The number of proxy fights is increasing this year as investors attempt to gain control of underperforming companies, according to Kingsdale Advisors. Year to date, Canada has had 29 proxy contests, 13 of which have yet to be decided, according to the advisory firm, which advises both investors and boards that defend against such campaigns. By this time in 2017, there had been 21 public contests and there were 32 in the full year. Investors have been successful in reaching their objectives 50% of this time this year, down from 63% in 2017, the firm said. Meanwhile, in the United States, the investors have come out the winners 72% of the time, Kingsdale said.

SandRidge Energy Inc (SD) announced Friday board member and interim CEO Bill Griffin will not be a candidate to lead the company, but will remain in his role until a successor is appointed. The oil producer in February fired CEO James Bennett following pressure from Carl Icahn, who had protested his pay and a $746 million bid to purchase competitor Bonanza Creek Energy Inc. (BCEI). SandRidge launched a strategic review in June, a month after Icahn won control of the company by acquiring five board seats and pushed for its sale. However, SandRidge said earlier this month it ended its review but spurned all bids, saying they undervalued the company.

Mitchell Saltz's multiple director roles at gun and security companies has spurred protests as he seeks re-election at American Outdoor Brands Corp. (AOBC), the parent company of gunmaker Smith & Wesson. At the center of the conflict is a decision by American Outdoor to halt training courses for police officers and soldiers. Shortly afterward, VirTra Inc. (VTSI)—where Saltz is also a director and investor—gained several contracts for its technology-based training service. It is unknown if Saltz was involved in American Outdoor's decision to scale back its training operations. But Glass Lewis & Co. is recommending shareholders vote against Saltz at the company's annual meeting on Sept. 25, saying he is compromised by his failure to disclose his role at VirTra to American Outdoor shareholders. While Institutional Shareholder Services Inc. is not recommending Saltz's removal, it argues that Saltz does not qualify as an “independent” director as the company claims, because he was the CEO of American Outdoor's predecessor, Smith & Wesson Holding Corp., with a severance agreement that requires the company to lease office space from him. American Outdoor has also come under pressure this year from BlackRock Inc., its largest shareholder with a 12.4% stake, and more recently from the Major Cities Chiefs Association, which represents chiefs of police of dozens of cities. Separately, Majority Action, a left-leaning shareholder group that holds American Outdoor shares, blasted the company for “abruptly” shuttering the Smith & Wesson Academy without sufficiently sharing its plan and for weak enforcement of company policy regarding conflicts. It also recently accused company managers of breaching an investor resolution regarding political contributions.

A Korean asset management firm has failed to unseat Macquarie Korea Asset Management as fund manager of the Macquarie Korea Infrastructure Fund, the only listed infrastructure fund in Korea. Platform Partners Asset Management's failed bid is considered the first attempt of shareholder activism by a local company engaging an overseas firm. Platform called for a shareholder meeting to replace Macquarie Korea after the Korea unit of the Australian financial group refused to lower its management fees. Of the shareholders who held a 74% stake that participated in the voting, only 31.1% of the total shares, or 42% of the participants, voted for dismissal of Macquarie Korea, failing to meet the 50% threshold. Major institutional investors and the three largest shareholders were a factor in the results. Three financial units of Hanwha Group, which hold 6.13%, and Shinyoung Asset Management, controlling 5.77%, reportedly voted against the Platform initiative. Glass Lewis supported a change in fund manager, while Institutional Shareholder Services opposed the idea.

Carige's top investor Vittorio Malacalza won control of the board on Thursday, defeating a group of rival investors who wanted to keep the current CEO to steer Carige toward a merger. The newly elected board will meet shortly to appoint UBS banker Fabio Innocenzi as Carige's new CEO. Malacalza, who owns a 27.6% stake in the embattled Italian bank, on Thursday installed seven of 11 directors, and his victory could limit the prospect of a merger which regulators have asked Carige to consider. “We shouldn't start by talking about a merger. A good board assesses the situation and then discusses it with the regulator,” Malacalza said after the vote. The European Central Bank (ECB), which is upset with the frequent management changes, has given Carige until the end of the year to fill a gap in its second-tier capital, unless it seeks a merger with a stronger peer. “The ECB's deadlines are reasonable. We are not here to improvise, we know exactly what we need to do,” said Pietro Modiano, an Italian banker picked by Malacalza as Carige's new chairman. “No more mistakes in Genoa: this is my commitment.” Modiano said the top shareholder would stand by the bank if it needed more capital. A quick merger was the goal of London-based Italian financier Raffaele Mincione, who had struck a deal with two other shareholders over 15.2% of Carige's capital. But with voting rights capped at 9.99%, the three could only appoint three board members on Thursday, including Mincione himself.

Ryanair Chairman David Bonderman has survived a shareholder revolt, but investors have called for change at the airline after a summer of strikes and flight cancellations, and amid accusations of a lackluster board unwilling to stand up to management. Approximately 30% of shareholders voted against the re-election of the long-serving Bonderman at its annual meeting. Meanwhile, CEO Michael O'Leary was supported by 98.5% of investors. However, Aberdeen Standard Investments, which on behalf of its clients manages a stake equivalent to 0.9% of the company, said it would be the last time it supported Bonderman and the senior independent director, Kyran McLaughlin. "Given the challenges the company faces, for example in union and labor relations, it is clear that governance needs to evolve. Strong, independent, and visible board leadership is more important than ever," says Alison Kennedy, an investment director at Aberdeen. She says she needs to see "clear progress on succession for these two key board positions by the time of the AGM next year," otherwise "we will vote against the re-election of Mr. Bonderman, Mr. McLaughlin, and the other members of the nominations committee."

Nestlé SA (NSRGY) is weighing strategic options for its skin-health business, in an effort to narrow its focus to food and beverages amid pressure from Daniel Loeb. The Swiss consumer goods giant on Thursday did not specify the unit was up for sale but such reviews often result in a disposal. The skin-health division could fetch about $4.1 billion, according to Jefferies analyst Martin Deboo. The move comes after Loeb acquired a $3.5 billion stake in the company last year and called for changes, including that it sell its stake in L'Oréal SA and the skin-health branch. The review is likely to close the door on a business that Nestlé just four years ago called one of its most promising, but as sales growth slowed, investors questioned how the unit fit into Nestlé's broader business. On Thursday, Nestlé said it had decided the unit's growth opportunities “lie increasingly outside the group's strategic scope.” It expects the review to be completed by mid-2019. Loeb has been critical of Nestlé, noting just half its sales comes from the businesses Schneider has said are key for growth: coffee, petcare, water, and infant nutrition. He said Nestlé could get rid of frozen food, ice cream, packaged meats, pasta, and peanut milk in addition to other assets. “We expect Nestlé to further divest nonstrategic, underperforming assets,” said analysts at Vontobel following Thursday's announcement.

Thyssenkrupp’s interim CEO denied that it would withdraw from its steel joint venture with India’s Tata Steel following a management shakeup. The comments came amid continued pressure from Elliott, which reiterated Thursday it did not support a breakup of the German industrial conglomerate. Last week, media reports said the implementation of the landmark deal was stalling over the sudden exit of Thyssenkrupp's CEO Heinrich Hiesinger, the main architect of the transaction. “The contrary is the case,” Guido Kerkhoff said Thursday. “We are continuing to implement the joint venture with Tata Steel with all our strength.” The deal will create Europe's second-biggest steelmaker and is expected to close at the end of 2018 or in early 2019. Kerkhoff has taken over until a long-term replacement is been found for Hiesinger. Sources suggested he could eventually become a permanent candidate for CEO himself if a restructuring of the industrials unit goes well. Ingo Speich, fund manager at Thyssenkrupp shareholder Union Investment, said Kerkhoff could also serve as COO alongside a new CEO.

