Media Center

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

Alexion Pharmaceuticals Rejects Elliott Push for 'Proactive Sale'
The Battle Over Green Investment Is Hotting Up
Lagardère Group Chairman Resigns 'For Personal Reasons'
Enzo Biochem Issues Open Letter to Shareholders
Investor to Oppose Instructure's Plans to Sell to Thoma Bravo
ABB CEO Says More Spin-Offs Possible
An Overwhelming Majority of Investors Expect Companies to Implement Effective Environmental, Social-Impact and Governance Practices
Moral Money: Davos Boss Tells Execs to Align Pay With Stakeholder Interests
Carl Icahn Blasts HP's Decision to Reject Xerox's Acquisition Bid
Carl Icahn Urges HP Shareholders to Reach Out to Board
'Significant Board Changes' Needed at Valaris, Shareholder Says
Pershing Square Raises Stake in Howard Hughes Corp.
Hudson's Bay Confident of Approval for Chairman's Buyout Bid
Amherst Is in Talks to Buy Front Yard After Investor Pressure
Microsoft Shareholders Defeat Two Investor Proposals
AT&T Aims to Cut 4% in Labor Costs Amid Effort to Bolster Financials, CFO Says
Paul Singer's Elliott Management Adds 4 Stocks to Portfolio in 3rd Quarter
Brexit Disruption 'to Spark Activist Investor Interest' in U.K.
Companies Vow to Improve Climate Disclosure After TCI Warning
Crystal Amber Bets on Britain's De La Rue
E.l.f. Beauty Shares Under Pressure as Marathon Partners Urges Company to Sell Itself
Netherlands to Force Companies to Have More Women on Boards
Icahn Urges HP to Move Forward With Xerox Merger Discussions
Third Point Posts Strong November Gain
Corporations Are Agreeing More to CalPERS Diversity Demands
Punish Directors Who Don't Make Climate Disclosures, Says Hedge Fund
TCI Hedge Fund Does More on Climate Action Than ESG Funds
Tribune Publishing Adds Two Board Seats for Alden; Hedge Fund's Stake Capped at 33% Until End of June
Ferguson First-Quarter Profit Rises as U.S. Residential Activity Picks Up
Crystal Amber to Double Stake in Banknote Maker De La Rue
Icahn Is Said to Push Ahead With Bid to Control Occidental Board
Toshiba, Once a Hedge Fund Target, Seeks to Become One
Elliott Calls Capgemini's $4 Billion Altran Bid Too Low
Vodafone Wins German Court Backing in Price Fight With Elliott
Catalyst Capital Group Makes Rival Takeover Offer for Hudson's Bay Co.; Land & Buildings Expresses Interest
Scout24 Is Exploring Sale or Separation of Auto Platform
In Oil and Gas, Activist Investors Lose Steam
An Investor Tries to Oust a Trump Confidant
Xerox Says It Will Take HP Buyout Offer Hostile by Going Directly to Shareholders
Crystal Amber to Buy More De La Rue Shares
Voce Calls for New Directors on Argo Board
Japan and Australia to Boost Asia M&A Activity in 2020, UFP Says
Starboard Takes Stake in CVS
Investor Presses Valaris for Broader Changes, Plans on Special Meeting
Investor Takes Step Back From Nashville Lender
More Women on Singapore Boards but Diversity Still Lacking
Shared Investors Make HP-Xerox Deal 'More Likely'
Who Says You Can't Trust ESG Data? One of the Biggest Names in ESG.
The Ackman Surge Continues
Climate Change Has Made ESG a Force in Investing
Hedge Fund Activists Are 'Shepherds, Not Wolves'
Carl Icahn Just Needs Any Xerox-HP Deal
Hedge Fund Boss Pays Himself £200 Million Despite Fund's Profits Falling
Major Institutional Investors Say Zuckerberg's 'Totalitarian Grip' on Facebook Must End
Institutional Investors Watch for Volatility, Activism
Labor in the Boardroom
Code Green: Investors Are Coming for Environmental Offenders
ISS and Glass Lewis Policy Updates
Video: Copy That
Shadow Governance
ISS Benchmark Policy Updated—Executive Summary
ESG Reporting Best Practices
TCI Plays Outrider to Mark Carney's Climate Drive
A Common-Sense Approach to Corporate Purpose, ESG, and Sustainability
Gordon Singer — Elliott's Quiet Man Making Noise in Europe
Investors Lay Down Challenge to Corporate France
Investors and Issuers Aligned on Board Diversity
The Business Case for More Diversity
Arnaud Lagardère's Battle to Retain Grip on French Empire
Corp Fin Enters Brave New Shareholder Proposal World
Why Investors React Negatively to Companies That Put Women on Their Boards

