Media Center

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

Engagement Today: AVI's Bauernfreund on Japan Insurgencies
ISS, Glass Lewis Support Bow Street’s Mack-Cali Nominees
Occidental Petroleum Holders Elect Board, Increase Shares and Authorize Berkshire Warrants
Washington State Becomes Next to Mandate Gender Diversity on Boards
Hong Kong Stock Exchange's Plan to Attract Tech Listings by Expanding Dual-Class Shares Structures Gains Traction
U.S. Firms Shield CEO Pay as Pandemic Hits Workers, Investors
Papa John’s Second Record Sales Month Fattens Hedge Fund Backer
Trian Trims GE Stake, Is 'Highly Supportive' of CEO Larry Culp
WeWork Board Factions Head for Clash Over New Directors
Bill Ackman Exits Investments in Berkshire Hathaway, Blackstone
Starboard Set to Win Eight Board Seats at GCP Applied Technologies—Sources
Bank of East Asia Extends Business Review Deadline Due to Virus
Carl Icahn Exits Bankrupt Hertz at Loss of Almost $1.6 Billion
GameStop Issues Investor Presentation Highlighting Its Progress Driving Value for All Stockholders
CIM Commercial Trust Responds to Letter From Engine Capital
Starboard Delivers Open Letter to GCP Shareholders
Mack-Cali, Bow Street Battle Wages On
Bow Street Sends Letter to Mack-Cali Shareholders Highlighting Board's History of Broken Promises
France's State-Backed BPI Raises 'Lake of Cash' for Stakes in Domestic Companies
Merit Medical Inks Deal With Starboard Value on Operations-Boosting Initiatives
Hertz Awards Over $16 Million in Retention Bonus to Key Executives
Investor Raises Pressure on Renewables Firm Energiekontor
Mack-Cali Board Minority Accuses Colleagues of Ignoring Concerns
U.S. Investor Mittleman Brothers Slams 'Bargain' $468m Village Roadshow Takeover Proposal by BGH Capital
EasyJet Founder Loses Bid to Oust Management in Strategy Showdown
Investors Slam GameStop's Board for Destroying $2.5 Billion in Shareholder Value
Bow Street-nominated Mack-Cali Directors Speak Out
Axel Springer Among Bidders for eBay's Classifieds Business
SoftBank's Masa-Misra Partnership Strained by Losses, Infighting
Driver Management Exposes First United's Refusal to Acknowledge the Truth
Ackman Tempts Musk to Join Cities With Howard Hughes Presence
Starboard Delivers Open Letter to GCP Shareholders
EasyJet's Future Hangs on Founder's Bid to Dismiss Leadership
SEC Urged to Take Global Lead in Requiring ESG Disclosures
Sony: Consolidation Begins
Hertz Creditor Talks Reach Impasse Ahead of Friday Deadline
What's Happening In Shareholder Activism In Canada?
SEC Chair Warns of Risks Tied to ESG Ratings
Recommendation from the Investor-as-Owner Subcommittee of the SEC Investor Advisory Committee Relating to ESG Disclosure
Activist Appetite Grows for Small Caps
This Company May Be JANA's Next Target
Opinion: Why You Should Discuss ESG on the Earnings Call
Asset Owners Continue to Flock to Sustainable Investments – Survey
What Hertz Had Under the Hood Wasn't Pretty
Board Diversity May Be a Covid Casualty
Hertz Was Already in Terrible Shape. The Pandemic Finished It Off.
Occidental Petroleum: The Coiled Spring That Could Jump to the Upside
Masayoshi Son, SoftBank's Worried Visionary
NBIM to Explain Votes Against Company Boards
Carl Icahn's Love for Occidental Petroleum Might Be Costly
The SEC's Suggested 'Speed Bump' Is an Affront to Institutional Investors

