Media Center

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

AT&T Doesn't Need Static on This Call
Japan to Exempt Asset Managers From Stricter Investment Rules
Nestlé to Refresh Bottled-Water Business as Sales Turn Flat
Ericsson Earnings Top Forecast as 5G Takes Off
New ASIC Standards Will Make Organizations More Risk Aware
Marathon Petroleum Board, Investors Are Said to Discuss CEO
Three Buyout Groups Vie for Scout24's Autoscout Unit: Sources
AT&T in Talks to Resolve Elliott Management's Campaign
Nestlé Has a $20 Billion War Chest. Here's How It Could Be Returned to Shareholders
SEC Seeks Board Explanation for Blocking Investor Proposals
Elliott Blasts Unizo for Handling of Takeover Offers
Arnaud Lagardère Ordered to Publish LC&M Accounts
Pension and Hedge Funds Push U.S. SEC to Reconsider Proxy Adviser Guidance
D.E. Shaw Gives Searing Indictment of Waste at Emerson Electric, Including Fleet of 8 Airplanes
CorSport: Improvement in Milan's Financial Situation
Video: D.E. Shaw Releases Scathing Report on Emerson Electric
MGM Resorts to Sell Circus Circus for $825 Million, Strikes Deal to Lease Back Bellagio
Sunrise Shareholder Canada Pension Plan Investment Board Backs $2.8 Billion Capital Hike
Box Hires Advisor for Potential Board Changes - Report
Hudson Executive Capital to Nominate Directors to Board of USA Technologies
USA Technologies Rejects Effort by Hudson Executive Capital to Take Over Board
Conduent: Carl Icahn Aggressively Adds Shares After Texas Lawsuit
Amber Capital Locks Horns With Lagardere Over Lawsuit
Sempra Energy Exits S. America With $2.23 Billion Sale of Chilean Businesses
Voce Keeps Pressure on Argo Group International
AECOM to Sell Management Services Unit for About $2.4 Bln
FirstGroup Chairman David Martin to Attend Showdown in U.S.
Aecom Nears $2.4 Billion Deal to Sell Management Services Unit
Caesars Entertainment, Eldorado Resorts Investors Save the Date Nov. 15 to Mull Casino Mega Marriage
Elliott and Blackstone Enter Hostile Territory in Japan
UTC, Raytheon Investors Block Merger
Box Tries to Escape the Curse of the Silicon Valley Midcap
Australia Makes Big Strides in Closing Gender Gap, Global Survey Finds
Citigroup Names New Global Co-Heads of Equity Capital Markets
Elliott Ranks as Busiest Hedge Fund in Third Quarter, Again
Uniper Remains Independent for Now Despite Fortum Push: CEO
N.Y.C. Official Calls for Mandatory Diversity Effort in the Boardroom
Lagardere Sues Amber Capital, Claims 84 Million Euros of Damages
Progenics Inked a Merger to Avoid Negotiating a Proxy War. One Investor Still Wants to Fight
U.K. Regulator Tells Companies to Improve Financial Disclosures
Victoria's Secret Head of Stores Is Stepping Down
SAP CEO Steps Down
'Sustainable' Investors Match the Performance of Regular Investors, New IMF Research Finds
Most Companies Avoid Putting ESG Metrics in Incentive Plans
PG&E Bankruptcy Judge Gives Outside Group's Plan a Chance
Auto1, Private Equity Firms to Bid for Scout24's Cars Unit: Sources
AT&T to Sell Puerto Rico Business as It Looks to Pay Down Debt
Stockholder Withdraws Other Nomination for Brookdale Board
Elliott Questions Japan Firm Unizo's Actions in Bidding War
Bed Bath & Beyond Picks Target Executive as New CEO
Norway Oil Fund to Publish All Voting Plans
At Least 70 Companies Still Need a Female Director to Comply With California State Law, Report Says
Finland's Fortum to Gain Control of Uniper in $2.5 Billion Deal
Hedge Fund Standard General Returns to Media Dealmaking Roots
Two Hedge Funds Dodge a Russian Poison Pill
Amag Settles With Caligan, Adds Two Board Directors
Fortum CEO Demands Uniper Chairman Seat After Shareholder Deal
Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff
