Media Center

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

Vodafone CEO Nick Read Ousted After 44% Collapse in Shares
ISS and Glass Lewis Recommend That Argo Shareholders Vote “FOR” All Seven of Argo’s Highly Qualified Director Nominees
Investor Who Called for Credit Suisse Break-Up Says Latest Overhaul Isn't Enough
U.K. Social Housing Landlord Faces Call for New Leaders
Coupa Investor HMI Says Co. Should Fetch $95 Per Share in Sale
Fuji Soft Proxy Fight the Latest Test of Japan Inc. Board Independence
U.S. Companies Face Backlash for Bypassing Investors on Top Pay
Opinion: An Uphill Battle Could Await Trian as the Firm Snaps Up a Stake in Disney
Investment Giants Call on Chemicals Industry to Phase Out 'Forever Chemicals'
Spain Weighs Indra Options as Amber Capital Calls for Break-up, Sources Say
Vanguard Fined for 'Misleading' ESG Claims
Republican Senator Floats Resolution to Overturn Labor Department's ESG Rule
Continental General Gets Two Board Seats in Alpha Metallurgical Settlement
ESG Fund Chaos Angers Investors as Greenwashing Concerns Mount
ISS to Demand Diverse Directors in 2024
Wave of Shareholder Activism to Hit Europe in 2023
As CEOs Grapple With Which ESG Issues to Focus On, They Should Prioritize Where Their Companies Can Make the Biggest Impact
Cracker Barrel's Rude Guest Doesn't Have the Answers
Opinion: When It Comes to Corporate Governance, One Size Does Not Fit All
Most in Finance Support ESG, Despite Republican Attacks
ESG Ratings: Considerations in Advance of Proxy Season
Thoughts for Boards: Key Issues in Corporate Governance for 2023
Governance in 2023: Value(s) Added
Bob Iger's Biggest Challenge at Disney: Finding the Next Bob Iger
79% of Directors in Ireland Do Not Integrate ESG Metrics Into Executive Directors' Compensation
The Future in Focus: Investor Relations in 2023
Understanding the Role of ESG and Stakeholder Governance Within the Framework of Fiduciary Duties
Opinion: The Wall Street Fight That Has Echoes of the Cold War
BlackRock's Proxy Votes Reveal a Nuanced Stance
Greater ESG Scrutiny Prompts Caution

12/5/2022

ISS and Glass Lewis Recommend That Argo Shareholders Vote “FOR” All Seven of Argo’s Highly Qualified Director Nominees

Business Wire (12/05/22)

Argo Group International Holdings Ltd. (ARGO) has announced that Institutional Shareholder Services (ISS) and Glass Lewis & Co. have recommended that shareholders vote “FOR” all seven of Argo’s director nominees at the company’s upcoming Annual Meeting of Shareholders to be held on December 15, 2022. In addition, Voce Capital Management LLC, the owner of approximately 9.5% of the company’s common shares, has informed the company that it has voted all of its shares on the BLUE proxy card in support of the seven Argo nominees at the company’s upcoming 2022 annual meeting. In making its recommendations, ISS stated in its December 2, 2022 report: “The dissident has not made a compelling case for change. The highest priority for ARGO is the ongoing strategic review. There is no reason to believe that the process is not being conducted to advance the best interests of shareholders, and there is no indication that a key competency or perspective is absent from the strategic review committee.” Further, “the addition of Dan Plants in early August only bolstered the board's credibility, particularly because he was appointed to chair the strategic review committee.” In making its recommendations, Glass Lewis stated in its December 2, 2022 report: “Overall, we recognize that steps taken by the incumbent board and management have significantly transformed Argo into a focused U.S. specialty commercial insurance business and the resulting company appears stronger, more efficient, and better positioned to generate value for shareholders than the legacy structure, in our view.” Further, “Shareholders should note that Capital Returns has not offered alternative suggestions to improve the business beyond pursuing a sale of the whole Company. Given that the board is already considering a sale and has solicited a large range of potential counterparties as part of the strategic review, we do not believe the Dissident Nominees would be clearly additive to the strategic review process or likely to improve the outcome for all shareholders, if appointed to the board.”