5/29/2020

ISS, Glass Lewis Support Bow Street’s Mack-Cali Nominees

Bloomberg (05/29/20) Deveau, Scott

A push to revamp the board of Mack-Cali Realty Corp. (CLI) from one of its largest investors received a boost Friday with two prominent shareholder advisory firms urging investors to support some its director nominees. Institutional Shareholder Service Inc. urged shareholders to elect all eight directors nominated by Bow Street LLC, while Glass Lewis & Co. encouraged them to vote for five of its nominees. ISS said in a report Friday that, despite the transition risk associated with Bow Street’s plans to remove Mack-Cali Chief Executive Officer Mike Demarco and the bulk of its board, several of its nominees have extensive experience in the sector, and have expressed a willingness to serve as interim CEO. It said while the company has made strides in transforming its business, there were serious obstacles to improving its operating performance, including excessive leverage and a development-heavy approach that consumes cash. Given the apparent inability or unwillingness of the legacy directors to challenge the company’s chairman, Bill Mack, Demarco, and others on the board, ISS said it saw little reason to preserve a strong minority of legacy directors. Glass Lewis said in its own report Friday that investors should support five of Bow Street’s nominees, arguing as well that change was needed at the company to improve its governance. The advisory firm said increased representation for Bow Street on the 11-member board would send a strong message to the Mack-Cali-backed board members that the “regressive governance tactics employed over the last year were profoundly misguided.”

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5/28/2020

Hong Kong Stock Exchange's Plan to Attract Tech Listings by Expanding Dual-Class Shares Structures Gains Traction

South China Morning Post (05/28/20) Yu, Enoch

Hong Kong Exchanges and Clearing (HKXCY) has gained backing among fund managers and stockbrokers for its plan to attract more technology giants to list in the city by expanding the use of dual-class shares. The exchange has proposed permitting corporate shareholders, founders, and key managers to own shares with more voting rights than other investors. Fund managers and stockbrokers are concerned about a small number of shareholders wielding outsize influence on a company's future, and they hope more safeguards will protect ordinary shareholders. The exchange is inviting U.S.-listed mainland Chinese tech firms due to the increasingly frayed relationship between the U.S. and China. At least 38 U.S.-listed mainland tech giants, including Tencent Music (TME), are currently ineligible for listing in Hong Kong because they have corporate shareholders with a weighted voting rights (WVR) structure, which is allowed in the U.S. and Singapore. The HKEX said roughly 42% of all U.S.-listed mainland tech firms have WVR structures, while 84% of the 50 biggest technology unicorns in mainland China have corporate investors. The 2018 listing reform allowed companies with multiple share classes with different voting rights to list on the exchange. "The new rules would particularly benefit any innovative businesses that are a part of an ecosystem of companies, or those that are locked in a corporate structure after rounds of pre-IPO funding," said Dechert partner Stephen Chan. However, the Hong Kong Investment Funds Association says the sunset clause limiting the WVRs shares to no more than 10 years, with an option to renew by no more than five years subject to the approval of independent shareholders, is too long.

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5/28/2020

U.S. Firms Shield CEO Pay as Pandemic Hits Workers, Investors

Reuters (05/28/20) DiNapoli, Jessica; Kerber, Ross

Six U.S. companies identified in a Reuters review of regulatory filings have moved to shield their executives’ compensation from the pandemic’s economic fallout as they laid off or furloughed workers. The six are: Sonic Automotive Inc. (SAH), which operates 95 U.S. car dealerships; plush toy seller Build-A-Bear Workshop Inc (BBW); restaurant operator Red Robin Gourmet Burgers Inc. (RRGB); retailer Signet Jewelers Ltd. (SIG); fashion brand DKNY owner G-III Apparel Group Ltd. (GIII); and fracking sand producer Covia Holdings Corp. (CVIA). Reuters found 75 other companies that disclosed they are considering changes to executive pay plans in light of the pandemic’s impact on their businesses. In an April 21 filing, for example, Sirius XM (SIRI) said it “may be prudent” to change executive pay terms to ensure it can attract and retain “senior management talent.” Critics say protecting executives’ pay in downturns undermines practices intended to tie compensation to shareholder returns. Nell Minow, vice chair of corporate governance consultant ValueEdge Advisors, said such plans need both an upside and a downside. “Otherwise, there is no point,” she said. Others counter that the moves to protect executive pay might serve investors as well as executives. “It’s critical to motivate the team and get through the crisis,” said Yonat Assayag, partner at pay consultant ClearBridge Compensation Group. “Through that lens, a lot of these decisions are very much aligned with shareholder interests.”