Argo Group Gets SEC Subpoena Over Executive Compensation
Neuberger Berman Takes a Victory Lap. Saba Says Not So Fast.
Investor Wins Seats on Tix Board
Aramark Announces a New CEO, Investor Becomes Vice Chair of the Board
Germany's Aareal Conducts Strategic Review Following Calls From Investor
ISS Seeks Input for 2020 Proxy Season Votes
Emerson Faces Pressure to Split Itself in Two
New Glass Lewis Chief to Expand Abroad Amid U.S. Regulatory Clamp-Down
Proxy Solicitor Okapi Hires Harnett From Strategic Governance Advisors
Brookdale Says Board Nominee Made 'Derogatory' Comments About Rival Female CEO
Lantheus Strikes Deal to Buy Progenics, Sparking Investor Backlash
Brookdale Calls Investor's Nominee 'Unfit' for Board
FTI Consulting Hires ISS Executive for Governance and Activism Team
Paddy Power Owner in $6 Billion Deal to Create Global Betting Giant
Andersons, Marathon, Merge Four Ethanol Operations Into One Company
CEO-Chairmen Are an Endangered Species
Five Things to Know About Japan's New Foreign Investment Rules
Dual-Class Shares: A Recipe for Disaster
Are Companies Rising to the Occasion? Why 181 CEOs Signed a Revolutionary Corporate Governance Pact
Activist Shareholders Are Becoming Change Makers
Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance
More Large-Scale Investors Are Skittish About an ESG Strategy at the Expense of Returns
In D.E. Shaw, Emerson Faces an Investor With a Growing Activist Streak
Newell Brands: Significant Upside if Turnaround Is Successful
Do Paul Singer's Restructuring Engagements Lag the Market?
ESG and Executive Remuneration—Disconnect or Growing Convergence?
Board Oversight of Corporate Compliance: Is It Time for a Refresh?
Eight Corporate Jets: What Is This, the '80s?
A Guide to the Big Ideas and Debates in Corporate Governance
Saba's Latest Proxy Battles: What Investors Need to Know
Hunting the Hunter: Following Elliott's Lead
CEO Pay Growth and Total Shareholder Return
AQR: Here's What ESG Really Does to Portfolios
The Evolving Boardroom: Signs of Change
Recent Trends in Shareholder Activism
Having More Female Executives Correlated With Better Performance at Companies, New Research Finds
Virtual Shareholder Meetings in the U.S.
Japan's Foreign-Investor Screening Risks Undoing Years of Reform
ESG Incorporation Starting to Take Hold in U.S. – Callan Survey
Time for Corporations to Get Their Houses in Order
We Talked to 24 People About the Hedge-Fund Wunderkind at Elliott Who Wants to Shake Up AT&T. Here's Why Management Should Be Terrified.
Corporate Board Elections Getting a Little Less Cozy
Spotlight Thrown on Japan Inc.'s Stakeholder-Focused Model
Men Agree That Gender Diversity on Boards Is Important—But They're Sick of Hearing About It
Shareholder Activism and Governance in France
Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads
Shareholder Activism Is a Balancing Act for Sias
Brexit and Shareholder Activism Could Be Behind CEO Exodus From FTSE 100 Companies, Experts Suggest
The Breakup of Another Industrial Giant Is Coming
AC Milan and Elliott: The Hedge Fund Trying to Crack Italian Football
How Boards Can Equip Themselves for Rapid Change
Investors Are Worried About AT&T's Content Game
Response to CII Proposal to Amend DGCL
Investors Are Getting Closer to a Climate Change Tipping Point
ComScore: A Hard Sell
Video: Lack of Diversity Puts Companies at Risk of Going Under, Says Ariel Investments Co-CEO Mellody Hobson
United Technologies' Merger With Raytheon Is Complicated. Three Ways to Play It.
There's a New Hedge Fund for Badly Governed Companies in Japan
Why Sustainability Reporting Needs Governance Perspective
Ackman Flat in September, But Still Crushing 2019