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12/5/2022

U.K. Social Housing Landlord Faces Call for New Leaders

Bloomberg (12/05/22) Louch, Will

A shareholder is urging Home REIT Plc to replace its leadership team following a short seller attack in November. The Boatman Capital Research published an open letter addressed to Home REIT director Simon Moore calling for the resignation of the U.K. social housing landlord's board. Boatman cited issues including claims that the landlord failed to conduct suitable due diligence on some of its tenants and make appropriate disclosures, as well as inflated the value of its property portfolio. Home REIT held back publication of its earnings and its shares have dropped more than 30% since a Viceroy Research report last month sharing concerns about the financial health and governance of some of the landlord's key tenants. The short seller also rebuked Home REIT's accounting practices and the fee structure of its outside management team. Home REIT called the report baseless and misleading. The Boatman Capital said Home REIT's rebuttal to that report exposed “substantive areas” where the landlord had been withholding in its disclosure, and a change in leadership was necessary. The shareholder said it is not affiliated with Viceroy, but that entities related to Boatman own shares in Home REIT and it may consider making a bigger investment. Boatman would also consider engaging with other investors to force change if it is not forthcoming. Home REIT claims it intends to mitigate homelessness in Britain while also producing inflation-protected income and capital returns. Its modus operandi is to purchase property which is then rented out on leases of more than two decades to charities and other organizations.

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12/5/2022

Coupa Investor HMI Says Co. Should Fetch $95 Per Share in Sale

Bloomberg (12/05/22) Deveau, Scott

HMI Capital Management, the leading shareholder in Coupa Software Inc. (COUP), said the company should fetch at least $95 per share in a sale after getting interest from at least one possible purchaser. HMI Capital owns a 4.8% stake in Coupa. HMI Capital stated in a letter to Coupa's board on Monday that the company is an excellent business with a great management team. HMI Capital said it would not back any transaction unless it was at the right price and came after a proper sales process. The shareholder said it may be a difficult time to realize the full value of the business in the current market. “Timing is everything when it comes to successful M&A, and the standalone option simply may make more sense right now than a transaction, and certainly makes more sense than a deal at the wrong price,” said RK Mahendran, HMI Capital partner, in the letter seen by Bloomberg News. Vista Equity Partners is weighing a potential acquisition of Coupa, sources said last month. HMI Capital, which noted it has never written a public letter to a company before, argues that Coupa is undervalued and says it would spurn any offer that failed to capture the potential upside. Shares in the company closed at $64.67 in New York Friday, giving it a market value of $4.9 billion. “Our worry is that now is a difficult time to realize the full value of Coupa’s long-term potential as a market-leader, given that Coupa’s share price is currently trading at a significantly depressed level and there are near-term sector-wide challenges in the software industry,” Mahendran said. Coupa’s shares are down approximately 63% from a year ago amid a wider selloff in the technology sector. HMI Capital said that, based on other deals in the sector, Coupa should yield more than $95 per share in a sale. Last week, another Coupa shareholder, Meritage Group, said in a regulatory filing it had conveyed its own views on what it thought would be a fair price for the company without disclosing additional details. “The future for Coupa is an exciting one, and any sale price or process that fails to appropriately value Coupa’s long-term potential at the expense of seeking to rush into a deal would not be tolerated by HMI,” Mahendran said.