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5/28/2020

WeWork Board Factions Head for Clash Over New Directors

Bloomberg (05/28/20) Feeley, Jef; Tan, Gillian; Savov, Vlad

The board of WeWork is scheduled to vote on appointing two new directors on Friday amid an ongoing battle between investor SoftBank Group (SFTBY) and a competing WeWork faction. An attorney for WeWork told Delaware Chancery Court Judge Andre Bouchard that the meeting is designed to fill two vacant seats by former legal counsel for General Electric (GE) Alex Dimitrief and former Convergence Group chief financial officer Frederick Arnold. SoftBank and the rival board faction are clashing over the former's move to ditch a $3 billion agreement to purchase stock from former WeWork CEO Adam Neumann and other shareholders. SoftBank initially agreed to the purchase in 2019 as it bailed out WeWork, but told stockholders in March that some of the deal's conditions had not been met. Two independent WeWork directors sued SoftBank, and one is Benchmark Capital partner Bruce Dunlevie, whose firm had planned to sell its WeWork shares to SoftBank. The new directors will be on a special board committee that will decide whether Dunlevie and fellow board member Lew Frankfort can properly represent WeWork in the lawsuit. Bouchard on Wednesday denied bids by Dunlevie and Frankfort to block WeWork from adding new directors. "We believe SoftBank has no basis to question the special committee's authority to bring this action and we are pleased by the court's recognition that any effort by SoftBank to challenge that authority must be presented" to the judge, stated a spokesman for the plaintiffs. WeWork officials supported by SoftBank claimed that they are acting in the best interest of the company.

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5/27/2020

Bill Ackman Exits Investments in Berkshire Hathaway, Blackstone

Bloomberg (05/27/20) Deveau, Scott

Bill Ackman said in a May 27 conference call that Pershing Square Capital Management sold off its investments in Warren Buffett's Berkshire Hathaway Inc. (BRK.A), Blackstone Group Inc. (BX), and Park Hotels & Resorts Inc. (PK). He said Pershing Square exited Blackstone and Park Hotels because it was not able to build large enough positions at attractive prices before markets rebounded. Ackman continues to view Berkshire as a sound investment, but he believes recent market volatility might create better opportunities to deploy capital on higher-returning investments. He said the markets have changed significantly since Pershing Square first disclosed its position in Berkshire in August 2019. "The one advantage we have versus Berkshire is relative scale," Ackman explained. "Berkshire has the problem, if you will, of deploying $130 billion worth of capital." However, he noted that Pershing Square has about $10 billion of capital to invest and therefore can be more nimble. "We should take advantage of that nimbleness, preserve some extra liquidity, in the event that prices get more attractive again," he added. Further, Ackman used the proceeds from a credit hedge to reinvest in some of its portfolio companies, such as Lowe's Cos. (LOW), and those companies have gained as much as 47% from the price he purchased them at after the coronavirus outbreak. "We still think everything we own is undervalued," he said.

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5/26/2020

GameStop Issues Investor Presentation Highlighting Its Progress Driving Value for All Stockholders

Globe Newswire (05/26/20)

GameStop Corp. (GME) has filed a detailed investor presentation titled "Driving Value for All Stockholders," highlighting its recent refreshment of the board and management, as well as leadership's progress on executing the business transformation plan "GameStop Reboot." The information provided in the presentation addresses the board's contention that its slate of director nominees is better qualified than the two candidates nominated by Hestia Capital Partners and Permit Capital Enterprise Fund to guide GameStop through its turnaround and deliver returns to all stockholders. The presentations points out that within the last two years GameStop has added six new independent directors—including two directors added under a cooperation agreement with Hestia-Permit—and enhanced the company's corporate governance practices. On GameStop’s newly refreshed board, which features nine out of 10 independent directors, seven directors have joined in the last 19 months. The directors targeted by the dissident stockholders, Thomas Kelly and Jerome L. Davis, have announced their intention to continue to serve as board members to steward the transition of the new directors in direct response to stockholder feedback requesting an orderly transfer of institutional knowledge, before retiring in June 2021. The board refreshed the company’s leadership team in 2019, intentionally recruiting executives, including CEO George Sherman, with experience working with large retailers that have undergone successful business transformations.