12/5/2019

The Battle Over Green Investment Is Hotting Up

Financial Times (12/05/19) Tett, Gillian

Christopher Hohn, founder of TCI hedge fund, entered the climate debate this week, announcing that he would engage companies like Airbus (EADSY) and Moody's (MCO) if they failed to improve their standards of disclosure and action over climate risks. Hohn then criticized BlackRock (BLK) for failing to impose equally strict disclosure requirements in its own investments. BlackRock responded to Hohn's attack by saying it "has the largest stewardship team in the world, and engaged 370 companies globally on the topic of climate risk in the past two years." The tussle has generated questions about whether it is possible for the asset management world to fight climate change while the sector is so dominated by passive funds that track indices, rather than active managers. BlackRock has grown largely on the back of exchange traded funds (ETFs) and other forms of passive investing that track the performance of a particular market or sector. Moreover, the ETF sector recently passed the $6 trillion mark, and BlackRock projects this will double by the end of 2023. BlackRock officials argue that if climate activists want to attack finance for its lack of "green" credentials, they should start with the index companies and proxy advisers. However, Hohn contends that asset managers should still insist on screening ETFs for climate issues, possibly using the metrics developed by the Carbon Disclosure Project. Changes at BlackRock are unlikely to be made immediately, and observers say investors should keep an eye out for BlackRock's comprehensive internal analysis of all its operations in relation to climate change, covering both active and passive funds. Further, the World Economic Forum plans to push the world's biggest asset managers to agree on joint standards and commitments for active and passive funds in Davos next month, and European regulators are raising pressure for reform as well, with Brussels preparing a lengthy taxonomy of green standards.

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12/5/2019

Lagardère Group Chairman Resigns 'For Personal Reasons'

Financial Times (12/05/19) Pooler, Michael

Citing personal reasons, Xavier de Sarrau has resigned as chairman of the supervisory board of Lagardère Group (MMB), a position he had held since 2010. De Sarrau will remain a member of the supervisory board and be replaced as its chairman by Patrick Valroff, who has served on the board for about 10 years. The development comes as the French group crosses swords with Amber Capital, a London-based hedge fund that recently became the group's third-largest shareholder by increasing its stake to 6.8%. Lagardère has shrunk considerably under the leadership of Arnaud Lagardère, who took over the group after the sudden death of his father Jean-Luc Lagardère in 2003. Amber has criticized the firm's corporate governance and tried to oust de Sarrau as chairman at its last annual shareholder meeting, which failed. In the past Amber has pointed to what it sees as a breach of independence at Lagardère's supervisory board. Valroff, the new chairman, has strong links with Crédit Agricole (CRARY), the main lender to Arnaud Lagardère's personal holding company, Lagardère Capital & Management. LC & M, through which Arnaud Lagardère holds a 7.3% stake in Lagardère, had €204 million of debt at the end of 2017, which exceeds the current value of his shares in the group that bear his family's name. In October a French commercial court demanded Arnaud Lagardère publish a decade of annual accounts for LC & M, another of Amber's demands. Arnaud Lagardère has defied the court order and is appealing the decision. Meanwhile, four members of Lagardère’s supervisory board have their mandates coming up for renewal by shareholders next year, and Arnaud Lagardère's own mandate as the group's managing partner is up for renewal by the supervisory board in March 2021.