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12/4/2022

Fuji Soft Proxy Fight the Latest Test of Japan Inc. Board Independence

Reuters (12/04/22) Yamazaki, Makiko

Singapore-based hedge fund 3D Investment Partners scored a win in its proxy fight with Fuji Soft Inc. by gaining board seats for two of its candidates. This is the latest incident to raise doubts about the independence of outside board members from Japanese corporate management following expansion of independent directors after nearly 10 years of governance reform. Governance experts say outside directors only have nominal independence if they are closely associated with management or do not provide proper oversight. 3D, which controls more than 20% of Fuji Soft, nominated four additional candidates for the company's nine-member board at Sunday's extraordinary general meeting (EGM), citing current outside directors' inability to resolve longstanding capital allocation deficiency. Fuji came to the defense of its current board, telling Reuters that the independence of its outside directors "has been ensured with no conflict of interests with shareholders. They have given objective opinions and have contributed to fostering active debate." 3D also pursued an EGM at Toshiba Corp. (TOSYY) this year to renew the push for a strategic review to consider going private and other options. Meanwhile, Oasis Management of Hong Kong requested an EGM from Fujitec Co. Ltd. (FJTCY) to oust all six incumbent outside directors and appoint seven nominees backed by the fund. According to the Tokyo Stock Exchange, 92% of the approximately 1,800 firms on its prime section classify at least 33% of their directors as independent, although measuring their independence from management beyond a set of written criteria is difficult. Governance experts say having a committee to nominate directors would help guarantee independence, yet just 3.9% of top-tier companies have a statutory nomination committee, where most of its members must be outside directors. The practice of senior government officials obtaining post-retirement private-sector positions has also been criticized as a corrupting element in Japanese bureaucracy.

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12/3/2022

Opinion: An Uphill Battle Could Await Trian as the Firm Snaps Up a Stake in Disney

CNBC (12/03/22) Squire, Kenneth

Ken Squire, founder and president of 13D Monitor, writes that Trian Fund Management could face an uphill battle in its efforts to engage Walt Disney (DIS). According to recent reports Trian took an approximately $800 million stake in Disney and may be interested in growing this stake. Trian is reportedly seeking a board seat, advocating for the company to make operational improvements and reduce costs, and it has expressed its opposition to Robert Iger’s reappointment as CEO. The calls for changes at Disney are very similar to what Dan Loeb and Third Point were advocating for at Disney earlier this year. On Sept. 30, Disney reached a deal with Third Point, including adding former Meta executive Carolyn Everson to its board of directors. On Nov. 11, Disney announced companywide cost-cutting measures and told division leaders that layoffs are likely. "So, a lot of what Trian is looking for – board change (particularly with former CEO Bob Chapek now off the board) and cost reduction – has either already happened or is in the process of happening," says Squire. Another thing about Trian, says Squire, is that it’s a very thoughtful investor, known for its detailed, comprehensive white papers. "The firm did not go into this without a plan and that plan was far from spontaneous or reactive. It was a plan that Trian has likely developed over many months. And it was presumably thrown for a loop when Disney announced that it replaced Chapek with former CEO, Bob Iger," writes Squire. "The fact that Trian had not yet built its full position when its holding was reported is more evidence that the firm felt it had to go public about its investment earlier than it wanted to in reaction to Disney’s announcement." Iger was an extremely respected and value-adding CEO at Disney for many years and the stock has reacted favorably to news of his return. So, it is interesting that Trian is reportedly opposing Iger’s appointment. Nor is the firm throwing its support behind outgoing CEO Bob Chapek. "Knowing Trian and knowing activists as we do, this could mean only one thing: Trian’s plan includes its own idea for a new CEO, something that would have been a lot easier to implement last week before Chapek was replaced by Iger," says Squire. "This is going to be an uphill battle for Trian. Disney recently reached a deal with activist investor Third Point and is not likely to settle with another activist for a board seat, particularly in light of all of the changes it has already made. Moreover, Trian would likely want Nelson Peltz or Ed Garden to be the firm’s representative on the board and Nelson is already on three public company boards and Ed is on two. Disney is definitely in need of serious change, but in the past three months the company has announced a cost-cutting plan, refreshed the board, and changed its CEO. It is not unreasonable to see if these initiatives work before considering additional changes. If Disney does not offer a seat to Trian, the firm would have to resort to a proxy fight to gain a seat, which it is unlikely to win on a platform of more change and opposing Bob Iger as CEO." More will soon be revealed, as Trian has until Dec. 9 to nominate directors for the 2023 annual meeting of shareholders.