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5/26/2020

Bow Street Sends Letter to Mack-Cali Shareholders Highlighting Board's History of Broken Promises

Seeking Alpha (05/26/20)

Bow Street is sending a letter to Mack-Cali Realty Corp. (CLI) shareholders highlighting the need for independence, accountability, and oversight in the Mack-Cali boardroom following a series of broken promises made by the legacy board of directors and management. Ahead of Mack-Cali's annual meeting on June 10, Bow Street urges shareholders to vote the gold proxy card for all of its independent nominees. Bow Street's letter says Mack-Cali has sought to remove from the board "the only four truly independent directors, aiming to replace them with hastily selected nominees interviewed and approved by [CEO Michael] DeMarco; sidelining these four truly independent directors in the Boardroom by excluding them from strategic discussions and decision making, and relegating them to committee positions designed to minimize their impact; manipulating the outcome of the 2019 annual meeting to permit William Mack to remain on the Board and retain his Chairmanship, despite being voted off the Board; failing to force Mr. Mack to recuse himself from conversations with prospective third-party bidders while he was hiring advisors to prepare a bid himself; supporting a CEO who lied on an earnings call regarding credible strategic interest to purchase Mack-Cali at nearly double the current share price; and misleading shareholders by concealing the conclusions of the Shareholder Value Committee." The letter adds that debt has increased in the absolute, and leverage has increased from 7x to 12x Net Debt/EBITDA as of last quarter. Mack-Cali's leverage is now at the highest levels in the company's 20-year history. Funds from operations have declined nearly 30%, from $1.83/share in 2015 to $1.30/share today. Further, during a period of broad economic prosperity, Mack-Cali's Net Asset Value has decreased from $34/share to $33/share.

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5/23/2020

Investor Raises Pressure on Renewables Firm Energiekontor

Reuters (05/23/20) Steitz, Christoph

ENKRAFT has accelerated a campaign at German renewables group Energiekontor (EKT), arguing that a recent shareholder vote shows growing dissatisfaction about perceived conflicts of interest at the board level. ENKRAFT had previously submitted changes to the group's three-member supervisory board, which includes Energiekontor's two co-founders, who collectively own 51.53% of the group at a value of 288 million euros ($314 million). The investors desire a new strategy for Energiekontor, and have said that if founders and management cannot come to an agreement on a new approach, then the value of the company could be better realized via a sale. Records on the company website indicate that at the May 20 annual general meeting (AGM) most minority shareholders refused to support the supervisory board. Excluding the co-founders' voting stake, the percentage of "no" votes at the meeting was about 33% of the total submitted by minority shareholders. "The voting results in the AGM [are] evidence that minority shareholders do not feel adequately represented anymore by the board," noted ENKRAFT managing director Benedikt Kormaier. ENKRAFT said it controls nearly 3% in Energiekontor. "The majority of outside shareholders are evidently not comfortable with the conflicts of interests the founders inherently have between their role in the supervisory board and their role as largest shareholders," Kormaier said. Energiekontor shares have climbed by about 8% since ENKRAFT's demands were first publicized earlier this month.

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5/22/2020

Mack-Cali Board Minority Accuses Colleagues of Ignoring Concerns

Bloomberg (05/22/20) Deveau, Scott; Tan, Gillian

Four Mack-Cali Realty Corp. (CLI) directors, elected after a proxy fight with Bow Street LLC last year, have issued a rebuke of the board's old-guard majority, saying they are disregarding concerns about the strategic direction of the real estate investment trust. "Mack-Cali has dismissed us as instruments of Bow Street in an attempt to shift attention from the severe governance problems that have hobbled the company and denied value to its shareholders," the group said in a new statement. "This is blatantly false." The four argue they are all fully independent and aim solely to serve shareholders, provide proper oversight, and ensure that the company's decisions were rooted in strong corporate governance. The directors accuse the others of putting a "rubber stamp" on decisions favored by CEO Mike DeMarco and lead director Alan Bernikow. They take issue with the fact that after a lengthy strategic review last year, only one of several recommendations made by a special committee of the board was implemented or made known to shareholders. Bow Street LLC owns a 4.9% stake in Mack-Cali and has nominated the four dissident directors for re-election, as well as four new candidates. Mack-Cali has refused to include the four dissident directors on its own slate for re-election. Mack-Cali has defended itself against Bow Street's accusations that it failed to adequately explore a potential sale, arguing that a proposal from the investment firm Rizk Ventures in December was not credible. Mack-Cali has also denied Bow Street's claims that at least four other prospective bidders have expressed interest since January.

