in the business. PayPal Chief Executive Dan Schulman shared on PayPal's earnings call that his team and the Elliott team were “completely aligned in our mutual goal to maximize shareholder value and we are substantially aligned on the areas of focus for achieving our objectives.”

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8/3/2022

ISS and Glass Lewis Recommend Catalyst Stockholders Vote 'FOR' All of the Company’s Nominees on the WHITE Proxy Card

Globe Newswire (08/03/22)

Catalyst Biosciences Inc. (CBIO) has announced that proxy advisory firms Institutional Shareholder Services Inc. and Glass Lewis have recommended that Catalyst stockholders vote for all of the company’s nominees on the white proxy card in advance of Catalyst’s upcoming 2022 Annual Meeting of Stockholders, scheduled to be held on August 15, 2022. In its report, ISS specifically noted: “In light of the board's success at selling the complement portfolio for more than the market's expectations, and its commitment to make an initial cash distribution to shareholders following the resolution of the dissident's proxy contest and litigation, shareholders appear to be best served by encouraging the board to continue pursuing its existing plan.” Further, “[T]he presence on the board of two independent directors appointed as part of a settlement with the dissident in 2020 (one of whom, [Dr. Geoffrey] Ling, was selected by the dissident), and the addition of a shareholder representative as an observer, appear to be sufficient safeguards to allow the incumbent directors to proceed with their stated plan.” In addition, “[I]t is preferable to allow the incumbent board an opportunity to continue with its plan to return available cash and attempt to monetize remaining assets over the next year.” In its report, Glass Lewis specifically noted: “Given that the board has already implemented (or committed to substantially implement) the Dissident’s core suggestions for the Company, we believe there is insufficient basis to support the Dissident’s campaign for further board seats at this time.” Further, “We also agree with the board that the Dissident Nominees lack both relevant industry-specific experience and sufficient independence from the Dissident.” In addition, “[B]ased on the biographical information presented by the Dissident, it’s unclear to us whether the Dissident Nominees have any substantive experience at other firms that could be viewed as a close parallel to the Company’s current situation (i.e., situations involving the successful divestment of assets and a significant return of capital to investors).”

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8/3/2022

SPAC Market Hits a Wall as Issuance Dries Up and Valuation Bubble Bursts

CNBC (08/03/22) Li, Yun

The special purpose acquisition company (SPAC) boom has stopped, with CNBC calculations of SPAC Research data showing not one SPAC was issued last month. Investors have shunned speculative high-growth equities lacking proven track records after many firms fell short of forecasts. Meanwhile, regulators began investigating transactions that draw investors with forward-looking statements after a surge in 2020 and 2021 created over 600 SPACs seeking targets before that surge ended. "I think that was a once-in-a-lifetime experience just like during the internet bubble," explained University of Florida finance professor Jay Ritter. "A year ago, the whole market was overpaying and now we have a reset. Giving a valuation of $500 million on a zero revenue company...those days are gone." The absurdity of SPAC valuations at the height of the boom was illustrated by Nikola's (NKLA) recently announced $144 million all-stock purchase of Romeo Power (RMO), representing about 10% of Romeo Power's valuation when it merged with a SPAC hardly two years ago. Accompanying the drying-up of issuances is an increase in liquidations amid problems with finding suitable companies. Three deals were tabled in July, including Bill Ackman's $4 billion Pershing Square Tontine (PSTH), raising total liquidations to 10 this year. Only one SPAC was liquidated last year. "We expect the acquisition landscape to remain highly competitive, and caution that many SPACs are likely to be pressured on time to find suitable targets," said Barclays' (BCS) Venu Krishna.

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8/2/2022

AB Value-Radoff Group Reiterates Commitment to Reaching a Good Faith Settlement at Rocky Mountain Chocolate Factory

Business Wire (08/02/22)

AB Value Management LLC and Bradley L. Radoff, who own approximately 17.6% of the outstanding shares of Rocky Mountain Chocolate Factory Inc. (RMCF), have issued a statement, saying, “We are extremely dismayed that the Board attempted to derail an agreed upon settlement – with the Company’s largest stockholder – by issuing an unprecedented press release rather than attempt to have a private conversation with us. The Board chose to set a new standard for low-road tactics in an election contest. We hope the Board finally begins to reflect on its obligations and shortcomings. We recently sent the Board a private communication to make it aware of concerning information pertaining to previously undisclosed matters about the past employment of the Chair of the Audit Committee. We cannot help but question if yesterday’s public missive was retaliation for us raising justified concerns about the leader of a key committee that is responsible for the Company’s financial integrity. Despite the Board’s scorched earth tactics, we still honored its request for a ‘good faith proposal’ last night and are now awaiting a response. We put forth a new highly qualified female director candidate with corporate governance acumen, food sector expertise and franchise experience. Our new candidate – who is completely unaffiliated with our group and respective organizations – also has public company board experience and strong knowledge of the U.S. and Canadian consumer markets. Assuming the Board will add this objectively stellar candidate, we are ready to agree to the other settlement terms that our group previously accepted. In our view, it would only validate the need for sweeping change atop Rocky Mountain if the Board continues to make a mockery of shareholder democracy and rejects yet another strong female candidate.”

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8/2/2022

HSBC Investor Starts Group to Rally Support for Ping An Plan

Bloomberg (08/02/22) Wee, Denise

Ken Lui, an HSBC Holdings (HSBC) shareholder and founder of the Hong Kong Investor and Entrepreneur Institute, is convening a group to push for the spinoff of the lender's Asia business, adding to pressure on the bank ahead of a meeting with investors on Tuesday. Lui is seeking to build on an effort from 2020 when he gathered about 3,000 local investors to protest HSBC's move to stop paying dividends as the pandemic erupted. “We are trying to engage the same group of people and also, of course, we welcome new shareholders as well,” he said. Lui's efforts back then, as the convener of HSBC Shareholders Alliance, were ultimately unsuccessful as the bank heeded calls by UK regulators to skip dividends. He's now getting behind a plan by HSBC's largest single investor, Ping An Insurance Group (PNGAY), to split up the lender. HSBC on Monday pledged to return to paying quarterly dividends next year as it seeks to head off the call to split up. The bank's Chief Financial Officer Ewen Stevenson also said it's hard to find value for shareholders in a potential split. Lui said a split would make it easier for HSBC to navigate the rising tension between China and the West. “On one hand, in Asia they have to live by the rules and regulations in China, but in the UK they have to face regulations from the UK government,” he said. “This creates risk for both HSBC and the shareholders.” So far, none of HSBC's biggest shareholders have come out publicly in support of Ping An's proposal.