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12/2/2022

Investment Giants Call on Chemicals Industry to Phase Out 'Forever Chemicals'

BusinessGreen (12/02/22) Murray, James

Investors with $8 trillion of assets under management and advice this week called on the world's biggest chemical producers to commit to phasing out persistent chemicals that pose a long-term threat to environmental and human health. A group of 47 asset managers have written to the CEOs of the world's largest chemicals producers to warn that growing awareness of the dangers posed by "forever chemicals" means they now present a significant legal risk, following an increasing number of lawsuits against firms and a tightening of legislation around the world. "We encourage you to lead, not be led, by phasing out and substituting these chemicals," the letter states. "In addition to the financial risks associated with litigation, producers of persistent chemicals face the risk of increased costs associated with reformulating products and modifying processes, which can have significant implications for company performance." The letter was co-ordinated by Aviva Investors and Storebrand Asset Management, and is backed by a host of leading asset managers including Axa Investment Managers, Credit Suisse Asset Management (Switzerland) AG, Resona Asset Management, and Robeco. Eugenie Mathieu, earth pillar lead at Aviva Investors, said chemical manufacturers were "lagging behind expectations when it comes to transparency and accountability. Investors are rightly pushing for better disclosure on the volume of substances being produced globally, which can inform better investment decisions and identify the corporations leading the transition towards a more sustainable and responsible future."

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12/2/2022

Spain Weighs Indra Options as Amber Capital Calls for Break-up, Sources Say

Bloomberg (12/02/22) Orihuela, Rodrigo; Soto, Alonso

Spain and the board of Indra Sistemas SA (ISMAY) are weighing possibilities for the company after Amber Capital LP called for it to be broken up, sources said. Board members have discussed options for Indra’s future since the hedge fund said Nov. 22 that the state-controlled company should be divided in two by separating its defense activities from information technology, the sources said. But the board hasn’t had any formal deliberations on a break-up, they noted. Any sale of the technology division could be politically sensitive because of the thousands of jobs at stake, some of the sources said. However, while the effect on jobs is a worry, it’s unlikely to be a deal-breaker if a decision is made to split up the company or sell the unit, they said. Spain owns 25% of Indra, according to regulatory data, and has said it wants to reach 28%; Amber owns 5%. The board is unlikely to make a decision prior to the government signalling its preference, one of the sources said. Half of the board comprises independents, the majority of whom were appointed in late October. Potential investors have already shown informal interest in the technology unit, a source said. Amber Chief Executive Officer Joseph Oughourlian said that each of the two spun-off units could potentially be worth as much as the current €1.8 billion ($1.9 billion) market value of the entire company, and urged a split-up, or for the technology unit to be sold or combined with another firm. Indra’s defense division is the more profitable of the two units, and is broadly thought to have robust growth prospects — particularly if Spain delivers on its recent pledge to boost military spending. The technology unit, known as Minsait, accounts for most of revenue, offering consulting services in a range of sectors and providing voting systems. The two divisions were carved out within the company under previous Executive Chairman Fernando Abril-Martorell, who was replaced in 2021 by Marc Murtra, who serves as a non-executive chairman. Murtra, a government nominee, has indicated in the past that he’s not opposed to splitting the company up.

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12/2/2022

Republican Senator Floats Resolution to Overturn Labor Department's ESG Rule

Pensions & Investments (12/02/22) Croce, Brian

Republican Sen. Tom Cotton (Ark.) has proposed legislation to overturn the U.S. Department of Labor's new rule permitting retirement plan fiduciaries to factor climate change and other environmental, social, and governance (ESG) issues into selecting investments and exercising shareholder rights. The joint resolution states that Congress "disapproves" of the rule, "and such rule shall have no force or effect." Cotton declared, "Retirement plans should prioritize investments with the highest return, not ESG scams." The resolution will not have traction in a Democrat-controlled Senate, but further reflects Republicans' resentment of the Department of Labor's Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights rule. The rule, which was finalized on Nov. 22, reverses two Trump-era rules. The rules barred retirement plan fiduciaries from investing in "non-pecuniary" vehicles that sacrifice investment returns or assume risk, and outlined a process a fiduciary must follow when making decisions on casting a proxy vote. DOL's Employee Benefits Security Administration "believes a final rule is necessary to reverse the 2020 rule's chilling effect on the integration of ESG factors into the investment selection and asset management process," said Lisa M. Gomez, assistant secretary for employee benefits security. The new ESG rule will be enacted on Jan. 30.