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5/22/2020

EasyJet Founder Loses Bid to Oust Management in Strategy Showdown

Reuters (05/22/20) Young, Sarah

EasyJet (ESYJY) founder Stelios Haji-Ioannou was unsuccessful in his effort to oust the airline's top three executives on May 22, giving it a brief respite in its fight for survival during the Covid-19 pandemic. Haji-Ioannou's family has a stake in easyJet of 34% and is its largest investor. With air travel largely halted and easyJet planes parked around the globe, Haji-Ioannou had ratcheted up his public campaign for management to scuttle a $5.6 billion order for 107 new Airbus (EADSY) aircraft that he says easyJet can't afford. A virtual shareholder meeting was called to remove the chairman, chief executive, finance director, and one other director that became a proxy vote on easyJet's broader strategy. The company said more than 99% of votes cast by independent shareholders supported the board. "The airline industry is facing unprecedented challenges and the board's immediate priority has been to take the necessary steps to successfully guide easyJet through this period of uncertainty," said Chairman John Barton. "The board seeks good relationships with all of the company's shareholders and hopes to be able to re-engage constructively with Sir Stelios." EasyJet's financial position is healthy enough to get through the crisis, and the new planes are needed to replace ageing jets and will help it stay competitive when flying resumes, according to management. Haji-Ioannou said he will continue to learn why the Airbus deal is going forward.

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5/21/2020

SoftBank's Masa-Misra Partnership Strained by Losses, Infighting

Bloomberg (05/21/20) Alpeyev, Pavel; Turner, Giles; Elstrom, Peter

SoftBank Group Corp.'s (SFTBY) $100 billion Vision Fund reported this week that it lost $17.7 billion in the latest fiscal year, the biggest loss in its 39-year history. As shares in the group are hammered and SoftBank Group founder Masayoshi Son plans to sell $42 billion in assets, there are signs of tension around Vision Fund manager Rajeev Misra. Misra has come under fire for an alleged effort to tarnish internal rivals including COO Marcelo Claure, and the company has acknowledged that it is conducting an internal review. Elliott Management Corp., meanwhile, has built a $3 billion stake in the company, asking SoftBank to name three independent directors and create a new board committee to improve the Vision Fund's investment process. Sources say Elliott wants SoftBank to get to the bottom of Misra's alleged campaigns against his colleagues, expressing dismay at the infighting among top managers. Some insiders speculate that Son needs Misra's financial expertise to navigate the next few months of asset sales, share buybacks, and loan repayments. Still, there are long-term risks for Son in tolerating what many see as a divisive culture and chaotic infighting that have plagued the Vision Fund. Misra's fate is ultimately intertwined with the Vision Fund, which now risks becoming one of Son's worst missteps. "Misra personifies what Vision Fund is about—a bunch of dealmakers obsessed with leverage who have no business running a venture capital fund," said Amir Anvarzadeh, a strategist at Asymmetric Advisors in Singapore. "But it would be naive to put all of their problems at Misra's feet. Son has the ultimate word."