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8/2/2022

HSBC Seeks to Placate Hong Kong Investors After Rejecting Break-up Call

Reuters (08/02/22) Li, Selena; Daga, Anshuman

HSBC Holdings' (HSBC) bosses met retail investors in Hong Kong on Tuesday, telling them that a strategy to operate as a unified bank is better for its future than a break-up mooted by top shareholder Ping An Insurance (PNGAY). At a meeting attended by hundreds of shareholders, management of the bank were quizzed by investors on its strategy for dividends and growth. "Our strategy which is now two and half years into execution should put the bank on the path to deliver returns in 2023 at a level we have not achieved in the last 10 years," Chair Mark Tucker said. "This return should help drive and increase the share price and have a positive impact on the dividend." The meeting was held a day after HSBC rejected the break-up call. Ping An, which has been building a stake in HSBC since 2017, owned 8.23% of the bank as of early February. Hong Kong retail shareholders have been particularly unhappy about HSBC scrapping its dividend in 2020 during the pandemic, following a request to lenders by the Bank of England. A Hong Kong politician has even urged HSBC to appoint Ping An's representatives to its board and move its headquarters back to Hong Kong. "We do worry if the Bank of England will order HSBC to suspend dividends again in the next wave of the pandemic," Christine Fong, a district council member in Hong Kong who was set to attend the meeting with HSBC, said. "If HSBC returns to Hong Kong, it will be less affected by UK political factors and regulation." In 2016, HSBC decided to keep its headquarters in London, rejecting the option of shifting it back to Hong Kong after a review.

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8/2/2022

Tesla Investors Urged to Vote Against Board Members, for Shareholder Proposals by Influential Advisory Services

MarketWatch (08/02/22) Sumagaysay, Levi

Glass Lewis & Co. and Institutional Shareholder Services (ISS) are urging Tesla Inc. (TSLA) investors to oppose the re-election of two board directors, as well as to vote for six out of eight shareholder proposals. The electric-car maker's general annual meeting is Aug. 4. Tesla is asking shareholders to re-elect Ira Ehrenpreis and Kathleen Wilson-Thompson this year, but ISS and Glass Lewis are against it because as members of the company's nominating and governance committee, they did not implement a shareholder proposal that most shareholders approved in 2021. The proposal recommended restructuring all board members to one class, with each director requiring annual election—but Tesla is proposing that the term a director serves be trimmed from three years to two years. "If our stockholders approve Proposal Two at the 2022 Annual Meeting, the Board will thereafter be divided into two classes with staggered two-year terms, with directors distributed as equally between them as is possible," the company asserted in its proxy. Glass Lewis and ISS were unhappy with this response, noting in their proxy research papers that Tesla fails to address the shareholder vote on declassification, nor does it give a reason why it is ignoring the will of most investors. "We believe this is a failure on the part of the nominating and corporate governance committee to fulfill its obligations to shareholders," Glass Lewis declared. Meanwhile, Glass Lewis and ISS are urging approval of proposals that include shareholder proxy access, yearly reporting on antiharassment and discrimination initiatives, disclosure on employee arbitration, reporting on lobbying, adoption of a policy on freedom of association and collective bargaining, and additional disclosure on water risk. Glass Lewis notes in its report that Tesla has faced "more than 40 lawsuits from former and current employees alleging that it fosters a sexist and racist work culture" in the past five years, while CEO Elon Musk is also facing accusations of sexually harassing an employee of SpaceX, where he is also CEO. ISS said Tesla currently is facing at least seven sexual-harassment suits, plus allegations of racial discrimination, including litigation by the California Department of Fair Housing and Employment and a probe from the Equal Employment Opportunity Commission. "Investors would benefit from additional information to understand how the company is managing and mitigating associated risks," ISS notes. Glass Lewis and ISS cited these actions against Tesla in recommending that investors also support a proposal from Nia Impact Capital to detail the effects of the company's mandatory-arbitration policies. Tesla said in its proxy that its "standard arbitration provision specifically states that the parties are entitled to all remedies available in a court of law." Another employee-related investor proposal supported by the advisory firm calls for Tesla to embrace a policy on freedom of association and collective bargaining, which would certify unions' right to organize.

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7/30/2022

Opinion: Elliott Snaps Up an Interest in PayPal. This Is What Could Be Next for the Payments Giant

CNBC News (07/30/22) Squire, Kenneth

Elliott Management has acquired an undisclosed material stake in PayPal Holdings (PYPL), according to the Wall Street Journal. 13D Monitor President Kenneth Squire writes that this aligns with past strategies by Elliott to invest in ailing businesses. "PayPal is down more than 70% from closing as high as $308.53 just over a year ago," he notes. "While that is primarily due to a sell-off in growth stocks, there is an opportunity here to improve margins as the company's sales, marketing, research and development expense levels are higher compared to those of its peers—even double the levels at some of those companies." Elliott is better known for pushing for mergers and acquisitions at its portfolio companies, and "has had its best returns buying portfolio companies, fixing them, and selling them," according to Squire. "However, at a $99 billion market cap, PayPal is likely too big for them to do that, even with a partner. A more likely scenario is that the firm encourages PayPal to explore strategic alternatives around Venmo or Braintree or acquire other companies that would have synergies with PayPal's core business." Squire suggests Pinterest (PINS) as a possibility, noting Elliott has a roughly 9% ($1 billion+) stake in the company. "Encouraging PayPal to acquire Pinterest could be a win-win situation for Elliott," he writes. Squire adds that, based on its history, Elliott's PayPal interest is probably in the 1% to 2% range, "primarily in swaps and other derivatives, which do not have the same disclosure requirements as common stock."

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7/29/2022

UK Companies May Face 'Action' if They Downplay Climate Risk, Watchdogs Say

Yahoo! Finance (07/29/22) Jones, Huw

Some of the biggest companies in the United Kingdom could be downplaying risks from climate change on their bottom line and could face "appropriate action." Companies listed on the London Stock Exchange's premium market have been required since 2021 to make climate-related disclosures to investors in line with the global Taskforce on Climate-related Financial Disclosures (TCFD), or to explain why they have not. The UK Financial Conduct Authority (FCA), which regulates listings, and the Financial Reporting Council (FRC), the UK audit watchdog, published reviews on Friday regarding how companies have applied TCFD so far. The FRC said it found companies were providing many of the TCFD disclosures, marking a significant improvement on previous years, but more needs to be done. As a first step, regulators are likely to ask some companies why some disclosures were missing or too vague, or why they were stressing opportunities from climate change but giving little detail on risks to the business. "We also encourage companies to look ahead to the future implementation of reporting standards in development by the International Sustainability Standards Board (ISSB)," said Sacha Sadan, director of environment, social, and governance at the FCA. Britain is expected to switch from using TCFD disclosures to those now being written by the ISSB. The FCA said it expects to consult on migrating from TCFD to ISSB standards and whether it would be appropriate to make disclosures mandatory by going beyond the current "comply or explain" system.