Aberdeen Standard Investments (ASI) declared Thursday it wants “clear progress” on the succession of Ryanair (RYAAY) Chairman David Bonderman and Senior Independent Director Kyran Mclaughlin by this time next year. ASI, one of Britain’s largest fund managers, owns a nearly 1% stake in the company. “The length of time both have been on the board suggests a lack of focus on board succession planning,” ASI said. “Excessive tenure also calls into question an individual’s independence and objectivity and our engagement on governance matters suggests that the board is not listening carefully enough to shareholders’ views.”

Comcast Corp. (CMCSA) and 21st Century Fox Inc. (FOXA) will settle their takeover battle for British broadcaster Sky PLC via an auction beginning Friday and ending the following day. According to the United Kingdom's Takeover Panel, there will be a maximum of three rounds to decide the fate of the deal, and each bid must be made in cash. In the first round, the company with the lowest bid—in this case Fox—can boost its bid for Sky. Comcast then has the opportunity to increase its bid in the second round. If the auction has not been concluded during that round, it is then carried into the third and last round. Sky, Fox, Comcast, and Disney (DIS) agreed to an auction to settle the bidding war. Such auctions are very unusual when it comes to deal-making for such a high-profile public company. Sky is presently valued at £27 billion, which translates to over $35 billion.

Nike (NKE) investors are calling for greater transparency related to its political spending and will vote on a proposal at its annual general meeting Thursday demanding regular reporting on political contributions. Nike’s board is recommending shareholders vote against the resolution for greater political-spending transparency, adding that the company's existing policies and disclosures have proper oversight, according to its proxy statement. Enhanced transparency would put Nike at a “competitive disadvantage,” according to the statement, because it would reveal “strategies and priorities designed to protect the economic future” of the company. However, “Nike has the most convoluted and opaque policies of all the companies we've examined and negotiated with over more than a decade now,” said Bruce Herbert, founder of Newground Social Investment, a responsible investing fund, and Investor Voice, an investor advocacy group. Investor Voice is the main proponent of the resolution. Investors concerned with social issues have recently upped the pressure on companies, seeking greater political spending disclosure. Nike has resisted repeated demands for greater disclosure, some investors said. The company has received proposals for improved political spending disclosures five times since 2012, and last year it received 30% support from shareholders.

Rent-A-Center (RCII) shareholders on Sept. 18 approved the acquisition of the company by an affiliate of private equity firm Vintage Capital Management. The deal must be approved by regulators, and is expected to close in the first quarter of 2019. Rent-A-Center announced the acquisition agreement with shareholder Vintage in June, noting Vintage intended to pay $15 per share to buy all outstanding stock—or about $1.37 billion, including debt. The Federal Trade Commission last week requested additional information in connection with the acquisition.

The Stilwell Group, the largest shareholder of Wheeler Real Estate Investment Trust Inc. (WHLR ), today announced that it has delivered an open letter to shareholders of the company. The letter says, "The legacy directors have consistently demonstrated their lack of competence and sound judgment. In our estimation, they have no business being directors of any public company (and, as best we can tell, two of them have never been directors anywhere other than at WHLR). ... Our plan for WHLR is to relentlessly focus on maximizing value for the common shareholders—something that the legacy directors have clearly failed at. We have been involved as activist investors in 64 other small cap financial companies over the past 18 years—60 of them have been profitable. If elected, we hope to do the same at WHLR."

Saudi Basic Industries Corp., an investor in Clariant AG, has installed one of its managers as chief executive officer of the Swiss chemicals maker and won four seats on the board. Ernesto Occhiello will assume the CEO job on Oct. 16, as outgoing CEO Hariolf Kottmann moves to become chairman. Clariant also announced a merger of assets with Sabic to create a more robust plastics business. The changes could bring some stability to Clariant, which was the subject of recurring takeover speculation during the past decade that culminated in a failed merger with Huntsman Corp. and an attempt last year by an activist investor to break apart the company. Instead, Sabic moved in and purchased a 25% stake. "Clariant's shares have lacked real momentum since the Huntsman deal was called off but today's announcement gives the shares the convincing equity story they need," noted Barclays analyst Alex Stewart.

Qualcomm Inc. (QCOM) is preparing to appoint at least two new directors to its board, according to sources, as it seeks to placate shareholders who withheld voting support for its board last March. Irene Rosenfeld, former CEO of U.S. snack foods company Mondelez International Inc. (MDLZ), and Martin Anstice, CEO of semiconductor equipment manufacturer Lam Research Corp. (LRCX), are in advanced talks to join Qualcomm's board, the sources said Tuesday. Their additions would expand the board from 12 to 14 members. Additional director appointments next year are possible, the sources added. Qualcomm is under pressure to deliver on its financial goals after upsetting shareholders by spurning a $120 billion takeover bid from rival Broadcom Inc. (AVGO), failing to secure Chinese regulatory approval for its $44 billion acquisition of NXP Semiconductors NV (NXPI), and neglecting to resolve a longstanding patent dispute with Apple Inc. (AAPL). Investors expressed frustration with the company last March when most of Qualcomm's board directors, including CEO Steve Mollenkopf, were elected with voting support of less than 50% of the shares outstanding despite running unopposed. That followed the exit of Chairman Paul Jacobs, who resigned to explore an acquisition offer for the company which has yet to materialize.

Starboard Value has quietly built a $500 million-plus stake in MGM Resorts (MGM) and reportedly is pushing for major changes at the Las Vegas casino chain. The investment is the latest by several major hedge funds in embattled casino chains, hoping Las Vegas is poised for a recovery, sources said. Starboard joins Canyon Capital, Eminence Capital, and HG Vora on MGM's shareholder register. HG Vora has also acquired a stake in Caesars Entertainment (CZR), according to a Tuesday regulatory filing, and reportedly will be pushing for changes. Starboard and other funds' ideas for MGM include pressuring the chain to sell its Macau property and combining its MGM Growth Properties real estate investment arm with Caesars' real estate investment trust, Vici Properties, sources said. Overall, however, it is a bet on Vegas. Shares of casinos there fell in August with the report of weaker-than-expected July results, but one MGM investor called it a "temporary hiccup," adding, "I'm still a big believer in the Las Vegas market." That includes the expectation that the NFL's Oakland Raiders moving next year to Las Vegas will bring more visitors. Also, the federal government repealing the ban on legalized sports betting should bring extra income to MGM and Caesars, the investor said. There could be proxy fights soon at the two chains, with the entire MGM board going up for election. There is a December deadline to nominate new directors, the investor noted.

Athenahealth Inc. (ATHN) has extended a bid deadline for possible buyers by a few weeks as it speaks with at least two interested parties, including Elliott Management Corp., according to sources. Elliott has teamed up with private equity firm Bain Capital and is actively considering a possible deal, as is at least one other strategic bidder, the sources said.  Athenahealth shares dropped as much as 11% on Tuesday following a report in the New York Post that Elliott was backing away from a May proposal to pay $160 a share for Athenahealth and that it might lower its offer. Elliott, which went public with an investment in the health records company last year, said in May it would be interested in purchasing the company for $160 a share and that the company had been mismanaged.