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12/4/2019

An Overwhelming Majority of Investors Expect Companies to Implement Effective Environmental, Social-Impact and Governance Practices

PR Newswire (12/04/19)

According the 2019 Edelman Trust Barometer Special Report, which surveyed 600 institutional investors in six countries, 84% of investors agree maximizing shareholder returns can no longer be the primary goal of the corporation, preferring a multi-stakeholder approach.  Seventy percent of respondents say they believe companies that place too much emphasis on shareholder return will be partially responsible for consumer or employee activism, and 74% say that companies with employee activism are less attractive investments. Almost all respondents expect the board of directors to oversee at least one environmental, social, and governance (ESG) topic, and 52% say tying executive compensation to ESG target performance would positively impact their trust in a company. In addition, 54% of investors say ESG practices positively impact trust, and 61% have increased their investment allocation to companies that excel with regard to ESG factors. Board diversity is also a topic of interest, with 55% of investors saying it has a significant positive impact on trust. Seventy-nine percent of respondents stated that most companies are not prepared to handle activist campaigns, with the main issue an inability to define and specify new and emerging areas of risk and value creation. Ninety-six percent of investors use one or more social platforms on a weekly basis, and 82% of investors consult a company's social media channels when evaluating an investment. Top strategies for underperforming companies to shore up trust with investors include announcing a change to business strategy (52%), conducting a business or strategic review process (51%), and implementing significant cost cuts (46%).

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12/4/2019

Moral Money: Davos Boss Tells Execs to Align Pay With Stakeholder Interests

Financial Times (12/04/19) Tett, Gillian; Nauman, Billy; Edgecliffe-Johnson, Andrew

World Economic Forum founding Chairman Klaus Schwab has issued a new "Davos manifesto" ahead of January's annual meeting in the Swiss mountain resort. The document unveiled in 1973 stated that "the purpose of professional management is to serve clients, shareholders, workers, and employees, as well as societies, and to harmonize the different interests of the stakeholders." The new document says the purpose of a company "is to engage all its shareholders in shared and sustained value creation." And multinationals must do nothing less than "improve the state of the world." One line may catch the attention of Davos attendees: "executive remuneration should reflect stakeholder responsibility." Meanwhile, a survey of more than 600 investors in the United States, United Kingdom, Canada, Germany, Japan, and the Netherlands by public relations and marketing consultancy Edelman reveals that 84% agreed that companies should balance shareholders' needs with those of their customers, employees, suppliers, and communities. Some 71% of investors said that overemphasizing shareholder returns exposed a company to consumer or employee engagement. More than 60% said they were investing more in companies that excel on ESG standards, 52% said that linking executive pay to ESG targets boosts their trust in a company, and 86% said they would accept lower returns to invest in a company that addressed sustainability or impact investing considerations.

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12/2/2019

TCI Hedge Fund Does More on Climate Action Than ESG Funds

Financial Times (12/02/19) Vincent, Matthew

Hedge fund TCI has vowed to punish company directors that do not address climate change. This is remarkable because a hedge fund has been able to do what most specialist environmental funds do not attempt, which is remaining a shareholder to bring about change from within. TCI will vote against company directors if they fail to disclose their carbon dioxide emission and reduction targets. As asset manager Sarasin & Partners recently noted, directors of the world's biggest fossil fuel groups were reappointed with an average 97% investor support. Conventional fund managers do not vote for change, because their investors do not demand it, their quarterly returns do not depend on it, or their notion of "fiduciary duty" does not extend to it. Managers of so-called environmental, social, and governance (ESG) funds do vote for change, but only by divesting from high-emission companies or buying shares in companies trying to tackle climate change. In doing so, those ESG firms are preaching to and investing in the converted. TCI argues that those engaging with steel and oil groups have failed to wield their power as owners, because their championing of ESG concerns has not been matched by support for climate-related shareholder resolutions. By contrast, TCI's threat to vote against directors already appears to be having an effect, as, for example, Charter Communications (CHTR) looks set to follow TCI's disclosure demands in its first emissions report, despite TCI being only a 4.7% shareholder.