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7/28/2022

BlackRock Backs Lower Percentage of Proxy Proposals

Barron's (07/28/22) Foster, Lauren

BlackRock (BLK) this week issued a report indicating it had supported 24% of environmental and social shareholder proposals in the U.S. this year, versus 43% last year. Lindsey Stewart, director of investment stewardship research at Morningstar (MORN), says the decline is unsurprising, as BlackRock declared in May that it was "likely to support proportionately fewer [shareholder resolutions] this proxy season than in 2021" because of an increase in the number of proposals perceived as inappropriately prescriptive. "The result coming out of BlackRock isn't terribly radical in the context of what's happened across the wider market," Stewart explains. "You've seen the average level of support drop from about one third into the high 20s in percentage terms from the 2021 proxy year up to the 2022 proxy year. BlackRock's actions seem to be in line with that." BlackRock says in its 2022 voting summary that it observed "a 133% increase in the number of environmental and social (E&S) shareholder proposals, many of them more prescriptive than in prior years." Saturna Capital President and CEO Jane Carten says BlackRock's disclosure "can't be extrapolated into an overall statement," adding, "the variables to consider don't remain constant from year to year, and BlackRock's own report notes that in real numbers, they voted for 10 fewer environmental and social proposals in the last year over the previous year." Meanwhile, As You Sow CEO Andrew Behar says "investors are disappointed to see BlackRock backpedal on their support for climate change shareholder proposals in 2022, claiming that they were too 'prescriptive.'" He continues that "these resolutions are the appropriate investor response to inadequate corporate action on carbon-emission reductions and lack of accurate scope 3 disclosure," which "align precisely" with BlackRock CEO Larry Fink's 2020 letter and statement that "climate risk is investment risk." Behar further argues, "In this time of increasing risk, global heat-waves, droughts, ice-shelf collapse, and climate refugees, BlackRock has shrunk from its leadership position." A BlackRock spokesman cited the foreword in a report by Sandy Boss, the firm's global head of investment stewardship. "In keeping with our investment convictions, our view continues to be that the best economic outcomes for our clients will come through an orderly energy transition by companies that recognizes the needs of their consumers and other key stakeholders," Boss writes. "In our work engaging with companies, and, where clients have tasked us with it, casting proxy votes, our work on climate-related issues remains unchanged in focusing on the material risks and opportunities that the energy transition poses."

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7/28/2022

Indaba Capital Delivers Demand for Inspection of Books and Records of Tabula Rasa HealthCare, Pursuant to Section 220 of Delaware Law

Business Wire (07/28/22)

Indaba Capital Management L.P., which is the largest shareholder of Tabula Rasa HealthCare Inc. (TRHC) and beneficially owns approximately 25.2% of the company's outstanding shares, has announced that pursuant to Section 220 of the Delaware General Corporation Law, it has requested that Tabula Rasa make available for inspection and copying the books and records of the company pertaining to the following: Chief Executive Officer and Chairman Calvin H. Knowlton’s and President and Director Orsula V. Knowlton’s share pledges and forced sales; financial results and guidance; directors’ adherence to the company’s insider trading policy; the Company’s agreement with Hope Healthcare Services, where director Dr. Samira K. Beckwith serves as President and Chief Executive Officer; Lead Independent Director A. Gordon Tunstall’s share sales, and; potential conflicts of interest involving officers and/or members of the board of directors and the company’s governance policies. Based on interactions with the board, information included in the company’s public filings, and other publicly available information, Indaba believes this books and records request is critical to protect shareholders’ best interests, stating, "As noted in our July 20, 2022, letter, Indaba has significant concerns regarding the independence of the directors and their apparent deference to conflicted insiders, particularly the Knowltons. Indaba questions how the Board can effectively oversee the husband-and-wife management team when its independent directors seem to have conflicts of interest, including Mr. Tunstall’s long-standing ties to the Knowltons and Dr. Beckwith’s role as the President and Chief Executive Officer of Hope Healthcare Services, a customer of the Company. Indaba has also identified questionable trading patterns by both the Knowltons and the Board’s lead independent director, Mr. Tunstall, in which sizable sales or pledging arrangements seem to have occurred shortly before or after changes to the Company’s guidance. Notably, we find it appalling that the Company has been unwilling to have any substantive interaction with Indaba over the past month, even as we have become the Company’s largest individual shareholder by a substantial margin. This is the case despite us being informed that all of the Board’s independent members recently voted in favor of a settlement term sheet proposed by Indaba. Accordingly, the Books and Records request will allow Indaba to investigate potential misconduct and assess individual directors’ independence, adherence to internal policies and performance of the Board and/or management’s fiduciary duties. As stated in our letter to the Company’s independent directors last week, we urge them to act with urgency and finally work with us in good faith to address shareholders’ concerns. We are committed to doing everything in our power and spending as much time as necessary in order to facilitate change atop Tabula Rasa.

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7/28/2022

Positive ESG Performance Improves Returns Globally, Research Shows

Reuters (07/28/22) Horton, Cole; Jessop, Simon

Sustainability data firm ESG Book reports that stock funds outperformed across global markets over the last five years when weighted toward companies with positive environmental, social, and governance (ESG) scores. Analysis of model portfolios holding 60 to 85 stocks on average showed variable performance according to individual ESG components, with companies with higher governance scores outperforming more strongly than those with higher social scores. The best regional performer was a model portfolio of European stocks skewed toward ESG leaders, seeing an annual average return 1.59% above its unweighted benchmark from January 2017 through April 2022. A similarly organized portfolio of Asia-Pacific companies followed closely, overtaking its benchmark by an average of 1.02% annually. North American and global portfolios showed marginal outperformance, with excess returns of 0.17% and 0.13%, respectively. This year has tested sustainable investors due to a decline in tech stocks and a rally in energy stocks, causing many ESG equity funds to underperform, but ESG Book's report supplements mounting evidence that ESG can still fuel outperformance across extended periods. "Over a long-term horizon, regardless of region, there are benefits and better risk-return profiles," said ESG Book's Todd Bridges. Concurrently, ESG Book found wide performance disparities when model portfolios were structured around individual ESG governance components. For example, portfolios skewed toward companies with strong corporate governance metrics topped their benchmarks across the four analyzed regions, with average annual outperformance as high as 2.17% in Europe. "It's a very uniform signal that markets understand the importance of governance and have been seeing it as a value creator," Bridges noted. Meanwhile, preference toward companies with high social scores caused underperformance in the North American and global portfolios, but outperformance in Asia-Pacific and Europe. "The markets are confused as to what it is, how to measure it, and how to determine performance implications," Bridges said. ESG Book CEO Daniel Klier observed slightly more agreement concerning the value of environmental factors, as companies aim to quantify and reduce their climate-related risks. Companies with high environmental metrics scores contributed to outperformance in all but the global category, where performance was impeded by exposure to emerging markets, trailing its benchmark by an average 0.82% annually. Klier said this variability in performance indicates why singular ESG ratings combining all three elements into a single score can be "meaningless" to investors. "Unless you unpack a single score into the drivers, you will never get to the bottom of what's driving performance," he concluded.