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12/2/2022

As CEOs Grapple With Which ESG Issues to Focus On, They Should Prioritize Where Their Companies Can Make the Biggest Impact

PRNewswire (12/02/22)

Today's CEOs face the challenge of not only balancing the priorities of multiple stakeholders, but also addressing a broad array of environmental, social, and governance (ESG) issues. As they identify the areas on which their companies should focus, their north star should be where their firms can have the biggest positive impact, as emphasized in a new report by The Conference Board ESG Center. Specifically, the impact that companies can have on their own welfare, that of their stakeholders, society at large, and the natural environment. CEOs should consider three key areas where they can move the needle: the products and services they offer in the marketplace, how they operate their businesses and treat their employees in the workplace, and the actions they take through government relations, communications, and corporate citizenship in the public space. The report also notes that CEOs should work with their boards to ensure that ESG is appropriately integrated into their companies' strategies and goals. And as they turn to implementation, integral to success will be having their C-suites aligned—a significant task in and of itself, and one that the CEO is best positioned to lead. The Conference Board produced the study with the support of KPMG, Morrow Sodali, and Weil, Gotshal & Manges. It is based largely on their recent roundtable exclusive to CEOs. Running through all the report's insights is the centrality of the CEO in driving ESG. "While CEOs may initially find it useful to develop a 'sustainability strategy,' the goal should be to incorporate ESG into planning to such an extent that the company has a 'sustainable strategy,'" said Paul Washington, co-author of the report and Executive Director of The Conference Board ESG Center. Among other things, the board should be fluent on key topics. CEOs can help to achieve this by educating the board on ESG issues that tie to the firm's main risks and opportunities; organizing an annual enterprise risk meeting for the full board, at which senior risk executives provide updates on the latest regulatory developments and expectations, mission-critical tasks, industry trends, and broader ESG lessons learned; encouraging directors to seek outside education on ESG, for example, by providing information about external governance programs and seminars; and having a transparent conversation with the board about the ESG issues where the company is in compliance or cost-saving mode, and where it is taking an industry leadership role.

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12/2/2022

Cracker Barrel's Rude Guest Doesn't Have the Answers

Wall Street Journal (12/02/22) Jakab, Spencer

Cracker Barrel Old Country Store (CBRL) investor Sardar Biglari has been a longstanding thorn in the company's side, but his aggression has ceased for the moment following a truce and standstill contract that saw an 11th board seat established in September for Biglari Holdings' (BH) nominee Jody Bilney. Cracker Barrel on Friday issued fiscal first-quarter results. The company's earnings per share decreased by 45% year over year while guidance for revenue growth for the rest of the fiscal year stood at at 6% to 8% and was less than expected commodity inflation. Previous criticism by Biglari appears unfounded. Since his lobbying gave Biglari Holdings management of Steak 'n Shake in 2008, Cracker Barrel's shares have generated more than 20 times its return and about double the S&P 500's. But the pandemic has been trying for the company, which has been trailing casual dining competitors like Darden Restaurants (DRI), Bloomin' Brands (BLMN), Dine Brands Global (DIN), and Brinker International (EAT) since February 2020. Biglari might be in a position to exploit Cracker Barrel's underperformance and weariness after five proxy fights he has led. Nevertheless, Cracker Barrel's return on invested capital exceeded 20% in the four years before the pandemic, which its large competitors were unable to replicate. Biglari Holdings itself only topped that mark once, nine years ago. Cracker Barrel's modernization attempts have not panned out, but a lessening of economic stresses should allow the company to again thrive using its tried-and-true playbook. Channels for growth are limited with little store expansion, but a dividend yield of 5% shows the company is capable at managing capital.