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12/1/2019

Crystal Amber to Double Stake in Banknote Maker De La Rue

Financial Times (12/01/19) Thomas, Daniel; Pooley, Cat Rutter

Investor Crystal Amber has built a nearly 14% stake in De La Rue (DELRF), up from its previously disclosed 7% position, making it one of the struggling banknote maker's biggest investors. Shares in De La Rue plummeted to an all-time low last week after the company warned that that there was "material uncertainty" over its future as it swung to a £12 million loss. The company warned on profits twice this year before last week's announcement as it suffers from falling earnings and rising debt. One source says that Crystal Amber has held discussions with the company's new management over the past week, being met with approval for a “common sense” approach to fixing the problems facing the company. Crystal Amber chief Richard Bernstein had been highly critical of the company's previous management, many of whom have since left the company, since building a stake in 2017. De La Rue's latest struggles have been caused by the breakdown of a lucrative contract printing banknotes for Venezuela, which has been unable to pay banknote suppliers despite needing a high volume due to hyperinflation. The company is also facing a Serious Fraud Office investigation into possible corruption in South Sudan, where it won the contract to print the country's banknotes. De La Rue has said it is too early to put an estimate on any potential liabilities arising from the investigation.

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11/27/2019

Catalyst Capital Group Makes Rival Takeover Offer for Hudson's Bay Co.; Land & Buildings Expresses Interest

Canadian Press (11/27/19)

Investment firm Catalyst Capital Group Inc. is making a competing takeover offer for Hudson's Bay Co. (HBAYF). Catalyst Capital, which has approximately a 17.5% stake in Hudson's Bay, is offering $11 a share in cash, besting an offer of $10.30 made by a group of investors led by Hudson's executive chairman Richard Baker. Investor Land & Buildings has voiced interest in the new proposal. Catalyst announced in October that it and other minority shareholders that together control a 28.24% stake of the company's common shares intend to vote in opposition to the offer by the Baker-led group. Baker's offer, which is subject to court and regulatory approvals, must obtain the support of a majority of Hudson's shareholders, excluding the shareholders behind the bid and their affiliates, as well as approval by a 75% majority vote at a special meeting of shareholders that HBC intends to hold in December. Catalyst's offer is better in terms of both value and treatment of shareholders and can be finalized in a timely manner, said Gabriel de Alba, managing director and partner of Catalyst. "Catalyst is committed to taking the necessary steps to ensure that its superior offer is evaluated on its merits and that the board is able to liberate itself from the coercive influence of Richard Baker and act for us all," de Alba said in a statement. "We continue to believe that the offer from the Richard Baker Group woefully undervalues Hudson's Bay and its real estate," said Land & Buildings founder Jonathan Litt in a statement. "Land & Buildings is interested in financially participating in this transaction with Catalyst should it move forward."

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11/26/2019

Voce Calls for New Directors on Argo Board

Royal Gazette (Bermuda) (11/26/19) Kent, Jonathan

Voce Capital Management is pushing for five new independent directors to replace incumbents on the board of Argo Group (ARGO), saying the governance situation at the Bermudian re/insurer has "significantly deteriorated" since its annual meeting this year. The hedge fund cited an investigation by the U.S. Securities and Exchange Commission into executive compensation and subsequent ratings agency actions. Voce, which owns about 5.8% of Argo, also criticized the "lucrative package" given to former CEO Mark Watson on his "sudden retirement" this month. The hedge fund said it has launched a process to call a special meeting of shareholders as it seeks support for the replacement of directors. It has been fighting a proxy battle with Argo since February, when it accused the company of having a "spendthrift culture" and misdirecting corporate assets to support Watson's "lifestyle and hobbies." Voce said in a statement, "There are crucial leadership, governance, and strategic choices which are being made in real time and will have lasting and potentially irreversible effects once rendered." It is calling for the replacement of five of Argo's existing board members with "highly qualified, fully independent directors." Voce said, "Once we file our definitive consent solicitation statement, we will simply be asking shareholders to consent to the calling of a special meeting, which is permitted by Argo's bylaws and will require the concurrence of holders of at least 10% of Argo's common stock. Consents at this stage will not determine if any Argo directors are removed or replaced, only whether a shareholder meeting to consider and vote on such proposals will occur."