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7/25/2022

Companies Urged to Use Technology to Improve AGM Engagement

IR Magazine (07/25/22) Human, Tim

The U.K.'s Financial Reporting Council (FRC) recommends that companies use technology to improve shareholder engagement at annual general meetings (AGMs). The corporate reporting watchdog says investors should be offered the same rights of participation, whether their attendance is live or virtual. It is legally unclear in Britain whether fully virtual AGMs are permissible, so companies transitioned to hybrid events; yet many opted to revert to physical-only meetings this year as social distancing rules were lifted. The FRC report argues that, for any virtual AGM component, companies should use technology that allows questions to be submitted in real time, and urges companies to open the online Q&A function at the beginning of the AGM and ensure questions are taken "from all the available channels." The agency adds that when employing a platform to manage online questions, meeting organizers should explain its workings and operate it in "a manner consistent" with any physical Q&A occurring. The FRC further suggests companies consider answering questions prior to the AGM via an online Q&A or webinar so investors can make better-informed voting decisions. The regulator explains that an individual approach to the AGM, including the selection of technology, is necessary because companies have different shareholder bases. "With this new guidance, we want to encourage companies to seize the opportunity to maximize shareholder engagement by embracing new technologies," says FRC CEO Jon Thompson. "We also recognize that there are many benefits of physical meetings, allowing for more effective in-person dialogue, so companies should think carefully about which approach is right for them and their shareholders."

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8/12/2022

Opinion: Richemont's Governance Armour Is Hard to Pierce

Reuters (08/12/22) Jucca, Lisa

Bluebell Capital's campaign for corporate governance changes at Switzerland-based luxury goods holding company Richemont looks like an uphill struggle. Under pressure from the investor, the company will allow listed A shareholders to designate a board representative at a September shareholder meeting. Yet Chair Johann Rupert's vast voting power means he may still reject outsiders. Bluebell argues, among other requests, that ordinary investors should be able to directly appoint a board member to get a bigger voice. Rupert, who owns unlisted B shares that carry 50% of the votes even though they count for just 9.1% of issued capital, can pick directors and decide strategy. Richemont's own by-laws and the Swiss civil code say holders of ordinary A shares are entitled to a representative. But this appears to have been neglected by shareholders. That will change in September, when the company will allow A shareholders to pick their own board member. The choice is between Bluebell candidate Francesco Trapani, a former boss of jeweller Bulgari, and Richemont-backed Wendy Luhabe, a current board member. Richemont has recommended shareholders vote against Trapani. However, Richemont's notice to the annual general meeting suggests the A shareholder representative will still need to be approved by a full shareholder vote. That means Rupert's unlisted B shares could still reject Trapani, provided there are valid reasons to do so. Rupert says there is no need to change Richemont's board as its discussions always take into account the interest of all shareholders.

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8/12/2022

Opinion: ESG Critics Could Be Leaving Money on the Table—and Missing an Opportunity to Make a Real Impact

Fortune (08/12/22) Rose, Jonathan

Several factors have been spurring companies to increasingly address environmental, social, and governance (ESG) factors in recent years, says Jonathan F.P. Rose, CEO of Jonathan Rose Companies. Amid recent high-profile criticisms of ESG, investors are seeking to differentiate between degenerative products—that worsen the health of people and the environment—and regenerative products, which encourage the well-being of human beings and the planet. For instance, the detrimental effects on human health from a product sold by Bayer (BAYRY) reduced the company's value by $20 billion. Investors are turning to international reporting standards to ensure the accurate and transparent assessment of their practices, such as the Sustainability Accounting Standards Board, the Task Force on Climate Related Financial Disclosures, and the Climate Disclosures Accounting Board. These need to be accompanied by sector-specific standards, such as The Global ESG Benchmark for Real Assets. Effectively planned ESG strategies can help investors curb risk and increase returns. The current criticisms of ESG will help shift investments toward the businesses that are creating the most regenerative, societal, and environmental value, with a potential to achieve long-term economic value. Investors that overlook the risk of harmful products and belittle ESG as a concept are likely to miss out on ESG's potential.

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8/11/2022

Three Important ESG Factors Reviewed for the 2022 Proxy Season

IR Magazine (08/11/22) Nagra, Nureen

The April to June proxy voting season is when many publicly traded companies host their annual general meeting and when shareholders, or their delegated proxies, vote on issues on the company’s ballot. Asset managers at mutual funds also may vote proxies on behalf of the funds’ unitholders, so proxy voting may be an important aspect to consider when selecting an asset manager. At the same time, environmental and social-related shareholder proposals are on the rise, including requests for enhanced disclosure on workforce diversity practices or climate-related risks and opportunities. Shareholders submitted an unprecedented 924 environmental, social, and governance (ESG)-related proposals to U.S. companies for the 2022 proxy voting season, according to data tracked by investor intelligence firm Georgeson. RBC Global Asset Management (RBC GAM) opts to make each voting decision independently based on its proxy voting guidelines. These custom guidelines are revised annually to reflect the company's views on trends in responsible investment and corporate governance. For instance, RBC GAM added a recommendation for boards to implement policies, goals, and timelines to enhance the diversity of boards and senior management. A 2021 report from SpencerStuart found that across S&P 500 Index-listed firms, women represented only 30% of all directorships in 2021, up from 28% in 2020. RBC GAM has also adopted a "net-zero ambition" for greenhouse gas emissions and has revised its climate change-related shareholder proposal guidelines to reflect these updates. For instance, the company expects issuers to work toward identifying and publicly disclosing material financial and strategic impacts resulting from the transition to a net-zero economy. Regarding COVID-19 and executive compensation, RBC GAM evaluated say-on-pay proposals on a case-by-case basis. The company has maintained a dedicated section in its guidelines on the impacts of COVID-19 on executive compensation, and pointed out that additional disclosure is especially needed in instances where a company made significant cuts to its workforce or furloughed employees as a result of the pandemic.