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12/1/2022

ESG Ratings: Considerations in Advance of Proxy Season

Harvard Law School Forum on Corporate Governance (12/01/22) Mencher, Michael; Flynn, Vince

The growing importance of ESG to investors has many companies contemplating ratings improvement strategies leading up to proxy season, according to Cooley. Before taking steps to improve any ESG rating, companies should engage with investors and other stakeholders to determine whether this particular rating is meaningful to them. To determine which ESG ratings apply to a company, Cooley generally recommends reviewing ISS and Glass Lewis proxy reports to determine which ESG ratings are included therein, engaging with investors to determine which ESG ratings they use that apply to the company, and reaching out to the ratings providers themselves. An ESG ratings improvement strategy should account for the fact that ESG ratings target a variety of investor audiences. Before investing in ESG ratings improvement efforts, companies should assess their overall ESG goals and consider which ratings are most relevant to actualizing those goals. An effective ratings optimization strategy also requires understanding the significant variation in the subject matter ESG ratings are aiming to measure. Adopting a generic “market best practices” ESG approach is generally an inefficient strategy for ratings improvement. Understanding the data sources and the assumptions underlying ESG ratings should play an important role in establishing an ESG ratings improvement strategy, Cooley adds.

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11/30/2022

Governance in 2023: Value(s) Added

IR Magazine (11/30/22) Maiden, Ben

Ben Maiden, editor of IR Magazine, investigates how corporate values on issues such as executive compensation are set to feature prominently in 2023. Large U.S. companies continue to face pressure to take public positions on a range of political and social issues such as racial equity. Some of those that have done so may think twice about doing so again after feeling the pushback from lawmakers and others. But investors and shareholder advocacy groups won't face such impediments in the coming proxy season and are expected to push companies on their values, says Maiden. A reason companies may find themselves in the crosshairs on values-based issues is the recent spike in anti-environmental, social, and governance (ESG) shareholder proposals in the social and environmental spaces. Research from Georgeson finds twice as many proposal submissions that were critical of the ESG landscape in 2022 (52) as in 2021 (26). In many cases, these anti-ESG proposals appear at face value to be similar to pro-ESG resolutions, but their supporting statements reveal very different intents. Those conservative proposals didn't gain much traction — according to Georgeson they secured an average support of 9.5% but observers expect them to continue to appear in 2023. As a result, governance professionals say it is time for companies to identify more proponents in their proxy statements so investors can better understand their perspectives. Companies need to educate themselves and shareholders about people submitting proposals, says June Hu, an attorney with Sullivan & Cromwell, noting that more proposals are being filed by individuals on behalf of groups. She says that faced with proposals on a sensitive topic, companies should consider what's right for their constituents, not just shareholders. She also notes that companies have for some time been willing to negotiate with proponents to potentially withdraw their resolutions, particularly on sensitive social matters, but proponents are less willing to settle following a change at the U.S. Securities and Exchange Commission (SEC). The agency's division of corporation finance in fall 2021 updated guidance on its process for deciding whether to give no-action relief under Rule 14a-8 for companies that wish to exclude a proposal from their proxy statements. This was seen as making it less likely that the SEC would grant such relief and as a result mean that a larger number and array of ESG proposals would get onto proxy statements — something that is generally accepted as having come true, says Maiden. "The shift is also generally seen as allowing proponents to get more granular and more prescriptive resolutions to votes at AGMs that in turn can face more opposition from investors."

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11/29/2022

Understanding the Role of ESG and Stakeholder Governance Within the Framework of Fiduciary Duties