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11/25/2019

Starboard Takes Stake in CVS

Wall Street Journal (11/25/19) Driebusch, Corrie

Investor Starboard Value LP has taken an ownership interest in CVS Health Corp. (CVS) and has held discussions with the drugstore-and-insurance giant's corporate management. The stake appears to be relatively small, according to the sources, while the talks held recently have been "amicable." What is not known as of press time is exactly how much Starboard currently owns and what specifically it has discussed with the company. But Starboard's presence in a stock usually causes a company to pay attention. Indeed, Starboard has a history of ushering in change at companies ranging from Darden Restaurants Inc. (DRI) to eBay Inc. (EBAY). CVS shares have been fluctuating since the company purchased health insurer Aetna Inc. (AET) for approximately $70 billion nearly a year ago. The stock declined significantly after CVS in February issued a downbeat earnings projection for the year due to challenges in its pharmacy-benefits and long-term-care units. The shares eventually rebounded as the company reported a series of unexpectedly robust financial results, and research analysts have taken a more favorable view. But some investors have privately voiced frustration about increasing costs from the company's Omnicare nursing-home pharmacy operation, the lack of a clear plan for a successor to CEO Larry Merlo, and the big size of its 16-member board, which is a legacy of the Aetna purchase.

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11/25/2019

Investor Presses Valaris for Broader Changes, Plans on Special Meeting

Reuters (11/25/19) Herbst-Bayliss, Svea; Osterman, Cynthia

Hedge fund Luminus Management has said it plans to call a special shareholder meeting at Valaris PLC (VAL) and press for broader improvements at the offshore contract drilling services company. Valaris' stock surged 12% after Luminus called on the company to improve operations, refresh the board, and shore up governance. The fund also wants management to "take a holistic and balanced approach to managing its capital structure, with a specific focus on ensuring liquidity, pushing out debt maturities, and effectively monetizing debt discounts." Luminus now owns 18.7% of Valaris, up from 4.5% a few months ago, and has enough shares to meet the threshold to call a special meeting. Its recent demands are far broader than its earlier requests when it had pushed for changes to the company's balance sheet, including a push to sell bonds in order to pay out a $2.5 billion special dividend. Luminus and Valaris management had agreed to a standstill wherein Valaris undertook an additional $100 million in cost cuts and shook up its board, in exchange for Luminus not buying more shares. The agreement expired in late October when the company rejected the hedge fund's settlement proposal. Some restrictions still remain, and the hedge fund is not permitted to own an economic stake of 20% or more. Luminus, which invests more than $2.5 billion for clients in energy and power investments, has delivered an average return of 11.8% a year since its launch in 2002.

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12/5/2019

Who Says You Can't Trust ESG Data? One of the Biggest Names in ESG.