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8/10/2022

Term Limits Alone Won't Achieve Desired Board Turnover

Forbes (08/10/22) Peregrine, Michael

In a new survey, The Conference Board indicates that limited board turnover rates pose a significant obstacle to increasing board diversity in terms of backgrounds, skills, and professional experience. The survey showed that the percentage of newly elected directors in the S&P 500 and the Russell 3000 has held steady in the range of 9% to 11% since 2018, which Michael Peregrine, partner at McDermott Will & Emery, says is "not sufficient to effectively enhance demographic diversity and add relevant skills and experience." Peregrine says this is becoming a governance problem. "First, boards are increasingly seeking to add more directors with business strategy experience in order to enhance boardroom discussions and increase the role of the board as a valued partner to management. Indeed, The Conference Board data suggests that the percentage of board members with business strategy experience has been declining as boards have focused more on adding directors with functional experience in ESG areas, among other core competencies," Peregrine explains. "Second, The Conference Board notes that investors and other key third party constituent interests are increasingly focused on supporting board composition that reflects a balance of short, medium, and long tenured directors. They are also frequently opposed to directors who are over-boarded—serving on the boards of more than four major companies—for engagement and attentiveness reasons." However, he notes that term limits and mandatory retirement policies are unpopular and unlikely to overcome concerns. "Rather, as The Conference Board suggests, combining those policies along with those which address over-boarding, director evaluation, and overarching expectations of director engagement, service, and tenure, offer the twin benefits of preserving to the board some flexibility to retain existing members, while offering additional, more discretionary options by which turnover can be effected," he says.

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8/9/2022

Hidden Gems: Do Compensation Disclosures Reveal Performance Expectations?

Harvard Law School Forum on Corporate Governance (08/09/22) Fee, C. Edward; Li,Zhi; Peng, Qiyuan

New research examines whether disclosed “unearned shares” provide new information about a firm's future performance. This new disclosure was mandated by a 2006 U.S. Securities and Exchange Commission rule change that aimed to raise the standards of compensation disclosure. Researchers reviewed a sample of large U.S. public firms from 2006 to 2013 for a paper forthcoming in the Journal of Accounting and Economics, "Hidden Gems: Do Market Participants Respond to Performance Expectations Revealed in Compensation Disclosures?" The paper shows that disclosed unearned shares from performance-based stock grants reveal valid forward-looking information about a firm. Unearned shares disclosure contains unique information that is not captured by a firm's current performance, observable firm and CEO characteristics, or other known information channels. The disclosed level of unearned shares is highly correlated to firms' future performances. Investors underestimate the correlation between disclosed unearned shares and future firm performance, and are later surprised when actual performance is reported. The findings suggest that under the enhanced disclosure rule, firms, on average, truthfully reveal new information to the public and that investors could improve market efficiency if they promptly incorporated such information into asset prices.

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8/9/2022

Opinion: A Radical Plan to Curb the Lure of the U.K. Buyout

Bloomberg (08/09/22) Hughes, Chris

Chris Hughes writes in an opinion piece that a review of the U.K. Corporate Governance Code has prompted two law professors to propose its abolition, but such a measure "might not be radical enough." When launched in 1992, the code's guidelines originally sought to bolster oversight of company audits and give outside directors a wider role. Hughes notes those guidelines "have since mushroomed in response to subsequent government reviews, adding directives on pay and the broader role of non-executives." This should not be problematic, as the code consists of provisions as opposed to rules. "If companies can't comply with the precepts, they can just say why," Hughes writes. "However, those with a so-called premium listing, a requirement for inclusion in the FTSE UK indexes, must describe how they have 'applied' the code in their annual reports." Investors can rebuke boards for offending moves by defeating company resolutions on directors' pay or re-election at annual meetings. "Despite the code's optionality, there is strong market pressure to comply rather than explain," Hughes points out. "A 2019 study by auditor Grant Thornton UK LLP found that nearly three-quarters of FTSE 350 firms followed all of the directives. In practice, then, the U.K. appears to have ended up with a one-size-fits-all governance regime that lacks the intended flexibility. The Financial Reporting Council that oversees the code has slimmed and simplified it in recent years. Yet there are still some 41 provisions." This can be limiting for smaller companies that may wish to retain unconventional leadership structures, especially in terms of founders' sway. The University of Cambridge's Brian Cheffins and Bobby Reddy want the code discarded outright. "They suggest that firms could simply make disclosures about a handful of key aspects of their governance, such as directors' possible conflicts of interest," Hughes writes. However, he sees a problem in the fact that "some companies ought to be subject to tough governance without qualification. Banks, insurers, and businesses involved in public-service contracts come to mind, given their failure would have a broader impact." Some authority will need to enforce restrictions, but Hughes suggests "a simplified code, with much more explicit wiggle-room for companies that pose less risk, would be an alternative remedy." In conclusion, he writes: "Britain needs a governance regime that's tough where necessary without stigmatizing companies that have sound reasons for custom boardroom arrangements. It must also decide precisely how directors' duties beyond serving shareholders are imposed and policed. Binning the current governance code won't, on its own, do the trick."

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8/9/2022

Letter: If Ever There Was a Case for Shareholder Activism...

Financial Times (08/09/22) Harris, Dan

In a letter to the Financial Times, Dan Harris, a partner at London's Chancery Advisors, said three fundamental points have been missed in the dispute between Ben & Jerry's Homemade (BJH) and Unilever (UL) involving an intermediate holding company called Conopco. "First, it is simply beyond comprehension to the markets that BJH effectively argues that it enjoys some sort of special exemption from group governance policies. The universal expectation is that these cascade downstream," wrote Harris. "Presumably BJH intended to become a Unilever product and that is why the Unilever logo is displayed on tubs of BJH ice cream. What BJH fails to see is that biting the hand (and reputation) that feeds you is a liability and not an asset." Further, Harris noted that "any arrangement between intermediate parent and subsidiary that preserves a degree of autonomy for the subsidiary owes its existence to the law of obligations...It would be illogical if, as part of the acquisition of a subsidiary, the arrangements alienated the very asset it had acquired." In his third point, Harris wrote, "BJH's activism in what it calls the 'occupied Palestinian territories' appears to have only developed in 2019. This was almost two decades after the acquisition agreement...It is difficult to see how that term captures an ex-post facto mission." Harris concluded, "If ever there was a case for shareholder activism, this is it. If not the New York courts or mediation, Nelson Peltz's Trian fund is well positioned to 'try and' sort it out."