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5/21/2020

EasyJet's Future Hangs on Founder's Bid to Dismiss Leadership

Bloomberg (05/21/20) Philip, Siddharth Vikram

Top EasyJet PLC (ESYJY) shareholder Stelios Haji-Ioannou is calling for the ouster of the U.K. airline's leadership, including CEO Johan Lundgren, Chairman John Barton, and CFO Andrew Findlay. Shareholders will vote on the motion at EasyJet's annual shareholder meeting on Friday. The clash centers on an order for more than 100 Airbus SE A320neo jets that comprise the bulk of 4.6 billion pounds in capital spending planned through fiscal 2023. Haji-Ioannou says the purchase will drain cash as the air-transport industry faces years of subdued demand in the aftermath of Covid-19; he wants EasyJet's existing fleet cut to 250 aircraft from 318. EasyJet says it has revised the order in light of the Covid-19 pandemic and also deferred the delivery of 24 planes to an undetermined date. The airline says it has reduced near-term capital expenditures by more than 1 billion pounds, though it has yet to announce job cuts of a level announced by peers.  Haji-Ioannou has generally failed to attract broad shareholder support in previous battles with management, but he has prompted some change, including, potentially, the departure of Barton's predecessor as chairman in 2013 and EasyJet's higher-than-average payouts. This time, Haji-Ioannou's call to cut spending comes with the industry mired in the deepest crisis in its history, which could turn more shareholders to his way of thinking. A defeat for Lundgren would still come as a surprise, as he and his family own about 34% of EasyJet, and the company reckons it could have the backing of shareholders controlling 45% of votes. Invesco (IVZ), Ninety One U.K., and Phoenix Asset Management, who together hold about 15% of EasyJet stock, have publicly pledged their support to management, and major shareholder advisory firms have also recommended that people vote against Haji-Ioannou's resolutions.

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5/21/2020

Hertz Creditor Talks Reach Impasse Ahead of Friday Deadline

Bloomberg (05/21/20) Boston, Claire; Ronalds-Hannon, Eliza; Welch, David

Hertz Global Holdings (HTZ) is stuck in a deadlock with creditors, including owners of asset-backed securities (ABS) tied to fleets of vehicles, with a May 22 deadline to either extend a forbearance agreement or make roughly $400 million in lease payments. Sources say Hertz may need to seek bankruptcy protection if an agreement cannot be reached. Top shareholder Carl Icahn could still make an 11th-hour rescue to protect his $1.6 billion investment. An increase in used-vehicle prices from tepid levels in the last two months has given ABS holders less incentive to again extend the forbearance period. J.D. Power says those prices bottomed out in the week ending April 19, down more than 15% from where they were prior to the federal lockdown. Prices were down less than 10% by the end of the first week of May. A liquidation scenario entails a risk for bondholders, because although quick vehicle sell-offs can help maximize the value of rapidly depreciating holdings, swamping the market with too many cars depresses prices. Few bondholders expect used-vehicle prices to plummet to such a level that owners of the largest, highest-rated portions of the ABS would take losses. Sources say while Hertz ABS have faced downgrades, any harm from liquidations would likely be felt in smaller, lower-rated portions of the securities. Senior segments of Hertz debt issued between 2015 and 2019 changed owners on Thursday for between 93.5 and 95 cents on the dollar, while Trace says a lower-rated portion of a 2015 deal slipped around 19 points to trade at 81 cents. Any action by Icahn could force him to deal with bondholders like Apollo Global Management (APO), which has been purchasing Hertz debt at distressed prices to offset a short bet in the credit-default swaps market.

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5/28/2020

Recommendation from the Investor-as-Owner Subcommittee of the SEC Investor Advisory Committee Relating to ESG Disclosure

Harvard Law School Forum on Corporate Governance (05/28/20) Bennington, Allison

The author, a member of the Securities and Exchange Commission (SEC) Investor-as-Owner Subcommittee, argues that it is time for the SEC to address environmental, social, and governance (ESG) disclosure. Investors have informed the SEC Investor Advisory Committee has learned that they consider certain ESG information material to their investment and voting decisions, regardless of whether their investment mandates include an "ESG-specific" strategy. Because of the patchwork approach to disclosure outside of the United States and the lack of clear disclosure obligations in the United States, third party ESG data providers have sprung up to fill the void between what companies disclose publicly and the information investors seek to make investment and voting decisions. The plethora of ESG data providers, all with different standards and criteria, has led to a significant burden on issuers, as each data provider uses different information sources to conduct its analysis and produce its work product. The Subcommittee recommends that the Commission "begin in earnest an effort to update the reporting requirements of Issuers to include material, decision-useful, ESG factors." Doing so will help provide investors with the material, comparable, and consistent information they need to vote, while also giving issuers a framework for disclosing said information themselves instead of relying on largely third party ESG data providers. It will also "level the playing field" among all issuers regardless of market cap size or capital resources and enable the SEC to take control of ESG disclosure for the US capital markets.