Institutional Investor (12/05/19) Segal, Julie

A new white paper published by Generation Investment Management indicates that although the sheer volume of data available tracking companies' environmental, social, and governance (ESG) standings has exploded in recent years, the ESG conclusions that can be drawn from the information are still limited. "The risk is that it puts the spotlight on what is available, rather than what is most important," said the paper. Felix Preston, the firm's director of research, said in an interview, "We need better data that connects with the scale and urgency of the problems we face." Generation said organizations want data that can be easily used to screen companies. "We believe that bridging the gap between the value of rich contextual information and the need to 'plug values into the spreadsheet' is where ESG data needs to go," according to the paper. While vendors are collecting data on environmental and social risks in supply chains and breaches of environmental regulations and allegations of corruption, among other things, Generation argues that the information is spotty and does not indicate whether a company is changing or what is on management's mind. "Last year's greenhouse gas emissions data for a company's operations is a commonly used metric. A more complete picture of how the company is doing would depend on understanding its supply chains, interactions with customers, opportunities to innovate and more," the paper said. Preston noted that the kind of contextual information that Generation's investment teams discuss and implement in their processes is broadly available. "Start weaving [that] into mainstream data," he said. "At the moment in the ESG world, it seems like [machine learning] is focused on filling gaps and standardizing. But it could be used to bring in all this rich context that would be beneficial and better reflect sustainability risks and opportunities that companies face."

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12/5/2019

Climate Change Has Made ESG a Force in Investing

The Economist (12/05/19)

Environmental, social, and governance (ESG) standards are becoming ever more important in the world of investing and capital markets, because at least $3 trillion of institutional assets now track ESG scores and the share is quickly rising. In America and Europe, some regulators, companies, and investors want to move away from measuring corporate performance based mainly on shareholder returns. Such calls are fueling demand for ESG ratings, which create a single score from disparate non-financial indicators, such as a firm's carbon emissions or its board diversity. However, these ratings are not yet ready for the weight they are being asked to bear. The most obvious sign of this is that—unlike credit ratings—ESG scores are not well-correlated with each other, frequently disagreeing about which companies are good or bad. Moreover, ratings are often based on business models rather than businesses themselves, meaning that it does not matter what firms sell as long as it is done sustainably. Tobacco and alcohol companies feature near the top of many ESG rankings, and many funds marketed on their green credentials invest in fossil fuels. The scoring systems sometimes measure the wrong things and rely on patchy figures, because only half the 1,700-odd companies in the MSCI world index reveal their carbon emissions, and penalizing non-disclosure can lead to strange results. Bigger firms tend to get better ESG scores because they are able to afford better disclosure. Even when figures are disclosed, they may be too out-of-date to be useful. ESG data have the potential to hold bosses and fund managers truly accountable, but right now the ESG rating industry is in its infancy.

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12/4/2019

Institutional Investors Watch for Volatility, Activism

Advisor.ca (12/04/19)

In a recent survey of global institutional investors, 53% of respondents cited volatility as the top risk to portfolios, while 50% cited interest rates and 37% cited a credit crunch. Investors also said they were preparing for an upcoming year of slower economic growth, rising public debt, and Brexit complications. More than half (58%) predicted that the next global financial crisis would occur within one to three years. In response, institutional investors are looking to protect on the downside through active management and diversification instead of making major changes to their portfolios. About 74% of respondents said the 2020 market environment will be favorable for active management, and their current allocation split has gone from 64% active and 36% as of 2015 to 71% active and 29% passive. In addition to downside protection, another survey indicates that investors are reconsidering shareholder primacy. The 2019 Edelman Trust Barometer, also release Wednesday, indicates that 91% of Canadian investors agreed that maximizing shareholder value should not be the only goal of a corporation. One reason that consideration of all stakeholders is important is to circumvent employee activism, as 81% of respondents said companies with activist employees were less attractive as prospective investments. Almost half of survey respondents said they look for companies that maintain a healthy company culture, and more than one-third said they wanted companies to showcase how they actively address social issues. Furthermore, 86% of respondents said they would support a reputable activist investor if they believed change was needed at a company.