Harvard Law School Forum on Corporate Governance (11/29/22) Lipton, Martin

Over the past decade, investors, companies, and commentators have increasingly accepted and adopted stakeholder governance as the way to pursue the proper purpose of the corporation and have embraced consideration of environmental, social and governance (ESG) issues in corporate decision-making toward that end, writes Martin Lipton of Wachtell, Lipton, Rosen & Katz. "But an emerging movement opposed to any consideration, at all, of ESG factors threatens to erase the gains that have been made over the past ten years and revert to the outdated view that the purpose of a company is solely to maximize short-term shareholder profits." The objective of creating sustainable, long-term value recognizes that the purpose of forprofit corporations includes value creation for investors, but also recognizes that the interests of other constituents — namely employees, customers, suppliers, and communities — are inextricably linked to that very creation of long-term value, says Lipton. "Vindicating this concept of corporate purpose necessarily requires consideration of ESG principles — failure to do so would undermine the long-term value and success of the enterprise." In carrying out decision-making, Lipton says, "corporate law imposes on boards a fiduciary duty of care to act on a reasonably informed basis after due consideration of relevant information and appropriate deliberation. This means that directors must take actions necessary to assure themselves that they have the information required to take, or refrain from taking, action; that they devote sufficient time to the consideration of such information; and that they obtain, where helpful, advice from appropriate experts. As we set out here, there should be no doubt: Longterm value maximization as the corporation's purpose and objective is entirely consistent with the board's fiduciary duty." Lipton continues, "By ignoring or not taking into account the interests of stakeholders and ESG considerations, a corporation will not be able to sustain itself over the long term. Considering the interests of not only shareholders, but also all who are critical to the success of the company, is essential to ensuring long-term sustainability, and is consistent with the board's fiduciary obligation to inform itself of and consider all relevant information." In recent months, Lipton writes, "the concept of ESG has become fraught with political and legal implications as actors and lawmakers on both sides of the political spectrum and at all levels of government have seized on ESG and attempted to conflate it with progressive or liberal values. Asset managers are commonly the target of anti-ESG attacks, as are companies, boards, and executives. These attacks and attempts to besmirch the ESG rubric misunderstand that the concept of ESG is as simple as it is uncontroversial: ESG is merely a collection of the risks and issues that all companies must carefully consider and balance, taking into account their own specific circumstances, in seeking to achieve sustainable, long-term value. The politicization of ESG does not alter or undermine the ability of boards and companies to consider stakeholder and ESG risks and issues."

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11/28/2022

Opinion: The Wall Street Fight That Has Echoes of the Cold War

Financial Times (11/28/22) Indap, Sujeet

Quentin Koffey—who after stints at Elliott Management and DE Shaw now has his own hedge fund, Politan Capital Management—is seeking a board seat at Masimo Corp. (MASI), a California-based maker of pulse oximeters. Koffey seeking election to the Masimo board is itself nothing extraordinary, but the fight has captivated Wall Street for a particular reason, writes Sujeet Indap, Wall Street editor for the Financial Times. Masimo does not think it should be so straightforward for Koffey to stand for election. It is insisting that the investor disclose the specific identities of his largest fund backers. Masimo has even gone as far as speculating in legal filings that Koffey just may be a “Trojan horse” representing “sovereign entities that do not respect — and have attempted to steal — intellectual property belonging to U.S. companies." The Masimo board has been careful not to explicitly accuse Koffey of being a foreign agent or of having malign motives. Rather, they believe Masimo shareholders deserve to know who is behind Politan before allowing Koffey to seek a board seat. Koffey disagrees, saying Masimo's information requirements needed to stand for election are both irrelevant and legally impermissible. He is asking a Delaware court to invalidate the requirements. The Politan/Masimo fight has erupted at a crucial moment in activist investing, says Indap. The U.S. Securities and Exchange Commission has just rolled out a universal proxy card that makes it easier and cheaper for shareholders to run against company-backed directors. The worry for companies is that now marginal or unsavoury shareholders can seize upon the universal proxy to snatch board representation. Corporate lawyers are advising incumbent directors that they can impose some order on board elections through a mechanism known as advance notice provisions in company bylaws. Advance notice provisions tended to be mild. In some instances, however, information shared would go on to reveal that a director nominee had previously unknown ties that could be sinister. Masimo may now be overplaying its hand, says Indap. "The worry for companies and corporate lawyers not involved in this dispute is that Masimo's advance notice requirements will be judged to have gone too far and that the Delaware court may finally curtail advance notice provisions as a general matter." Besides disclosing the identities of Politan's investors, Masimo is demanding information on past and future Politan activist campaigns as well as details of investment holdings of these backers and even their household members with the theory that those details could show conflicts of interest. “The bylaws protect against a 'Trojan Horse' situation where a nominating stockholder and its director nominee are acting on behalf of — and potentially sharing confidential information with — undisclosed actors who do not have Masimo's best interests in mind,” Masimo wrote in its court filings. Indap says, "It may be that Koffey has bad ideas and bad intentions for Masimo, as the company's board worries. But the question really is why does the board get to cut off the debate on both Koffey's ideas for the company, as well as whatever shortcomings he brings, without permitting shareholders to decide those questions for themselves."

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