10/17/2019

Nestlé to Refresh Bottled-Water Business as Sales Turn Flat

Wall Street Journal (10/17/19) Chaudhuri, Saabira

Nestle SA (NSRGY) plans to overhaul its struggling bottled-water arm as the business grapples with rising competition, high costs, and growing concerns about single-use plastic. The company has faced criticism from investor Daniel Loeb, who wants it to improve its financial performance and sell its stake in L'Oréal SA (LRLCY). The water arm, which sells brands like San Pellegrino and Poland Spring, will go from being a stand-alone, globally managed business to one managed locally in Nestle's various regions. The head of Nestle Waters, Maurizio Patarnello, will also leave the company by the end of the year. About 60% of Nestle's bottled-water sales come from local or regional brands. The Nestle Waters restructuring comes as the brand said sales in the nine months ending on Sept. 30 were 68.37 billion Swiss francs ($68.71 billion), up from 66.42 billion francs in the same period last year. Organic growth was 3.7% for the first three quarters, mostly driven by higher volumes, meeting analyst estimates. Nestle also said it would return 20 billion francs to investors over the next few years, primarily through share buybacks, and did not release profit figures. In the water business, revenue was flat and volumes dropped 2.2% over the nine months. One analyst noted that the water business is losing share to rivals in the United States, its biggest market, namely to Coca-Cola Co. (KO), PepsiCo Inc. (PEP), and market leader LaCroix (FIZZ). Since taking over in 2017, Nestle CEO Mark Schneider has tried to focus Nestle's energies on a handful of core businesses that he views as high-growth. Schneider has sold several slower-growth, nonfood assets and made several big acquisitions.

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10/17/2019

Ericsson Earnings Top Forecast as 5G Takes Off

Reuters (10/17/19) Hellstrom, Johannes; Soderpalm, Helena

Swiss telecoms equipment maker Ericsson (ERIC) has beat quarterly expectations and lifted its market forecast for 2020 thanks to quickly rising demand for 5G networks. Investor Cevian Capital, Ericcsson's largest owner by shares and third-largest by votes, said the targets were conservative and the company could deliver more. Together, Ericsson, Finland's Nokia (NOK), and China's Huawei provide most of the radio access network equipment needed for 5G mobile services. Ericsson is now targeting sales of 230-240 billion Swedish crowns ($23.5 billion-$24.5 billion) in 2020, up from 210-22 billion previously, and its adjusted third-quarter operating earnings rose to 6.5 billion crowns from 3.8 billion a year earlier, corresponding to an 11.4% margin and beating the 5.2 billion mean forecast. The company kept its target for an operating margin of at least 10% for 2020, citing short-term pressure from some contracts and higher initial costs for new 5G products. Ericsson shares jumped as much as 7.4% to a three-month high, pulling up Nokia shares in their wake, though they are still down 1% since the firm's second-quarter results in July, when it warned that costs related to winning new contracts for its network business would likely hit profit margins in the second half of the year. 5G networks are at the center of a tech war between the United States and China, as they are expected to host critical functions from driverless vehicles to smart grids and military communications, underscoring their importance to national security. Ericsson said it expected 5G deployments to start "near term" in China, where it has invested to gain market share, adding that it expected "challenging" initial margins.

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10/17/2019

Marathon Petroleum Board, Investors Are Said to Discuss CEO

Bloomberg (10/17/19) Deveau, Scott; Wethe, David; Ngai, Catherine

Sources say Marathon Petroleum Corp. (MPC) board members are meeting this week with investors to discuss CEO Gary Heminger's future and the company's strategy. Investors Paul Foster and Jeff Stevens, who control about 1.7% of the company, met with several board members on Oct. 16, and on Oct. 17, representatives for Elliott Management Corp. and D.E. Shaw & Co. had plans to meet with directors. Marathon said in a statement that it "has delivered substantial shareholder value under the leadership of Chairman and CEO Gary Heminger, who has the full support of the board. As we have said publicly, the company is conducting a comprehensive strategic review, and has been collecting feedback from many shareholders as is our practice. The review is ongoing and no conclusions have been reached." Elliott, which has a 2.5% stake in Marathon, has called on the company to split into three in order to unlock more than $22 billion in value, and D.E. Shaw, which held a 0.9% stake at the end of June, has called on the company to find ways to unlock more value. Meanwhile, Foster and Stevens have called for Heminger's ouster and reportedly told board members during this week's meeting that they are hearing significant support among shareholders for Heminger to step down and agreement with Elliott's plan to break up the company. However, a source noted that board members said shareholders have told Marathon's investor relations team that they do not object to Heminger staying on as CEO.