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8/9/2022

Japan's Corporate Governance Reform in Limbo in Post-Abe Era

Nikkei Asia (08/09/22) Obe, Mitsuru

Former Japanese Prime Minister Shinzo Abe's corporate governance reform legacy faces an uncertain future as current Prime Minister Fumio Kishida pitches a "new form of capitalism." Kishida said in a policy address in October, "It is important that companies take a long-term perspective and do business in ways that are good for everyone, in which not only shareholders but also employees and customers are able to benefit." Some investors are worried the message signals that reforms may fall by the wayside, including bringing management under tougher oversight, ending cross-shareholdings among companies, opening up Japan Inc. to takeovers, and accelerating consolidation in industries. People close to the Kishida government recognize the importance of Abe's reforms, and the need for further efforts. "It is the only thing I can point to in Abenomics...as having a significant impact 10 years later," said Ken Shibusawa, chair of Commons Asset Management and a member of Kishida's New Form of Capitalism Realization Council. "In the last 10 years, Abenomics did play a part in better corporate governance. The question then is, 'Is it enough?'" Shibusawa says the need for dialogue with shareholders is now widely understood in Japan. But greater awareness has yet to translate into a noticeable improvement in corporate performance, according to Tomohiro Ikawa, a portfolio manager and Tokyo-based head of engagement at Fidelity International. Over half the companies in the TOPIX index, the most widely followed stock market gauge in Japan, have a price-to-book ratio below one, unchanged from 30 years ago, Ikawa said. That indicates investors do not expect those companies to make sufficient returns on their capital in the future. The planned revamp of the TOPIX index could play a role. The Tokyo Stock Exchange will gradually remove companies with low market capitalizations from the index and promises public hearings on a further review of the index but has not given a date. "If the TOPIX becomes like the S&P 500 index, with fewer issues and regular reshuffles, it would take the Tokyo market to the next level," Fidelity's Ikawa said. But even enforcing changes that have already been made is proving difficult. Of Japan's 12,000 corporate pension funds, only 56 had signed the stewardship code as of the end of June, according to data from the Financial Services Agency.

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8/6/2022

Back to Basics: Board Committees

Harvard Law School Forum on Corporate Governance (08/06/22) Cooper, Natalie; Lamm, Robert; Morrison, Randi Val

Only 13% of boards added new standing committees in the past year, according to a survey of Society for Corporate Governance members representing nearly 180 public companies. Among boards that added a new committee, a technology committee was most common, while others included cybersecurity, sustainability, and environmental, social, and governance-related (ESG) committees. Fifty-five percent reported their board expanded oversight responsibilities of one or more of its standing board committees, with many citing the inclusion of ESG. Sixty-eight percent reported changes in their boards' committee composition that came about organically. Thirty percent reported they have sought or are currently seeking one or more new directors with specific expertise or skill sets related to a committee's scope of responsibility. For shareholder engagement, 68% of large-caps delegate oversight to the nominating and governance committee and 27% delegate oversight to the full board, compared to 55% and 29%, respectively, for mid-caps. For shareholder proposals, 81% of large-caps delegate oversight to the nominating and governance committee and 14% delegate oversight to the full board, compared to 63% and 32%, respectively, for mid-caps. Few respondents said the board changed delegation of oversight in the past year or were considering doing so.

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8/5/2022

U.S. Companies Are Hoarding More and More Cash Overseas

Fortune (08/05/22) Kelleher, Kevin

Cash held by U.S. companies has increased from $1.6 trillion at the turn of the century to about $5.8 trillion this year, according to Mitchell Petersen, a finance professor at Northwestern's Kellogg School of Management. The rate of increase, driven by tax considerations, concerns investors who'd rather see that money put into operations or returned to them in dividends or buybacks. The Tax Cuts and Jobs Act that went into effect in January 2018 was aimed at reducing incentives to hoarding corporate cash overseas. Instead of shifting more cash into domestic operations, however, most companies stashed even more money abroad. Cash positions of U.S. companies stood at $4 trillion in 2018, shortly after the tax reforms became law, but have since risen 48% to $5.9 trillion. While multinationals have an easier time these days repatriating overseas profits, thanks to tax reform, those with intangible assets like software IP, including tech giants, still have an incentive to hold such assets in countries with low tax rates. Companies are also waiting to see what new regulations could put the squeeze on their cash holdings. The Inflation Reduction Act before Congress would impose a minimum 15% corporate tax rate, a policy that President Biden has encouraged since taking office. Last year, the OECD finalized a tax deal in which 136 countries representing more than 90% of global GDP agreed to a minimum 15% tax rate starting next year. If regulations and laws don't help to bring money home, there's always the pressure applied from investors. It was Carl Icahn who pressured Apple (AAPL) to share some of its cash holdings with investors after complaining about the “massive amount of cash on the balance sheet.” Apple's cash on hand has fallen to $193 billion last quarter from $267 billion in 2018.

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8/4/2022

SEC Proposes to Narrow Three Substantive Exclusions in the Shareholder Proposal Rule

Harvard Law School Forum on Corporate Governance (08/04/22) Posner, Cydney

The U.S. Securities and Exchange Commission voted, three to two, to propose new amendments to Rule 14a-8, the shareholder proposal rule. The SEC is proposing to amend three of the substantive exclusions on which companies rely to omit shareholder proposals from their proxy materials. The “substantial implementation” exclusion would be amended to specify that a proposal may be excluded as substantially implemented if “the company has already implemented the essential elements of the proposal.” The “substantial duplication” exclusion would be amended to provide that a shareholder proposal substantially duplicates another proposal previously submitted by another proponent for a vote at the same meeting if it “addresses the same subject matter and seeks the same objective by the same means.” The resubmission exclusion would be amended to provide that a shareholder proposal would constitute a “resubmission” if it “substantially duplicates” a prior proposal by “address[ing] the same subject matter and seek[ing] the same objective by the same means.” Almost half of the no-action requests the SEC staff received under Rule 14a-8 in 2021 were based on these three exclusions. The SEC said the new proposal is designed to “improve the shareholder proposal process and promote consistency by revising three of the substantive bases for excluding a shareholder proposal under the rule.” However, the two dissenting commissioners seemed to view the proposed changes as an effort to undo or circumvent the balance achieved by the 2020 amendments without actually modifying those aspects of the rules.