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12/2/2019

ISS Benchmark Policy Updated—Executive Summary

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/02/19) Mishra, Subodh

Institutional Shareholder Services (ISS) has updated its benchmark proxy voting guidelines for the upcoming year. The main updates for the United States address problematic governance structures at newly public companies, independent board chair shareholder proposals, and share repurchase program proposals. When assessing time-based sunset requirements, ISS will consider the company's lifespan, its post-initial public offering ownership structure, and the board's disclosed rationale for the specific duration selected. ISS will not consider a sunset period of more than seven years from the date of the IPO to be reasonable. ISS will likely support well-crafted independent chair shareholder proposals at companies where boards rely on a weak lead independent director role or there is evidence that directors failed to oversee material risks facing the company or did not adequately respond to shareholders' concerns. With regard to share repurchase program proposals, a grant of authority to the board to engage in a buyback generally will be warranted unless it is used for an abusive practice, such as to reward company insiders, boost compensation metrics to increase payouts to executives, or threatens a company's long-term viability. The policy updates will be effective for meetings that occur on or after Feb. 1, 2020.

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12/2/2019

TCI Plays Outrider to Mark Carney's Climate Drive

Reuters (12/02/19) Hay, George

Chris Hohn of hedge fund TCI said his firm will vote against directors of companies that do not disclose how their balance sheets would be hit by climate change. Doing so would help outgoing Bank of England Gov. Mark Carney's push for greater transparency about the financial risks of global warming. Carney has championed the Task Force on Climate-related Financial Disclosures, which wants companies to disclose their carbon emissions and issue a climate risk analysis. The Task Force on Climate-related Financial Disclosures is founded on the notion that more information makes markets more efficient. Carney, who on Sunday was appointed as UN special envoy for climate action and finance, asserts that companies representing assets worth $120 trillion already support the idea of transparency, but in most sectors, full disclosure on strategic resilience is limited. Despite warnings by Carney and others about government action to make it mandatory, this is still uncertain and at least a year away. The link between disclosure and investment success is not yet straightforward, because even if all companies disclosed more information, share prices would still depend in part on whether politicians collectively decide to tackle climate risks through carbon taxes and other green measures. For Hohn, meanwhile, presenting activist investment as part of the solution to the climate problem is good marketing, especially because it is true.

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12/1/2019

A Common-Sense Approach to Corporate Purpose, ESG, and Sustainability

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/01/19) Glassner, Frank B.

America's top business and financial leaders have acknowledged that environmental, social, and corporate governance policies are linked to business risk, value creation, financial performance, and sustainability. The central concept at the heart of the Business Roundtable's "Statement on the Purpose of a Corporation" is "while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders." This assertion suggests that each company can determine how to tell its ESG and sustainability story, how to deal with its stakeholders, and how ultimately to define its purpose and achieve sustainability. Companies now must consider the skepticism and criticism that the statement has drawn, the confusing terminology surrounding sustainability, how to deal with different sustainability metrics and standard-setters, whether to fit sustainability reporting into their legal disclosure obligations, and whether customized sustainability reporting undermines comparability in the marketplace. Investors are now working to integrate sustainability issues into their investment decisions as well as their stewardship duties and proxy voting policies. Companies will need to take a holistic approach to defining their purpose and integrating ESG and sustainability issues into their financial reporting, shareholder communications, investor relations, board engagement, and proxy solicitation campaigns. They should consider publishing a statement of corporate purpose; looking closely at the content of corporate reporting; tailoring shareholder communications to address the interests of all stakeholders; and organizing a systematic, annualized approach to shareholder relations and communication. Meanwhile, investors must devote more resources toward evaluating ESG issues at companies, develop deeper expertise about the risks and value drivers, and push third-party ratings and advisory firms to develop better methods of assessment.