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10/15/2019

D.E. Shaw Gives Searing Indictment of Waste at Emerson Electric, Including Fleet of 8 Airplanes

CNBC (10/15/19) Faber, David

D.E. Shaw issued a report on Oct. 15 detailing the ways Emerson Electric (EMR) has failed shareholders over the last decade. The report confirms that the hedge fund has a more than 1% stake in the company and calls for Emerson to split its industrial automation business from its climate technology business and undertake significant efforts to slash costs. D.E. Shaw highlights what it calls a history of poor capital allocation since David Farr became Emerson's CEO. Among other things, the report indicates that Emerson's 3% pretax return on incremental capital since 2000 significantly lags nearly every one of its peers, which recorded an average return of 11.4% over the same period. The hedge fund blames, in part, a cost structure that includes the highest level of selling, general, and administrative expenses relative to sales among its peers and the lowest revenue per employee versus those competitors and a broader universe of industrial companies. Specifically, D.E. Shaw points to 18 different facilities in the city of Houston and the company's aviation department—which includes eight airplanes, one helicopter, and a staff of 40 people complete with its own internship program—as potential areas for cost cuts. The report also suggests that Farr has been overcompensated with pay of $150 million over the last 10 years, or 50% more than the S&P 500 average, despite shareholder returns that have lagged the index significantly. The hedge fund is calling on the company to alter its metrics for long-term incentive compensation and destagger its board so that all directors come up for a vote every year.

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10/13/2019

Elliott and Blackstone Enter Hostile Territory in Japan

Bloomberg (10/13/19) Ren, Shuli

Developer and hotel operator Unizo Holdings Co. is currently fighting off a hostile takeover bid that could shake up the Japanese market. Unizo, which has much of its office rental business in Tokyo, has seen its stock soar 128% since July, when it received an unsolicited tender offer from leading travel agency HIS Co. This was followed by a rival bid from SoftBank Group Corp. (SFTBY)-owned Fortress Investment Group, which was itself followed by a higher offer from private-equity giant Blackstone Group Inc. (BX). Though initially supportive of the Fortress offer, Unizo's board of directors has since demanded terms whereby a new owner will be unable to restructure or dissolve Unizo without the consent of employees. Employees would also determine whether the fund will exit and how it will do so—possibly through buybacks, strategic sales, or re-listing. Elliott Management, which has built a 13% stake in the company since August, has voiced its disappointment with these terms, which are unlikely to work for Blackstone or Fortress. If both deals fall through, Elliott will carry a significant loss and may not be able to call an extraordinary general meeting until January. The Fortress offer will expire Thursday. Foreigners who want control of Unizo may be fighting an uphill battle, because the company has shown a willingness to dilute its shareholders many times over to maintain its independence. Unizo is heavily indebted, and the stock trades at 1.4 times book value, but because Japanese developers do not account for valuation changes in their properties, the company's actual net asset value is more than twice its book value. This makes it an attractive deal for private equity, but only if Unizo allows the funds to divest assets and pay off debt.

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10/9/2019

PG&E Bankruptcy Judge Gives Outside Group's Plan a Chance

New York Times (10/09/19) Eavis, Peter

On Oct. 9, federal bankruptcy judge Dennis Montali ruled that California utility PG&E (PCG) no longer had the sole right to shape the terms of its reorganization. This allows a group of creditors including Elliott Management to present a rival proposal, which has the support of individuals with claims against PG&E for wildfire damages. The ruling, which sent PG&E stock down nearly 30% in extended trading, is a significant blow to PG&E management and its largest shareholders. The creditors' plan would provide up to $14.5 billion to wildfire victims and grant bondholders a 59% stake in the company. About 41% of the stock in the reorganized PG&E would go into trusts to help pay insurance claims and the damages submitted by the wildfire victims, leaving current shareholders with a tiny stake. By contrast, PG&E's plan would pay up to $8.4 billion to wildfire victims and preserves more of shareholders' stakes. In his decision, Montali seemed to encourage a resolution between the two parties and noted that "parties more deserving of consideration" had spoken through the group representing wildfire claimants. Due to a new state law enacted this year, PG&E must exit bankruptcy for the company to access a new state fund that is being set up to help pay for the catastrophic costs of future wildfires. The bankruptcy battle has repercussions in PG&E's service area, which covers most of Northern and Central California, and the state aims to have the company emerge with the financial ability to pay for wildfires caused by its power lines.

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10/9/2019

Elliott Questions Japan Firm Unizo's Actions in Bidding War

Bloomberg (10/09/19) Lee, Min Jeong; Hyuga, Takahiko

Japanese developer Unizo Holdings Co. is under fire from top shareholder Elliott Management Corp. for its handling of a bidding war that started in July. In an Oct. 9 letter to the company's board, Elliott questions the decisions that Unizo has made in responding to competing offers for the firm, specifically a lack of disclosure and the presence of potential conflicts of interest. Elliott's letter is the latest twist in an unusual bidding battle, which started in July when HIS Co. launched an unsuccessful hostile bid for Unizo. This was followed by a competing 4,000 yen-per-share offer from SoftBank Group Corp.'s Fortress Investment Group in August, which Unizo supported until last month, when it received a rival bid from a large investment fund, reportedly Blackstone Group (BX), for 5,000 yen a share. Elliott asked for Unizo to explain the "Employee Share Ownership Management Company," which Unizo proposed to Fortress as grounds for any deal agreement and would give employees significant control over decisions such as buying and selling properties and nominating directors. The structure may be meant to let existing management retain control over the company through an arrangement similar to a management buyout. Elliott also questioned why Unizo did not disclose its basic policy on acquisitions when it expressed its position on tender offer bids in August. Shares in Unizo have surged nearly 130% since July 10, closing at 4,560 yen per share on Oct. 9.