Analysts doubt that athenahealth Inc. (ATHN) will sell for more that $160 a share, after reports that Elliott Management is not willing to pay that much for the health information technology company. Elliott disclosed a 9.2% stake in the company as of May 2017. Leerink Research analyst David Larsen said in a note Sept. 18 that he is "cautious" on athenahealth's potential acquisition price, citing a New York Post article that Elliott has "backed away" from the $160-per-share offer it made in May. According to the Post article, other bidders have "gone quiet," prompting athenahealth to extend its deadline for a final bid to Sept. 27. The Post article said that athenahealth may still consider making a lower bid. "We believe there is an increased likelihood that if final bids emerge, they will be well below the initial $160 (per share) offer from Elliott," Larsen noted. "If no final bid emerges, we believe athenahealth shares could face substantial weakness and trade back down to the $125 level athenahealth traded near prior to Elliott's $160/share offer in May." Meanwhile, Kevin Huang of CFRA Research said in a note that "many investors already expected the deal to fall through." Elliott and other bidders continue to pursue athenahealth.

Stockbroker Cenkos saw a 90% decline in its pre-tax profit in the first half of the year, as strict new European markets rules start to pressure the sector. Richard Bernstein, founder of Cenkos' fifth-largest shareholder Crystal Amber, has been calling for a strategic review and possibly selling all or parts of the company. The company's pre-tax profit on continuing operations shrank from £4.6 million to £500,000 in the six months through June. The broker said this was partially because its 2017 results had been supported by its role in fundraising for logistics group Eddie Stobart, while the pace of fundraising was "slow" in the first quarter of 2018. Shares were down 12% on the news. The disappointing showing came after it emerged Sept. 17 that Spanish bank Banco Santander had been in preliminary discussions to purchase U.K. broker Peel Hunt. This would be the first large transaction in the sector since the Mifid II European Union regulations came into force at the start of 2018. Under Mifid II, brokers must charge asset managers separately for investment research, instead of including the cost in fees for carrying out trades. This has caused a number of asset managers to cut back on purchasing research, squeezing brokers' research revenues. Cenkos said Sept. 18 that Mifid II has cut its revenues from research and commission by 12%. Its revenues dropped 38% overall.

Nestle will sell Gerber Life Insurance to closely held Western & Southern Financial Group for $1.55 billion in cash. The world's largest food company has been under pressure from investor Dan Loeb. Leaving the insurance business, which tends to be capital-intensive and require significant regulatory supervision, will allow Nestle to focus more on businesses like coffee, bottled water, and pet care. "It will allow us to invest further in our core food and beverage business and in consumer health care," Nestle CEO Mark Schneider said Monday in a statement. The move is part of an ongoing evolution of the company's portfolio, added Schneider. Nestle's goal is to transform 10% of its portfolio's total revenue through acquisitions and divestments. The Gerber Life Insurance deal follows the sale of its U.S. confectionery business.

Thyssenkrupp employees are open to a restructuring of the company as long as their interests are protected, according to Dirk Sievers, newly elected works council chief. The company's second-largest shareholder, Cevian, has long argued that an overhaul would give its individual businesses greater freedom, making it easier for the group to explore structural options. Meanwhile, Elliott disclosed in May it had taken a stake of less than 3% in Thyssenkrupp, stoking fears of a break-up among its nearly 160,000 workers. "If an investor accepts that workers and society do have justified interests then I don't have a problem with that," said Sievers. He said there must be "a long-term perspective for workers and the business." Thyssenkrupp also is searching for a new chief executive and chairman after the group's two top bosses quit in July following pressure from shareholders.

Trian Fund Management sold 4.9 million shares of food service giant Sysco (SYY) last week, according to a recent filing. The hedge fund firm said the sales were done "for portfolio management purposes" and in connection with the expiration of a lock-up period. The stock, which Trian began buying in the second quarter of 2015 to take a 7.1% stake in the company, has roughly doubled since the middle of that year and remained the firm's second-biggest U.S. long position as of the end of the quarter. In a separate filing, Trian said that partner Matthew Peltz resigned from the board of directors of water treatment company Pentair (PNR) on Sept. 10. Peltz stepped down from the board "to devote more time to current and future board positions and his commitments to Trian Management," according to the firm. Earlier this year, Pentair completed its plan to spin off its electrical business, now called nVent Electric (NVT). While Trian owned 17.56 million shares of nVent at the end of the second quarter, it sold 1.7 million of its 14 million shares of Pentair on Aug. 13, leaving it with a 7% stake. Trian has now moved into the black after posting losses earlier in the year.

Activist debt investors are a growing threat to U.S. companies. So-called "net-short debt activism" involves a hedge fund purchasing a significant enough position in a company's bonds to call for the company to be declared in default—and an even bigger position in a company's credit default swaps, which pay remuneration when the default is confirmed. This tactic was used by credit fund Aurelius Capital Management last year against telecom company Windstream. A pending court decision could spur additional hedge funds to use the tactic. Law firm Wachtell Lipton in August wrote a memo arguing that net-short debt activism is a major danger to companies. The tactic could easily destabilize companies "in part because of the asymmetric risk that it presents. ... The company has the burden of going to court to demonstrate that no default has occurred." Until the company wins in court, creditors and counterparties can pressure the company, the memo said.

Symantec Corp. (SYMC) announced Monday it appointed three of Starboard Value's five nominees to its board, less than a month after the investor acquired a 5.8% stake in the Norton anti-virus software maker to push for change. The new board members are Starboard managing member and head of research Peter Feld, Marvell Technology Group Ltd. (MRVL) Chairman Richard Hill, and media analytics firm Comscore board member Dale Fuller. “We are excited to work with the management team and board as the company continues to execute on the transformation plan,” Feld said. Symantec, which is conducting an internal accounting investigation, is slashing jobs in an effort to boost margins. Starboard had said its board nominees could help remediate any financial-reporting issues and improve operations at the company.

Sempra Energy (SRE) announced it has entered into a cooperation agreement with affiliates of Elliott Management and Bluescape Energy Partners, which collectively own a 4.9% stake worth $1.6 billion. Per the agreement, the parties have worked together to identify a list of final board candidates and expect to collaborate over the appointment of two new directors to Sempra Energy's board in the coming weeks. In addition, Sempra Energy will repurpose its board's current LNG Construction and Technology Committee into a new LNG and Business Development Committee. The new committee will include its three existing members and, upon appointment to the Sempra Energy board, the two new directors. Elliott and Bluescape have agreed to customary standstill, voting, and other provisions. The full cooperation agreement will be filed on a Form 8-K with the Securities and Exchange Commission, Sempra Energy said.

Elliott Management has backed away from its $160-a-share bid for Athenahealth (ATHN) and could be considering a bid at a lower price, according to sources. Meanwhile, other suitors have also gone quiet, sources said. Following the hedge fund's retreat and the lack of serious interest from others, Athena has extended a final bid deadline by 10 days to Sept. 27, the sources added. Elliott, which succeeded at getting Athena to oust founder and CEO Jonathan Bush and to put the company up for sale, said in May it was prepared to pay $6.9 billion for Athena—contingent on due diligence. “There has been a lot of speculation on Elliott's motives” for saying in May it was prepared to pay $160, an industry source said. “It feels now like they never really wanted to own it,” and were just setting a floor for the auction, the source said. Meanwhile, Elliott might have learned upon doing diligence that there were unexpected problems at the company, sources said. Speculation in healthcare circles is that Athena will see sub-$150-a-share bids, sources said. The remaining suitors, including Elliott, which is teaming with Bain Capital on its bid, are likely trying to see what Athena will take in a face-saving sale, sources said. The news could be positive for David Einhorn's Greenlight Capital, which has been shorting Athena shares. “Our take is that the activist has little interest in actually buying the company, but hopes someone else does,” Einhorn said in a July letter to his investors.