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8/4/2022

North American Boards Lag on Executive Pay ESG Links, Survey Finds

IR Magazine (08/04/22) Maiden, Ben

A survey by IR Magazine sister publication Corporate Secretary determined that fewer boards at North American companies are tying their executives' compensation to environmental, social, and governance (ESG) than those in Europe. Sixty percent of European governance professional respondents say their board links executive compensation to ESG, versus 37% of those in North America. Investors are increasingly eager to see ESG factored into executive compensation in order to incentivize management to meet goals like improving diversity or reducing greenhouse gas emissions, which they subsequently expect to enhance financial performance or evade various risks. Worldwide, 44% of respondents say their board ties executive compensation to ESG metrics, while 45% say their board does not; 33% of respondents at small caps and 42% of those at large caps say their board links compensation to ESG, compared to 55% of those at mid-caps and 58% of those at mega-caps. Globally, 72% of respondents who note that executive pay is tied to ESG say environmental issues such as climate change, water, biodiversity, and pollution are the metric cited most often, followed by health and safety (48%); diversity, equity, and inclusion (DE&I) (44%); corporate culture (39%); supply-chain management (19%); and community relations (17%). Only 47% of North American respondents whose board links executive compensation to ESG metrics say they use environmental issues, versus 96% of European respondents. Globally, respondents at small-cap companies more often cite health and safety (73%) than their larger company counterparts, while those at mega-caps more frequently refer to DE&I (64%) than do peers at smaller issuers. Meanwhile, 60% of respondents at small-cap companies say the compensation committee primarily oversees executive compensation, compared to 90% of those at mid-cap companies. Worldwide, 75% say their board uses outside advisers on executive compensation matters, while 27% of those at mega-caps say their board's primary discussions on compensation are conducted in the first quarter of the calendar year.

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8/4/2022

Debate Looms Over SEC Shareholder Proposals Plan

IR Magazine (08/04/22) Maiden, Ben

A plan by the U.S. Securities and Exchange Commission (SEC) to update the grounds on which companies may be allowed to exclude shareholder proposals looks set to divide opinion along traditional lines. The SEC last month proposed amendments to Rule 14a-8, which governs the process for including shareholder proposals in a company’s proxy statement. The rule provides several bases on which companies can apply for no-action relief if they exclude a proposal. The proposed amendments would revise three of these bases for exclusion. The proposals follow on from the SEC’s division of corporation finance last fall updating its guidance on its process for deciding whether to give no-action relief to companies seeking to exclude shareholder proposals. The division rescinded three staff legal bulletins introduced during the previous administration in a move widely seen as making it less likely that it would grant such relief and, in turn, meaning that a wider array of environmental, social, and governance (ESG) proposals would get onto proxy statements. Industry professionals say that expectation has come true. According to a report from Proxy Impact and As You Sow, a record-breaking 529 ESG proposals were filed this year. More recently, those groups and the Sustainable Investments Institute reported that in the six months to the end of June a record-breaking 282 votes were taken on ESG shareholder proposals. Groups behind ESG-related shareholder proposals are broadly positive about the planned changes to Rule 14a-8. Issuers and their counsel who seek Rule 14a-8 relief to omit proposals are expected to be less pleased with the proposed changes.

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8/3/2022

U.S. Institutions Look for Answers as ESG Questions Mount—Schroders

Institutional Asset Manager (08/03/22)

Global asset manager Schroders (SHNWF) expects environmental, social, and governance (ESG) investment to mature and enter the mainstream this year, as it polled 770 institutional investors worldwide with $27.5 trillion in assets for its annual Institutional Investor Study. The firm said previous years' strong performance fueled ESG investment interest and appetite, with money managers reporting $28.03 trillion in global assets managed under ESG principles at the end of last year, a more than 20% gain from the year before. "However, as interest rates, inflation, and energy markets rise, and 'ESG friendly' expensive growth stocks sell off, investors are being forced to re-assess and re-define ESG investment for themselves," Schroders said. "This recalibration has brought questions surrounding performance, ESG data comparability, and investment tactics to the top of U.S. investors' minds." The issue of sustainable investment performance appears to weigh more heavily on U.S. shareholders than those elsewhere. Survey respondents also indicated that comparable data, increased transparency, and better reporting on ESG investment are necessary, as are quantitative evidence and data to support investors' comfort with ESG investing. Schroders said it is critical that transparent and comparable data is widely accessible and broadly comprehensible. When taking various sustainable investment opportunities under consideration, two-thirds of U.S. respondents said they wished to invest in funds or solutions that focus mainly on delivering financial returns while broadly integrating ESG factors, compared to the 58% global average. Institutional investors also placed greater emphasis on active ownership this year, with 35% considering it important or very important, versus 29% last year. "As the performance of naive, passive ESG strategies falters and the regulators circle the wagons, sustainable investing is at a critical juncture," said Schroders' Marina Severinovsky. "Investors are clear that they need more quantifiable evidence of the value and impact of ESG, and more clarity and transparency into how this investing is practiced and measured."

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8/2/2022

Investors Put Forward More Proposals, Dialing Up Pressure on Companies

Wall Street Journal (08/02/22) Williams-Alvarez, Jennifer

Investors are pressing for more changes at companies after the U.S. Securities and Exchange Commission (SEC) made it harder for businesses to exclude shareholder proposals from proxy statements. The SEC in November tightened the rules regarding when a company can cite “micromanagement” or lack of relevance as reasons for omitting an investor proposal from proxy statements, ahead of annual meetings. The SEC specifically said proposals that raise issues of broad social or ethical concern may not be excluded. Already, shareholder proposal numbers are on the rise. Investors submitted 650 proposals to S&P 500 companies as of July 29, up from 613 proposals and 556 proposals during the same period in 2021 and 2020, respectively, according to data analytics firm Esgauge. All but 12 proposals this year were related to environmental, social, and governance issues. Companies have to spend more time and money to engage with investors as they submit more proposals and become more prescriptive in what they are asking for, lawyers said. The latter is resulting in a lower percentage of proposals gaining majority support. It dropped to 10.6% this year from 16.2% last year, according to Esgauge. BlackRock, meanwhile, said in a report last week that it supported fewer climate-related proposals this year. The company in part attributed the decline to “more prescriptive” proposals and declined to comment beyond its report.

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8/2/2022

Podcast: Getting Directors on Board to Tackle Climate Crisis

Corporate Secretary (08/02/22) Maiden, Ben

A major barrier to combating climate change is the short-term views many companies and investors still take when it comes to meeting the market's quarterly expectations of financial performance. This contributes to a focus on making changes and pursuing strategies that don't fully take into account risks and opportunities beyond the immediate horizon. "Corporate boards get to decide whether they want to go the route of the phoenix or the dodo," says Veena Ramani, research director at FCLTGlobal, paraphrasing BlackRock Chair and CEO Larry Fink in this podcast. FCLTGlobal is a non-profit organization whose aim is to focus capital on the long term in support of a sustainable economy. Ramani tells podcast host Jeff Cossette that she has seen an attitudinal shift among directors on climate change. "One major reason is that the impacts of climate change are clearly visible all around us," she says. "The transition consequences of climate change are all around us as well. [They and] the transition costs of climate change are the risks a company faces, given that the market context is changing." Ramani points to a combination of other factors such as capital flows, global policies, and even litigation as factors causing boards to pay attention to climate-related risks and opportunities. She also notes that demonstrating expertise in the field makes directors attractive candidates to join other boards. She says investors aren't looking for directors with scientific expertise but for directors who have knowledge and understanding of what climate change means and what it means in the specific context of the company they oversee. They also want to see individuals who can translate this knowledge into what it means to be a corporate director: the impact on strategy, capital allocation, risk, and long-term value creation.