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11/29/2019

Investors Lay Down Challenge to Corporate France

Financial Times (11/29/19) Keohane, David; Agnew, Harriet

French boards, regulators, and politicians are wrestling with how to respond to the arrival of activist investors who are testing the country's reputation for protectionism. The past year has seen investors including Elliott Management, Third Point, and CIAM challenging some of France's biggest companies, including Capgemini (CGEMY), Pernod Ricard (PDRDY), EssilorLuxottica (ESLOY), and Renault (RNLSY). In March, finance minister Bruno Le Maire said France would seek more measures to thwart activists, including the option of using taxpayers' money to defend companies of strategic interest. Despite this, investors and corporate governance experts say the French establishment's protectionist reflexes may prove less effective or even counterproductive in 2019. Analysts also say the eruption of activism in France is part of a wider trend across Europe thanks to the combination of corporate governance climbing the agenda and conglomerates falling out of fashion. Activist activity is stirring tensions in the upper echelons of the business world. For example, media company Lagardère (MMB) has sued Amber, its third-largest shareholder, for €84 million in damages, alleging the London fund had sought to destabilize it. Last month, a French parliamentarian committee called for more transparency around the borrowing and lending of a company's shares, an examination of when a given level of short selling prevents a market functioning properly, and the fast-tracking of investigations by the French markets regulator. U.S. short seller Muddy Waters says the committee's report "takes a myopic view of corporate governance and communication issues," and that "instead of addressing these issues, the report targets those whose job is to spot them—short sellers."

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11/26/2019

Arnaud Lagardère's Battle to Retain Grip on French Empire

Financial Times (11/26/19) Agnew, Harriet

Since taking over Lagardère (LGDDF) from his father in 2003, Arnaud Lagardère has attracted a great deal of criticism for his management style and the performance of the business. Lagardère has been lax in his duties as CEO and the company's share price has substantially underperformed its benchmarks, while management and restructuring costs have soared. Now Lagardère is facing his moment of truth in the form of a battle with investor Amber Capital, in which a French court recently ruled that the CEO must publish a decade's worth of accounts for Lagardère Capital & Management (LC&M), a private holding company. The new ruling threatens to lift the lid on Lagardère's personal debt levels and put his empire under renewed scrutiny, as previous reports have established that LC&M had €204 million of debt at the end of 2017. It remains to be seen whether investors and the supervisory board continue to support Lagardère once they have a better sense of his true financial situation. Lagardère SCA's dated "commandite" structure means that despite only owning a 7.2% stake in the group through LC&M, Lagardère's position is highly protected. Shareholders cannot remove Lagardère as they could in a normal company; instead, the supervisory board votes to renew his mandate every six years. The counterbalance to Lagardère's unlimited powers as general partner of the SCA is that he also has unlimited responsibility for the company's liabilities, which Amber uses to argue that shareholders need to know what Lagardère's financial guarantee is worth. Four members of the supervisory board who have so far supported the status quo have their mandates coming up for renewal by shareholders next year, and Lagardère's own mandate comes up for renewal by the supervisory board in March 2021.

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11/26/2019

Corp Fin Enters Brave New Shareholder Proposal World

Bloomberg Law (11/26/19) Rasmussen, Peter

Starting in 2020, Securities and Exchange Commission (SEC) staff may respond orally instead of in writing to some no-action requests. The Division of Corporation Finance policy shift will slightly restrict the flow of information to the public, but will be less consequential because staff responses have not historically been a source of extensive useful analysis by the staff. SEC staff will also make some information about the disposition of exclusion requests available in chart form, identifying the company, proponent, relevant dates, staff action taken, regulatory basis for exclusion, and whether the staff issued a written response. Currently, the staff has included only two dispositions in the chart: one with a written letter and one that was orally communicated. Glass Lewis & Co. addressed the new policy by saying it believes that companies should only omit proposals in cases where the SEC staff has explicitly concurred with the company's asserted basis for exclusion. Similarly, in instances where the SEC has orally permitted a company to exclude a shareholder proposal and there is no "written record" provided by the SEC about the determination, Glass Lewis believes that the company should provide "some disclosure" concerning the staff action. The SEC has also proposed extending the stockholding period required for shareholders to submit a proposal from one year to three years. It would also raise requirements for excluding proposals based on vote totals. The proposals have generated a significant number of comments, including comments from leading shareholder advocates and investment managers, who urge the SEC to extend the current 60-day comment period to 120 or 180 days.

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