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10/8/2019

Norway Oil Fund to Publish All Voting Plans

Financial Times (10/08/19) Milne, Richard

The world's largest sovereign wealth fund, which is managed by Norges Bank Investment Management, aims to release all its voting intentions ahead of the annual meetings of all portfolio companies by 2022. The move is expected to shake up how investors approach corporate governance. Norway's $1.1 trillion oil fund currently shares how it has voted within 24 hours of annual meetings, but since 2015 it has disclosed a handful of times a year prior to shareholder votes. Its strategy for the 2020-22 period, laid out on Oct. 8, will extend this practice to all 9,000 of the companies in which it has stakes. The new strategy also fleshes out the fund's impending move into renewable energy infrastructure assets; it expects such assets to account for about 1% of its portfolio. Fund executive Yngve Slyngstad told the Financial Times in 2017 that pre-disclosing its voting intentions a few times a year was effective in changing corporate behavior but needed to be done with care, because companies were often compromised by the mere threat that it might disclose voting intentions early. The investment mandate is decided by the Norwegian parliament and currently aims to hold 70% in equities, 5% in property, and the rest in bonds. The fund is also expected to reduce its number of employees for the first time since its inception in 1996, as a result of natural attrition in some jobs and the movement of some functions such as communications and human resources to Norges Bank. It also plans to increase its "active positioning around corporate actions and capital market events" and repeated its warning that the Norwegian public should be ready for "significant fluctuations" in the fund's value due to its increasing equity exposure.

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10/8/2019

At Least 70 Companies Still Need a Female Director to Comply With California State Law, Report Says

San Francisco Chronicle (10/08/19) Pender, Kathleen

Clemson University researchers say that publicly traded companies based in California have increased their number of female directors since last year, when the state passed a law requiring female representation on corporate boards. Previous academic studies have focused on the law's impact on California companies in the Russell 3000 index, but the law will have a bigger short-term impact on smaller companies that are not in the index. The researchers examined the board makeup at 488 of the 602 California companies that had filed a proxy statement in the first half of 2019 and compared it to last year's statement. They found that companies boosted their number of female directors by 23%, while public companies in a control group (which excluded states that had voted for the Democratic nominee in each of the past five presidential elections) increased their female directors by 14.5%. However, the researchers also found that 70 companies, or 14% of the examined companies, still did not have a female director listed on the statement. These companies have until the end of 2019 to have at least one female board member before they face a $100,000 penalty. Researchers note that most of these are smaller companies, and many are biotech firms that "might not have the cash flow" or reputation to easily attract female directors. They also note that the average annual director pay at the 70 companies without a female director was about $142,000, suggesting that some firms may benefit from delaying an appointment and paying the fine. The researchers predicted that while smaller companies will struggle to attract female candidates, that negative is offset by the networking effect if the firm's board has a venture capitalist from a venture firm that has a high-ranking woman.

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10/8/2019

Two Hedge Funds Dodge a Russian Poison Pill

Bloomberg (10/08/19) Hughes, Chris

Elliott Management Corp. and Knight Vinke were successful in getting a higher price from the Finnish utility Fortum Oyj (FOJCY) for their combined 21% holding in Germany's Uniper SE. Seeing a potential path to Russian approval of its takeover bid for Uniper has prompted Fortum to agree to pay 2.3 billion euros ($2.5 billion) for the position held by Elliott and Knight Vinke, which would give it a 71% stake. "For Elliott, it's a classic short-term win from opportunistically buying into a bid target. For Knight Vinke, it's the profitable culmination of a longstanding activist campaign that began with nudging the German power giant E.ON SE (EONGY) to carve out Uniper in a demerger three years ago," says Bloomberg Opinion columnist Chris Hughes. "There's nothing here for Uniper minority investors, though. They were hoping to get a fresh takeover offer from Fortum, made available to all shareholders. Either that or a so-called 'domination agreement' whereby Fortum got full access to Uniper's cash flow in return for paying minority shareholders a chunky dividend. Fortum says it has no plans to make a fresh bid and won't seek a domination agreement for at least two years." Hughes adds, "Minority investors are always in a tough spot when the register includes other big beasts, especially when one is a strategic bidder and another is Elliott. The episode is a reminder that sometimes their interests are best served by management not fighting too hard."