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5/27/2020

Opinion: Why You Should Discuss ESG on the Earnings Call

IR Magazine (05/27/20) Tomlinson, Brian; Eckerle, Kevin

Environmental, social, and governance (ESG) issues are relevant to the long-term performance of a company and should be mentioned in the earnings call. This is especially true in the era of Covid-19, which has elevated the importance of employee safety and pay, the treatment of suppliers, and broader stakeholder issues at a time of increasing expectations for corporate behavior. More ESG information is appearing with greater frequency in proxy statements, 10Ks, and across a variety of other disclosure formats. Investor-focused ESG calls and webinars are becoming more common, and IR teams have been encouraged to adopt ESG approaches by the National Investor Relations Institute, reflecting the growing investor pressure for more and better ESG information. Integrating ESG issues into the earnings call can be difficult, however, as limited disclosure makes meaningful discussion and analysis difficult. The authors recommend establishing the foundation for success by getting C-suite support and conducting an assessment to identify the most financially material ESG issues. IR leaders should build up to the earnings call by incorporating ESG content into extant disclosures, and they should also share ESG-specific questions with sell-side analysts to shape the Q&A discussion. There must also be a plan for how to use each of the four earnings calls in the fiscal year so as to make ESG and long-term strategy content a consistent component of the company's value creation narrative.

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5/27/2020

Asset Owners Continue to Flock to Sustainable Investments – Survey

Pensions & Investments (05/27/20) Williamson, Christine

The percentage of asset owners that have chosen to utilize sustainable investment practices climbed to 80% in 2019 from 70% in 2017, according to a survey of 100 institutional investors by Morgan Stanley Investment Management. Another 15% said they are seriously contemplating adoption of sustainable investment practices. "There is substantial demand for sustainable investing, more than I could have imagined five years ago. It's no longer regional. It's across the globe," said Theodore Eliopoulos, vice chairman and head of strategic partnerships at MSIM. "We're seeing the convergence of long-term performance, risk consideration, and mission alignment for asset owners. They stand side-by-side for investors, who are no longer substituting one of these factors for another," he said. The most robust driver of commitment to sustainable investment—81%—was demand from investors, followed by the possibility of good investment returns (78%); evolving policy and regulation (76%); and risk management (75%). Sixty-three percent said the most important result of implementing sustainable investment strategies was the reputational benefit, while 49% said the practice assisted with employee retention and 43% said it helped to improve environmental outcomes. Although 22% said they invest only with money managers using sustainable investment approaches, 35% said they are contemplating doing so. Eighty-eight percent said environmental issues matter most. Gender diversity and education are the top social issues, at 67% each.

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5/20/2020

NBIM to Explain Votes Against Company Boards

Pensions & Investments (05/20/20)

Norges Bank Investment Management as of May 20 plans to publish and explain all votes against company boards at shareholder meetings. The firm, which operates the assets of the 10.2 trillion Norwegian kroner ($986 billion) Government Pension Fund Global, will publish the reasoning behind its votes against a company board one day after shareholder meetings. "In most cases, we will support the board's recommendation," NBIM stated. The firm is hoping the move to be more transparent over its voting decisions will aid the market in better understanding its views. "As a global investor, we depend on an efficient voting process," Carine Smith Ihenacho, chief corporate governance officer, said in the statement. "We see that in several markets, there are still manual voting processes, several layers of intermediaries, and a lack of electronic solutions. We depend on issuers, investors, business participants, and regulators cooperating to make relevant information available, propose improvements, develop good electronic voting solutions, and modernize frameworks." NBIM also published on May 20 four position papers delineating its perspectives on board independence, multiple-share classes, shareholder rights in equity issuances, and related-party transactions. The perspectives outlined in the papers "will serve as a basis for our discussion with boards," NBIM said. With respect to board independence, the position paper said a board should "guide company strategy and monitor management performance without conflicts of interest. A majority of shareholder-elected board members should be independent of management, dominant shareholders, and business relationships." And "in majority-controlled companies, at least a third of board members should be independent." Further safeguards should be implemented where board decisions "are particularly vulnerable to conflicts of interest," with management not serving on audit or compensation committees, for instance.

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