Cigna (CI) and Express Scripts (ESRX) announced Monday the U.S. Department of Justice (DOJ) has cleared their $52 billion deal. In combining Cigna, a health insurer, and Express Scripts, a pharmacy benefit manager, the firms say they can improve care for patients and lower healthcare costs. Shareholders voted to approve the merger last month, despite opposition from Carl Icahn, who wrote an open letter urging shareholders to reject the deal. The companies say they are still working on final approvals from state regulators, but they expect to close the deal by the end of 2018. The DOJ's antitrust division found that after the Cigna- Express Scripts merger, there will still be at least two large pharmacy benefit management firms and several smaller PBMs in the market. The DOJ also said it would be hard for Cigna to increase PBM costs for other insurers because of competition from other integrated insurer-PBM players. The decision bodes well for competitors CVS Health (CVS) and Aetna (AET) in terms of their bid to become an integrated PBM and health insurer.

ValueAct has doubled its stake in Horizon Discovery after agreeing to a transaction to purchase the shares from Neil Woodford. ValueAct now owns nearly 10% of the British gene-editing specialist, with Woodford's stake trimmed to 18%. Horizon CEO Terry Pizzie said the U.S. investor had "expressed a desire to have a seat at the board," but that it was "something that over a period of time we will consider when we know what their motivations are." Horizon initially met with ValueAct six months ago. "They were very interested in our story and supportive of it. We were pleased they came on board," Pizzie said. For its part, a ValueAct spokesperson said: "We are in the early stages of exploring with Horizon Discovery's management team and other stakeholders the possibility of appointing a member of its team to the board of Horizon Discovery. ValueAct believes Horizon Discovery is one of the leading players in its field and is highly supportive of the company's ongoing efforts to contribute to improved healthcare."

Third Point's engagement of Campbell Soup (CPB) is intensifying as questions about a long-serving board member emerge. Third Point, which has a 5.7% stake, has been expected to face an uphill battle because 40% of the condensed soup-maker's shares are held by descendants of John T. Dorrance, the company's early president, and the descendants are resistant to changes. However, almost one-third of the shares held by descendant Bennett Dorrance—whose total stake is 15.4%—have been pledged as collateral for loans, according to proxy materials filed by Campbell Sept. 14. Sources close to Third Point's Daniel Loeb say he may use Dorrance's decision to pledge company shares for loans to raise questions about his suitability as a board member. Two sources who are in contact with Loeb said he hinted to them that he had damaging information on some of the descendants' personal and business dealings. The allegations are of the "soap opera" variety, according to a Third Point investor.

Vodafone's incoming CEO has unveiled plans to overhaul the business, which could potentially include a sale of tens of thousands of mobile masts to reduce the company's €31 billion debt pile. The announcement by Nick Read, CEO designate until he takes over from Vittorio Colao next month, followed a recent trading update that provided investors with an uninspiring outlook for the rest of this financial year because of competition in its Italian and Spanish markets. Meanwhile, Vodafone’s waning share price has opened the door to Elliott Advisors, which has purchased shares in the company and, according to one source, could pressure Vodafone to sell off its mobile masts. The telecoms company has 110,000 towers across Europe but has been hesitant about a deal under Colao. Barclays has estimated that Vodafone's European towers could be worth €12 billion. “Towers are also a consideration,” Read said, adding that Vodafone would be “pursuing” the strategy although there was “nothing today” to announce. The company will present more of its plans in November when it reports results as Read tries to improve confidence in the company's strategy.

The need to sell a business unit has delayed United Technologies' (UTX) $23 billion acquisition of Rockwell Collins (COL), according to CEO Greg Hayes. He expects the deal, which was announced a year ago, to close by the end of the month, and in the meantime, the industrial conglomerate is moving ahead with plans for a possible breakup. Bill Ackman's Pershing Square Capital Management and Daniel Loeb's Third Point have been pushing the company to pursue a split. United Technologies is looking at various options for splitting up. The company has previously talked about a possible three-way split, with its aerospace business, including Rockwell Collins, combining with jet engine maker Pratt & Whitney. The Otis elevator business would be separate, along with its Climate, Controls & Security division, which owns Carrier air conditioners. The company likely will make its decision within 60 days, Hayes said, but hinted that investors prefer the company to separate.

Daniel Loeb's Third Point LLC and Campbell Soup Co. (CPB) have filed preliminary proxy materials exhorting shareholders to vote in favor of their respective slates of board nominees. Third Point, which owns a 5.65% stake in the company, launched a proxy contest last week to overhaul Campbell’s 12-member board. It said that the soup-maker was in a “mess” and blamed its board for failing to take corrective action. The move came a week after Campbell unveiled the results of a strategic review and said it would sell its international and fresh refrigerated-foods units. Third Point's 12-person slate includes William Toler, former CEO of Hostess Brands (TWNK); Munib Islam, a partner at Third Point; and George Strawbridge, a grandchild of chemist John Dorrance who invented condensed soup and formerly ran Campbell. The company, which wants to keep its existing board in place, said it did not support any of Third Point's nominees. Two other Dorrance grandchildren and a great grandchild currently serve on the board and own a major stake. Third Point said the Campbell board's failure to have a functioning succession plan in place following CEO Denise Morrison's departure in May was "a reflection of its inability to conduct one of the most essential duties of any board of directors."

An effort by Solomon Lew's Premier Investments to shake up the board at Myer appears less likely to succeed after another major shareholder came out in support of management. "[Chairman Garry] Hounsell must step down immediately or risk having his board spilled by a strong shareholder revolt at the upcoming AGM," Lew said last Wednesday after the company reported a $486 million bottom line loss and its seventh consecutive quarter of declining same-store sales. Lew, who had been criticizing Myer since Premier bought a 10.8% stake last year, finally saw his chance to appoint three of his own directors to the Myer board and was confident fellow shareholders would reject the remuneration report at the upcoming annual meeting, triggering a board overhaul. However, Lew was unaware that veteran fund manager Geoff Wilson had been quietly gathering a stake in Myer since early July following the arrival of new CEO John King. On Friday, after seeing Myer's full-year results, Wilson's Wilson Asset Management Group (WAM) upped its stake from 4.9% to 5.5%. Wilson not only publicly declared his support for King and his new team, but also suggested WAM was prepared to play an active role in countering Premier's campaign. "The new CEO John King is a proven retailer with a strong track record, we believe his strategy will deliver," Wilson said, adding that there were some encouraging signs in Myer's full-year results and that concerns about the company's viability were fading. Wilson also said that Lew's campaign against Myer was a waste of shareholders' money and time.

A U.K. public pension group has advised members to vote against Ryanair’s financial report and to oppose the re-election of Chairman David Bonderman at the annual shareholder meeting on Sept. 20. Britain’s Local Authority Pension Fund Forum (LAPFF), whose members schemes run roughly 230 billion pounds ($300 billion) on behalf of public workers, said its recommendations reflected “significant concerns” about Ryanair's treatment of workers. Ryanair has struggled with labor relations in recent months and faced its worst one-day strike last month, disrupting the plans of about 55,000 travelers. “Ryanair has failed to adequately address concerns about the company's troubled relationship with its employees and the potential impact on its business,” LAPFF Chair Ian Greenwood said. “The company faces more strikes and allegations of poor working conditions continue to emerge. Questions about the company's business model and governance now pose a threat to shareholder value.” LAPFF said that Bonderman, who has been chairman for over two decades, had been in the role too long and there were “significant doubts” about his independence. Bonderman also faces opposition to his reappointment from Glass Lewis & Co.