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8/1/2022

ESG, Cryptocurrency Discussed a Lot but Not Often Adopted

Pensions & Investments (08/01/22) Croce, Brian

Environmental, social, and governance (ESG) investing and incorporating cryptocurrency into 401(k) plans have become popular topics of conversation recently, but widespread adoption of either in plan lineups still hasn't taken off. As of December 31, there was only $33.4 billion managed in ESG mandates for defined contribution (DC) plans, down 2.7% from the previous year according to data from Pensions & Investments. "We are definitely seeing an uptick in conversations around ESG from plan sponsors, (but) not seeing movement of ESG funds incorporated into plan lineups very quickly," said Matthew Brancato, principal and head of client success for Vanguard Group's institutional investor group. "I think we need clarity from the U.S. Department of Labor (DOL), which should happen this year." Among Fidelity Investments' 401(k) plan clients, 18.2% offered a sustainable fund as of March 31, an increase from 17.6% at the end of 2020 and 14.3% at the end of 2017, according to Michael Shamrell, vice president of thought leadership. On cryptocurrency, Fidelity made news in April when it announced a program where participants in DC clients' plans can place up to 20% of their 401(k) plan accounts in bitcoin in a stand-alone investment called a digital assets account. Fidelity's announcement came six weeks after the DOL issued a March 10 "compliance assistance release" telling 401(k) plan fiduciaries to "exercise extreme care" before selecting cryptocurrency as an investment option. Dave Gray, Boston-based head of workplace retirement offerings and platforms at Fidelity, said that the firm "continues to have strong interest for digital assets and the blockchain. ... We are on track to launch our first plan sponsor clients this fall."

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7/29/2022

Proxy Rules Attain Consensus: No One's Entirely Happy

Pensions & Investments (07/29/22) Croce, Brian

U.S. Securities and Exchange Commission (SEC) proposals to change rules governing proxy-voting advice have elicited dissenting opinions. The SEC on July 13 voted to rescind two amendments to its rules concerning proxy-voting advice adopted under the previous administration that increased restrictions on proxy advisory firms. In a vote along party lines, the commission approved a final rule rescinding amendments adopted in 2020 that allow companies that are the subject of voting advice to be able to access that advice prior to or at the same time as it is disseminated to clients. Another amendment requires proxy advisory firms to provide clients with access to any response the company provides on voting advice before those clients vote. The "onerous provisions" the commission rescinded "could have harmed the independence, cost and timeliness of proxy-voting advice," said the Council of Institutional Investors. "Institutional investors, the primary customers of proxy-voting advisory firms, did not request or support the provisions." The National Association of Manufacturers (NAM) has a different view. "Our hope for the 2020 rules was that it would improve the mix of decision-useful information for investors so that they had the full picture of what companies and proxy firms were saying and could then cast an informed vote," said Charles Crain, senior director of tax and domestic economic policy at NAM. "We don't have a good answer as to what the impact actually was because the SEC unlawfully did not allow the 2020 rule to take effect." The NAM on July 21 filed a lawsuit in U.S. District Court in San Antonio, alleging the commission exceeded its authority in rescinding the two amendments. A similar lawsuit was filed against the SEC July 28 in the U.S. District Court in Nashville by the U.S. Chamber of Commerce, the Business Roundtable, and the Tennessee Chamber of Commerce & Industry. While there is much debate over the amendments the commission rescinded on July 13, there's another amendment from the 2020 rule-making that it left intact. In 2020, the commission also approved an amendment making clear that proxy-voting advice generally constitutes a solicitation. Glass Lewis would like the SEC to scrap the 2020 rule in its entirety, though welcomed its partial rescission. "While we continue to disagree with the SEC's characterization of proxy advice as a solicitation, with these changes, the United States' regulatory regime will more closely align with the approaches of most other major jurisdictions, which focus on preserving the independence, quality and timeliness of the proxy advice that institutional investors depend on," said Nichol Garzon-Mitchell, Glass Lewis' chief legal officer and senior vice president of corporate development. Institutional Shareholder Services said the SEC's July 13 "action misses the mark by failing to address the most critical defect; namely, the reclassification of proxy advice provided in a fiduciary capacity as proxy solicitation." ISS has challenged the 2020 rule-making in court, and oral arguments began July 29 in the U.S. District Court for the District of Columbia, Washington.

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7/26/2022

The Next Big Threat to Corporate Diversity Success Is Here

Fortune (07/26/22) McGirt, Ellen

According to PwC’s 2021 Annual Corporate Directors Survey, environmental, social, and governance (ESG)-related issues are the number one topic investors most want to discuss with board members during shareholder meetings. Further, 64% of directors now say ESG metrics are linked to company strategy—a 15-point increase from the year before. Ninety-five percent of S&P 500 companies now publish some sort of ESG data, and nearly 60% use ESG metrics as part of their executive compensation plans in 2022, primarily tied to bonuses. The big winner in the governance category is diversity and inclusion. Now one of the most commonly focused-on metrics, it appears to be emerging as a proxy measure to fast-track ESG progress. Alison Taylor, an adjunct professor at NYU Stern School of Business and executive director of its Ethical Systems research platform, and Brian Harward, a lead research scientist at Ethical Systems, are skeptical of the trend. “The current state of ESG efforts by corporations is disappointing but understandable,” they wrote in a recent opinion piece. “Investors pressurise them into what amounts to a box-ticking, virtue-signalling exercise – and it shows. ... Declaring diversity an ESG target rather than a baseline expectation appears to be a self-serving strategy to generate positive PR.” Taylor and Harward suggest that this is already leading to window-dressing behavior that ignores deep systemic issues that any responsible company should face. The solution is to stop short-term thinking. When a company decides that diversity is essential to its core purpose, it’s a matter of “striv[ing] to meet customer, supplier, and employee expectations over the long term,” say Taylor and Harward. Well-compensated executives don’t need new bonuses to do their job, they argue. “Executives could then do what they were hired to do: bring new ideas to the table, assess the risks of their actions, and lead others,” which means tapping relevant new perspectives. “They should be asked to create plans for how their division or function can address the diversity imperative, and encouraged to compete with each other and test micro innovations.”

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