The number of women holding seats in the boardrooms of Canada's big, publicly listed companies is ticking higher, but gender diversity is stagnating at the executive level, according to a new Osler Hoskin & Harcourt LLP report. As of July 31, women occupied 16.4% of the board seats at Toronto Stock Exchange-listed companies—up nearly two percentage points year over year. However, since 2015, the number of female executive officers remains virtually unchanged. That's the year Canadian securities regulators introduced a "comply or explain" policy, requiring companies to annually disclose the number of women in executive positions and on their boards. "Women occupied, on average, 15.8% of the executive officer positions at TSX-listed companies, up marginally from 15% where it has sat for the past three years," notes the Osler report. Attorney Andrew MacDougall, who specializes in corporate governance, reasons that it's harder to effect change in the C-suite than in the boardroom.

At Malin Corp.'s annual general meeting on Sept. 12, Chairman Ian Curley averted a boardroom coup. Amid the life sciences investment firm's falling share price, major shareholders including Woodford Investment Management, which has a 23% stake, and the Ireland Strategic Investment Fund voted to reject Malin's executive pay and severance plans. About 27% of shareholders also voted against re-electing CEO Adrian Howd. The company's major shareholders presided over a boardroom shake-up in July that installed Curley as chairman, but sources say Woodford and others plotted to replace Curley with Malin co-founder John Given. However, there are signs that Curley can help the company turn around, with observers citing his expertise in capital markets and capital allocation. Recently, Malin said it decided to focus on four investments with the most potential, meaning 14 others could be disposed.

On Sept. 14, Hyundai Motor Group promoted heir apparent Euisun Chung as executive vice chairman to respond to "deteriorating global trade issues and changes in competitive dynamics in major markets." He will assist his father and company chairman, Mong-Koo Chung. The move puts him one step closer to succeeding his father as head of the South Korean company, and comes as Hyundai struggles with declining profits and increasing pressure from Elliott Management to improve its governance.

Public companies won a victory in a longstanding fight to temper the impact of consultants who influence shareholder votes on hot-button topics such as executive pay.  The Securities and Exchange Commission (SEC) has rescinded two nearly 15-year-old letters written by its staff that had given mutual-fund managers greater assurance to rely on a consultant's recommendations regarding matters up for a vote at a public company's annual meeting. Many corporations say the letters boosted the influence of proxy advisers. The U.S. Chamber of Commerce has prodded legislators and the SEC to quash the letters and more tightly regulate Institutional Shareholder Services (ISS) and Glass Lewis & Co., its main competitor.  The chamber applauded the SEC's move after successfully arguing that ISS and Glass Lewis form a duopoly that has gained sweeping influence over corporate-governance matters via their recommendations.

Three of Carige's major investors will have their voting rights capped at 10% at a shareholder meeting next week unless they gain regulatory clearance for the their combined 15.2% stake, the Italian bank said. Carige’s largest shareholder, local businessman Vittorio Malacalza, is seeking to remove CEO Paolo Fiorentino at the Sept. 20 meeting after ousting his two predecessors over the past four years. A regulatory filing on Thursday showed Malacalza, who has become the single largest investor in Carige after backing three successive cash calls since 2014, had further upped his stake to 27.56%. Malacalza has submitted a list of board nominees proposing to replace Fiorentino with UBS banker Fabio Innocenzi. Meanwhile, three prominent shareholders in Carige led by Italian financier Raffaele Mincione together own 15.2% of Carige and have agreed to jointly back a separate list of board candidates seeking to keep Fiorentino in his job. Carige said Thursday it had received a letter from the Bank of Italy saying the three shareholders lacked the authorization needed for a banking stake larger than 10%. The three investors now have 15 days to obtain the necessary clearance or they will not be able to exercise their voting rights for the part exceeding the 10% threshold, the regulator said.

Sports Direct's founder and CEO Mike Ashley declared he had been “stabbed in the back” by shareholders, warning that future engagement with them would be “extremely challenging.” In a statement issued to the London Stock Exchange, Ashley—who is also the U.K. sportswear retailer's majority owner with 61% of its equity—blasted shareholders for failing to support the board. At Wednesday’s annual shareholders meeting, 9.78% of votes were cast against Ashley's re-election, while chairman Keith Hellawell resigned just before the meeting. Their re-election had been opposed by three shareholder advisory groups. “The company's shareholders appear to be affected by the pressure of the media and certain other organisations, and they have failed to support Sports Direct, Keith and myself, on this journey,” Ashley said. He added that it was “blatantly apparent that true entrepreneurs will never be accepted in the public arena.”

Activists see new investment opportunities in mid-cap companies in European markets, according to European hedge fund Teleios Capital. The new Mifid II regulations, which limit what research costs investment funds can pass on to clients, have caused a decline in the liquidity of mid-cap companies. With less analyst coverage to guide investors and management, activists are circling in an effort to find companies that are undervalued or in need of a shake-up in strategy, says Adam Epstein, co-founder of Teleios. Based in Switzerland, the fund has focused on companies that are "really under the radar screen of most investors," says co-founder Firas Abi-Nassif, adding that the strategy "gives us an edge." The fund has returned about 17.6% annualized since its inception in 2014, and says four of the companies that fit its criteria—SodaStream (SODA), Fenner, Hogg Robinson, and Cambian Group—received takeover bids this year. Teleios, which recently closed to outside investors after reaching more than $1 billion in assets, returned 6.4% this year to the end of August. HFR's activist index is up 2.1% through the end of July.

About a third of Japanese companies are not compliant with the nation's recently revised Corporate Governance Code, according to a new report by equity analysts at Jefferies. Overall, governance has improved by 2-3% in 2018, with outside influence leading the way (up 3%), followed by shareholder alignment (up 2%), skills (up 1%), diversity (up 1%), and entrenchment (0%). Companies that were already rated good or average on governance continued to get better, while those that were among the bottom companies made no big improvements. This trend indicates that there is limited pressure on the worst companies to improve, according to Jefferies. A minimum acceptable score is +100 points. However, if the current pace of change continues , it would take 10 years for the average company to improve its score from the current +40 to reach that level. Jefferies says the pace of change is too slow, but is hopeful "because activism by shareholders is on the rise. If much greater pressure is not exerted on companies to reform, we believe that the governance reform movement could lose not only its momentum, but also its credibility," says Jefferies.

Apple (AAPL) unveiled new iPhones and an iOS 12 mobile operating system on Sept. 12 that will help users manage their smartphone addiction. Among other things, Apple is rolling out a new "Screen Time" tool that generates activity reports showing how often people pick up their devices, how long they spend in apps or at websites, and the number of notifications received. Further, the operating system will enable users to designate "down time" when iPhones or iPads cannot be used. Earlier this year, Jana Partners and the California State Teachers' Retirement System called on Apple to give parents more tools to ensure children are using its devices in ways that are not hurting them, indicating that doing so would not threaten the company as it makes most of its money selling devices, not from how often they are used.

HG Vora Capital reportedly has acquired a 4.9% stake in Caesars Entertainment (CZR) and plans to push the company to sell itself or to let go of major assets, sources said. The move comes amidst growing shareholder frustration with CEO Mark Frissora. Private equity firms Apollo Global Management and TPG Capital named Frissora as CEO in 2015, months before another group of hedge funds forced the chain into bankruptcy and took control. However, many of those hedge funds were surprised by Frissora's appointment given his lack of gaming experience, a source said. Frissora was previously ousted as CEO of Hertz Holdings in 2014, following pressure from Carl Icahn, after the company reported accounting errors. There is speculation that a lack of support for Frissora from some institutional investors is keeping them from buying its shares. That, in turn, is keeping down the stock price, a source said.

Malacalza Investimenti—which is seeking to oust Carige CEO Paolo Fiorentino at a shareholder meeting next week—has upped its stake in the Italian bank. It is Carige's top shareholder with a 27.555% stake as of Sept. 7, according to a regulatory filing Thursday. Meanwhile, a rival group of shareholders is seeking to keep Fiorentino in the top job at the Sept. 20 meeting. Malacalza Investimenti said it might further lift its stake in coming months, remaining below the 30% threshold that would trigger a mandatory buyout offer.

Shareholder activism has been growing in Asia for the last decade, due in part to pressure for improved corporate governance and the protection of minority shareholders. This trend comes with various implications for investors, ranging from share price movements to corporate governance reforms. Last year, four of the 10 countries that were engaged by activist investors, excluding the U.S., were in this region. Campaign volume in Asia has seen a compound annual growth rate of 48% since 2011, according to a JP Morgan report in May. “Broadly speaking, activism has been on the rise since the global financial crisis as part of the circular change on how the wider investment world views its role in managing companies. There has been a view that the board may manage the company, but shareholders have a greater role to play in overseeing the board,” says Josh Black, editor-in-chief of Activist Insight. More activism campaigns could occur in the future due to the strong economic growth, he adds. “Shareholder activism is on the rise in Asia, but mostly in South Korea and Japan due to the maturity of their corporate governance frameworks. That said, other parts of the region are also seeing an increase in such activities,” says Roland Jude Thng, who runs the Judah Value Activist Fund of the Singapore-based Swiss-Asia Financial Services Pte Ltd. “These activities will only increase in the future due to the evolution of financial markets. The U.S. and European markets serve as a precedence to what will happen in Asia,” he says.

Telecom Italia SpA was facing challenges when it was being dominated by its biggest investor, Vincent Bollore's Vivendi SA, and the interest of Paul Singer's Elliott Management Corp.—and its wresting of boardroom control from Bollore—has hardly helped matters, according to this opinion piece. Telecom Italia's shares have declined 29% in the last six months on a total-return basis. Therefore, Elliott would probably do well to listen to Telecom Italia CEO Amos Genish, who Bloomberg News says is considering a Brazilian takeover of Nextel Telecomunicacoes and asset sales. Amid the conflict between Vivendi and Elliott, his two largest shareholders, Genish is still the company's "best shot at stability," the opinion piece says. A Bloomberg report examining Genish's merger and acquisition plans suggest he is carefully trying to walk the line between his own cautious nature and keeping Elliott happy. His plans will be presented to the board on Monday. Nextel Telecomunicacoes was valued at about $200 million last year, or approximately one-tenth of Telecom Italia's underlying quarterly profit, so it could bring subscribers to Telecom Italia's successful Brazilian business without being too expensive. The move would be a bold one, considering that Elliott's arrival at Telecom Italia prompted speculation that there might be a quick Brazilian exit strategy in the works. But this "is a better option and doesn't prevent a sale in the future," the opinion piece says. Meanwhile, possible asset sales of wholesale arm Sparkle or towers business Inwit likely would be supported by Elliott.

Nestle (NSRGY) CEO Mark Schneider is showing that he can sell, and not just buy, assets. On Tuesday, Schneider sold the Gerber Life insurance unit for $1.55 billion, and two days later announced that Nestle is exploring options for its skin health business. Although the sale of Skin Health, which could be worth between $6 billion and $8 billion, will not move the dial financially for the world's largest food company, the move is a positive one because Schneider is proving that he can get good prices for the assets he puts on the block, writes Bloomberg columnist Andrea Felsted. Moreover, Schneider is facing pressure from investor Dan Loeb to reshape the company's portfolio more quickly. Schneider deserves credit for tackling the company's diverse portfolio, but its $30.4 billion stake in L'Oreal is the one divestment he has so far resisted, despite Loeb's insistence. Any sale will undoubtedly be met with demands for the proceeds to be returned to shareholders, so Schneider will be loath to let it go without a clear plan for using the funds. Schneider is willing to sell more Nestle assets, so Loeb should let him do so when he feels the time—and the price—is right, according to Felsted.

Shareholder activism is expanding in Australia. Activists have engaged companies on matters such as corporate performance, executive pay, and governance, but they are increasingly focusing on environmental and social sustainability issues. Shareholder activism has taken a more direct approach toward engagement, which has shaken up the corporate status quo and is no longer conducted behind closed doors. Small, micro, and nano-cap stocks accounted for 87% of the publicly reported shareholder activism this year, according to a report from Schulte Roth & Zabel. However, Elliott Management's campaign for a unified shareholding structure at BHP (BHP), which led to resignations and strategic changes at the company, suggests that shareholder activism could now spread to large-cap stocks. Activity remains elevated this year, being driven primarily by occasional activists and concerned shareholders, the report says. Activism is unlikely to subside anytime soon, and some consider the surging interest in activism to be a good opportunity for companies to improve their operations and performance.

Sempra Energy (SRE) has agreed to help get two Elliott Management nominees onto its board. The two directors will take seats on an expanded committee that will have the authority to hire outside advisors. Sempra has given into some of Elliott's demands since the fund manager began publicly criticizing the company as an undervalued conglomerate in June. Since Elliott showed up, Sempra has reversed a decline in its valuation relative to the energy sector, which may create some pressure for action. Yet over the past few months, Sempra has not simply rolled over, writes Bloomberg columnist Liam Denning. Elliott originally wanted six directors, and Sempra has shown little interest in divesting South American utility assets and the Cameron liquefied-natural-gas business, which is the focus of much of the debate over Sempra's potential valuation. Tuesday's agreements seems like a truce. In Elliott's press release, the fund manager's head of activism, Jesse Cohn, had his name attached to a statement about "continuing the collaborative relationship." As a result, Sempra should expect some intensive collaboration as it rolls into 2019.

Geoff Wilson's purchase of a 5% stake in Myer thrusts him into a dangerous fight with the department store's biggest shareholder, Solomon Lew. So far Wilson and Lew are keeping it civil, but their respective positions mean it is only a matter of time before a battle arises. Premier Investments' Lew has been lobbying Myer shareholders to support his campaign to replace the board. Lew lacked the numbers for this even before Wilson Asset Management arrived on the scene. Lew's goals now seem much tougher. Meanwhile, Wilson says he supports Myer's new CEO, John King, and is yet to make a decision about the board. He might ultimately push for board members to exit, but this does not mean he will back Lew's nominees. It is not in Wilson's interests for Lew to secure control of the board with just a 10.8% stake. Wilson is more likely to share his agenda with Investors Mutual, another major shareholder that does not want Lew to gain control of the company after Lew attacked its founder, Anton Tagliaferro, repeatedly over the past year. Wilson's best bet would be for Lew to make a full bid for Myer, although Lew has denied this is a possibility. The second best option would be for King to successfully revitalize the embattled retailer.

Corporate scandals over the past year in the South African financial markets have prompted the Johannesburg Stock Exchange (JSE) to propose stronger listing rules. In a consultation paper published Wednesday, the bourse calls for boosting diversity on boards, doubling the notice period before new stocks start trading, greater disclosure when directors use shares as collateral, and supports plans for information on short-selling transactions to be made public. The exchange said it needs to review its responsibilities and tighten regulation because of recent events. Retailer Steinhoff International Holdings collapsed almost nine months ago after losing more than 90% of its value as a result of an accounting scandal. Also in December, EOH Holdings said forced stock sales due to margin calls involving two directors prompted a 35% plunge in its share price. The following month, regulators said they were studying sharp drops in stocks including Aspen Pharmacare Holdings and Resilient REIT amid speculation they were about to be the subject of a negative report by short seller Viceroy Research. In March, the financial services watchdog said it was probing trading in shares including Capitec Bank Holdings, EOH, and Mr Price Group. JSE is accepting comment on the proposals until Oct. 22.

Rather than reflecting weak prospects, NXP's (NXPI) poor valuation is indicative of shareholder turnover. The automotive chip giant's shares have plummeted by nearly a fourth since early June, when its deal with Qualcomm (QCOM) started to fall apart. Qualcomm was prepared to pay $127.50 per NXP share, valuing the company at $44 billion. Eight weeks after Qualcomm walked away, NXP stock is at $92. By most measures NXP stock now looks undervalued. However, the low stock price likely is not a fair reflection of NXP's prospects, and the company has a major stake in key tech trends. The best explanation for NXP's weak stock-market valuation is its shareholders. Hedge funds took over after the Qualcomm deal was announced, with the top five shareholders at the most recent quarter-end including Elliott Management, Third Point, HBK, and Pentwater Capital. Qualcomm initially got a good price for NXP, but as NXP's operating performance improved, Qualcomm's initial $110-a-share offer looked too low. Arbitrageurs swooped in, successfully agitated for more, and stuck around—but ultimately less successfully. Some hedge funds are probably fleeing right now, while long-term shareholders appear to be waiting for a better price. Prospective investors should know there will continue to be sellers for some time yet. But waiting for the selling to end may mean missing a good buying opportunity.

The Securities and Exchange Commission (SEC) has taken the step of withdrawing guidance from 2004 that enshrined proxy advisory firms as stewards of corporate governance. The SEC's guidance encouraged corporations to consult proxy firms to obtain favorable recommendations, writes the editorial board of the Wall Street Journal. The SEC said rescinding the guidance is intended "to facilitate the discussion" about "the proxy voting process, retail shareholder participation, and the role of proxy advisory firms." Glass Lewis and Institutional Shareholder Services (ISS) control 97% of the proxy advisory market, and there are potential conflicts of interests in providing proxy voting and consulting services. Shareholder proposals by activist investors on subjects from board diversity to climate change are voted on in block by large asset managers, based on recommendations from ISS and Glass Lewis. The rise of shareholder activism, along with a shift toward more index-fund investing, has made proxy firms more powerful. "Withdrawing the SEC's 2004 guidance is the first step in subjecting the proxy giants to much-needed scrutiny," according to the editorial board.

The California Public Employees' Retirement System, Sacramento, (CalPERS) has voted against 438 directors at 141 companies because of the companies' failure to respond to CalPERS efforts to urge greater board diversity.  Officials at the $361.1 billion pension plan wrote letters in the summer of 2017 to 504 companies in the Russell 3000 asking them to improve board diversity. CalPERS sent a second letter to non-responsive companies in December, cautioning that it would use its proxy votes to hold boards accountable for their failure in this regard.  As of the end of July, 151 of the companies had added at least one diverse director to their boards. CalPERS is beginning to hear from executives at some of the companies at which it cast a "no" vote that are now willing to engage CalPERS regarding the lack of boardroom diversity, says Simiso Nzima, investment director, corporate governance.

Companies want to restrict how much, and how frequently, they must provide information to investors. Tweeting in August that top business leaders want to stop reporting financial information quarterly, President Donald Trump said he would ask the Securities and Exchange Commission (SEC) to consider requiring disclosure only every six months. The SEC appears to be moving away from disclosure and toward allowing companies to put out less information to the investing public, writes Peter J. Henning. In a recent meeting about entrepreneurship, SEC Chairman Jay Clayton said he wanted to make it easier for retail investors to buy shares in private companies, which have minimal disclosure obligations. Companies complain that disclosure requirements force them to focus on the short term at the expense of making investments that may pay off years later. Less disclosure would make it more difficult for the SEC to assess whether enough information is available to judge the potential risks and rewards of an investment. "In an era when activist investors routinely take on corporate boards, such as Third Point's seeking to remove all 12 directors from Campbell Soup (CPB), limiting how frequently a company must release information could also forestall outside challenges, further insulating management," notes Henning.

Investors should not treat environmental, social, and governance (ESG) scores as settled facts to be used on their own, but as potentially worthwhile analysis that needs to be understood before being acted on. Investors who blindly follow the scores established by the scoring companies are buying into those opinions—even thought a company's score can vary widely from one scoring company to another. For example Tesla (TSLA) is ranked by MSCI at the top of the automobile industry on ESG issues, while FTSE Russell ranks it as the worst automaker globally on ESG issues. Sustainalytics ranks Tesla in the middle. The rankings vary, depending on what is measured and how the measurement is affected by disclosure. MSCI granted Tesla a near-perfect score for environment, because it has selected two topics as the most significant for the car industry: the carbon generated by its products, and the opportunities the company has in clean technology. FTSE granted Tesla a "zero" on environment, because its scores ignore emissions from its cars, rating only emissions from its factories (to confuse things further, FTSE's separate "green revenue" score gives Tesla a 100%). Tesla points to another significant difference in scoring: what to do when a company doesn't disclose. FTSE says it has to assume the worst if no information is provided about issues that matter to a company, and that granting it the worst score encourages disclosure. MSCI, meanwhile, is more magnanimous, assuming that if there's no disclosure the company operates in line with regional and industry standards. Sustainalytics declined to explain its methodology, but it gives points for disclosure of policies and low scores for issues where there is too little disclosure to calculate. Another problem is how to collate the separate environmental, social, and governance scores. For example, there is some question over whether a highly polluting company should be able to offset that by having strong governance and treating workers well.

The recent problems at CBS Corp. (CBS) highlight a larger issue with the corporate-governance system. Directors need to be held more accountable when they fail to set the proper tone at the top, and currently there is almost no consequence for most governance failures. Three of CBS’s most prominent personalities have been accused of harassment: TV host Charlie Rose, former CEO Les Moonves, and “60 Minutes” Executive Producer Jeff Fager. They have all denied these allegations and the board’s investigations continue. However, recent reports about how Moonves and Fager tried to deal with the allegations are reflections of what appears to be a culture problem at CBS. The New York Times reported that Moonves tried to find one of his accusers a job at CBS when she threatened to go public with the allegations, and he did this without reporting the situation to the board. Meanwhile, Fager apparently sent a threatening text message to a CBS News reporter who was reporting on the allegations. The correct response for a CEO who learns of allegations against him is to report them to the board. So how did the culture develop that seems to have empowered these two executives to allegedly take action that could even just be perceived as keeping information from the board? From a legal perspective, it is extremely unlikely current or former directors will have any liability. The only way to hold directors accountable for their failure to fulfill their duties is through class action-type lawsuits where, if the directors lose, they would be responsible for enormous levels of damages. A better approach is that statutes and regulations set out a more aspirational standard for conduct expected for directors and an administrative remedy when directors are found to have breached that standard—such as censure, reasonable levels of fines, or barring directors who failed the test from holding a fiduciary relationship.

Some experts believe the erratic public comments made by Tesla (TSLA) CEO Elon Musk should have sounded an alarm for the company's board, but six of its nine directors said they fully supported him as "he continues to lead the company moving forward." According to Yale School of Management's Jeffrey Sonnenfeld, "The board is completely negligent here. Enron while it was collapsing did not have turnover as high as this company does. If you go back 18 months, it's 50 significant people that have left...Where is the board in terms of looking at exit interviews and what's being said by those leaving, at this unparalleled level of instability?" He believes Tesla needs a disciplined executive at the helm who knows how to run complex industrial enterprises but also understands changing technology and markets. Sonnenfeld says Musk could better serve Tesla as "some sort of chief creative officer and perhaps vice chairman or a non-executive chairman. He's not at the stage of life where he's fit to be CEO. At best, he's still operating the way a startup operates. But he's not a startup anymore." Portfolio manager Aeisha Mastagni adds, "The board needs to start ensuring he is running the company for the benefit of all shareholders. Unfortunately, this board is not sufficiently independent to properly oversee Elon; the board is rife with conflicts, including Elon's brother Kimbal Musk, who didn't take his role as a board member seriously enough to attend at least 75 percent of the meetings." Of the board, Sonnenfeld says, "They are violating a duty of care. They have a reckless disregard for facts and for operational, financial, and communications failures."

Since Germany passed a law requiring public companies' supervisory boards to be at least 30% female, the proportion of women in the boardroom has risen from 25% to 31% in the past three years. However, senior management remains overwhelmingly male. Centuries-old ceramics manufacturer Villeroy & Boch was recently forced to leave a position on its supervisory board vacant for several months because it was unable to find a qualified female candidate. Franziska Giffey, Germany's minister of family affairs, said Villeroy & Boch's problem was good news, a sign that the country's mandatory quotas on women's representation were working. Monika Schulz-Strelow, head of FiDAR, a group campaigning to see more women in the boardroom, also welcomed the news. “That vacant seat showed that the law has more teeth than we thought,” she said. Firms without women at the top are risking damage to their corporate image, she added. The business community is generally opposed to legally enforced equality measures, but supporters say quotas have made a significant difference in accelerating change. That success has driven some to demand new quotas focusing on women in senior management. Among Germany's top 200 companies, measured by annual revenue, just 8% of senior managers are women. Giffey's ministry is working on new legislation to force companies with zero women in senior positions to publicly explain why.

There is general consensus that the U.S. proxy voting system is broken, but people disagree on possible solutions. The current system faced wide-ranging criticism at a recent meeting of the Investor Advisory Committee, a group of private citizens charged with advising the Securities and Exchange Commission (SEC) on regulatory priorities. At the meeting, SEC Commissioner Kara Stein said the current proxy voting system is “far from ideal…. There is no question that [it] is inefficient and can lead to erroneous results. We can and must do better.” Most presentations agreed with that view. One of the two most common themes was that the SEC should consider using blockchain technology to improve the ability of shareholders to know that their voting intention was properly registered and tabulated. Secondly, some speakers said that to help boost shareholder voting participation in a proxy vote or annual votes, both issuers, or corporations, and dissidents in a contested proxy vote should have direct access to beneficial shareholders. The SEC intends to hold a roundtable on proxy voting this fall.

Umakanth Varottil, an Associate Professor of Law at the National University of Singapore, questions the influence of proxy advisors over institutional investors, citing the potential to destabilise management. He notes that Housing Development Finance Corporation Ltd. Chairman Deepak Parekh narrowly remained as a non-executive director after U.S. proxy advisory firms ISS and Glass Lewis recommended that institutional investors vote against the resolution for extension of his appointment beyond October 2019. "The HDFC episode has touched a raw nerve – the leverage that U.S. proxy advisors have over the governance of Indian companies," Varottil said. While the Indian advisory firms are subject to registration with the Securities and Exchange Board of India under its regulations issued in 2014 to research analysts, the U.S. ones are not. Management have raised alarm bells that U.S. proxy advisory firms, therefore, resort to a 'hit and run' strategy and that they do not possess sufficient understanding of the Indian markets and the nuances of specific Indian companies and their board structures. The answer, Varottil says, may lie in a market-based approach that places the burden on institutional investors. "No longer can they simply outsource their governance obligations; they must take responsibility for individual voting decisions based on the advice received," he said. "They must adopt a stewardship role by which they enhance value for their own investors on the one hand and improve the governance of their portfolio companies on the other ... Given the increasing influence of institutional investors in the Indian markets, the need for a stewardship code has never been stronger."

Bloomberg columnist Liam Denning argues in this opinion piece that Tesla Inc. (TSLA) needs a new board, noting that its directors have stayed relatively quiet as CEO Elon Musk engaged in bizarre behavior beginning with an Aug. 7 tweet about funding being secured for a buyout deal. His recent behavior has revived calls for Tesla to appoint a COO to assist Musk in his duties, but Denning argues that such a strategy will not work until a deeper problem is fixed. "In one respect, a board's relationship with the CEO is like that of a parent with a teenager: providing latitude to grow and thrive while also keeping wilder instincts in check. In Tesla's case, this is trickier than usual, because Musk is the largest shareholder, the chairman, and the central character in the stock's narrative of innovation and disruption," writes Denning. "Very independent this board isn't. That Musk's own brother, Kimbal, a food entrepreneur, is still a director eight years after the company went public isn't the only issue, but it epitomizes the problem." Tesla did appoint two new directors in 2017 in response to calls for reform following the 2016 SolarCity Corp. acquisition. "Even if he were fine with the turnover in the senior ranks, any new COO would surely demand some sort of guarantee that he could overhaul Tesla's operations without Musk countermanding him. But how could this board realistically provide such backing?" questions Denning. "Musk surely could use an extra pair of hands. But it won't do much good if he remains free to simply slap them away whenever he feels like it."

At the time Third Point's Daniel Loeb announced that he wants to replace the entire board of Campbell Soup (CPB) with his chosen candidates, the company's sales are down, and its stock has fallen 25% in the past year. Campbell said in late August that it would sell its fresh food business and Campbell International, pushing the stock down another 2%. Interim CEO Keith McLoughlin also has acknowledged that "simply put, we lost focus." Kate Weckerly, head of the crisis communication department at the public relations firm SSPR, said the company's board should have expected pressure from an investor, especially as it has "lost $7 billion in value since 2012." She said the board should have communicated with Loeb at the earliest point possible. "They should have sat down with the investor group and figured out what they wanted. It's clear to me that the board wasn't listening," Weckerly remarked, adding that it should have known that selling off a couple of divisions would not placate investors. Further, she said the board needs to provide shareholders with "transparent and timely communication. Update them twice a week or daily if needs be, to keep the communication flowing."

Corporate executives are placing a greater emphasis on return on invested capital (ROIC) due to the success of companies that prioritize capital allocation, along with pressure from the investment community. This trend should increase the efficiency of the capital markets and create opportunities for investors to benefit from improved corporate governance, writes David Trainer, CEO of New Constructs, an independent research firm in Nashville, Tenn. The ability of a company to earn a return on capital greater than its cost of capital has long been understood to be the primary driver of value creation, but there is a large disconnect between CEOs and investors regarding the importance of ROIC. Companies that focus on ROIC thrive in all markets, but they especially outperform in down markets—the only S&P 500 stocks to rise 10% or more in 2008 were companies that earned consistently high ROICs. In addition, an emphasis on ROIC prevents overinvestment in low-return projects that destroy long-term shareholder value. The contrast between General Motors (GM) and General Electric (GE) shows why ROIC is so important. One company prioritized ROIC over accounting earnings, sold off underperforming segments, and successfully invested in its future, while the other company focused on buying back shares to hit EPS goals and ignored the decline in its ROIC. According to Trainer, the turnover at GE after losing $160 billion in market value—the company recently replaced its CEO and half its board—more than anything explains why CEOs are focusing more on ROIC: if they don't, they might not be CEO for much longer.