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10/8/2019

Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff

Bloomberg (10/08/19) Lepido, Daniele

Seeking to cut its massive debt pile and share the burden of future infrastructure spending, Telecom Italia SpA will spin off its 23 data centers in Italy and list them on the stock market. CEO Luigi Gubitosi wants to create a separate unit for the facilities in the first half of 2020 and bring in financial investors to improve its growth prospects ahead of the IPO. Telecom Italia would keep overall control of the unit and keep operations in Italy for security reasons. News of the spinoff saw Telecom Italia shares reverse a decline to close up 0.4% on Oct. 8 and rise another 0.5% at open on Oct. 9. The spinoff follows a truce in a year-long board battle between two of the company's biggest shareholders, which had limited Gubitosi's ability to move ahead with reforms. Telecom Italia, which sold 11 data centers to Asterion Industrial Partners for 550 million euros in May, will follow other companies in seeking new investors to help their data centers compete with the rollout of 5G wireless networks. Sources say the data centers are valued at 12 to 18 times their pre-tax earnings, potentially worth around 1 billion euros. The data center plan would replicate what Telecom Italia did with its wireless towers, turning them into a new unit called Inwit and listing it in June 2015, since which its shares have more than doubled. Elsewhere, Gubitosi is looking to merge Telecom's largest asset, Italy's dominant fixed-line network, with rival Open Fiber SpA. An analyst with Bloomberg Intelligence has said, "The abating tussle between Telecom Italia shareholders Vivendi and Elliott Management is enabling a focus on execution and asset sales, boosting the ambition to return to domestic Ebitda growth next year and leverage reduction."

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10/4/2019

New Glass Lewis Chief to Expand Abroad Amid U.S. Regulatory Clamp-Down

Reuters (10/04/19) Herbst-Bayliss, Svea; DiNapoli, Jessica

Glass Lewis & Co. intends to expand its operation overseas in the wake of newly introduced restrictions by the Securities and Exchange Commission (SEC), says new Executive Chairman Kevin Cameron. He co-founded Glass Lewis in 2003 and in September took over leadership of the firm, a few weeks after the SEC announced new oversight rules for proxy advisers. The SEC said proxy advisers such as Glass Lewis cannot distribute incorrect data, which could make them legally liable if they do, and also clarified that investors have no obligation as shareholders to vote their shares, which could cut their reliance on proxy advisers. Cameron's aim is to assist Glass Lewis with navigating this new regulatory environment, as well as win market share over bigger rival Institutional Shareholder Services Inc. (ISS). "We want to keep expanding globally, including in Asia where we historically haven't been as strong," Cameron said. "Europe will also see growth, building on the investment we've made building out our presence there in recent years." In September, Glass Lewis also hired Gordon Seymour as its special counsel for public policy to aid in assisting with the new regulatory landscape, Cameron said. Seymour previously worked as general counsel for the Public Company Accounting Oversight Board and at the SEC. Carrie Busch, who worked at Glass Lewis at its inception and led its international proxy research and new business initiatives divisions, returned in September as president.

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10/3/2019

Brookdale Says Board Nominee Made 'Derogatory' Comments About Rival Female CEO

Nashville Business Journal (10/03/19) Stinnett, Joel

In an Oct. 3 letter to shareholders, Brookdale Senior Living (BKD) accused board nominee Jay Flaherty, former chairman and CEO of HCP Inc. (HCP), of making "derogatory" comments about the female CEO of rival Ventas (VTR) and participating in "fraudulent" behavior intended to mislead the market. According to Brookdale, the actions taken by Flaherty—who was nominated by shareholder Land & Buildings—cost HCP more than $100 million in damages before he was terminated. The company called Flaherty "unfit to serve" on its board and argued that his election to the board could hinder Brookdale's relationships with Ventas and HCP, which own a combined 60% of Brookdale's leased properties. Land & Buildings responded with a statement that read, "The deeply personal attacks Brookdale has chosen to make against our director nominee, James (Jay) F. Flaherty III, are reflective of a board that has willingly sacrificed its professionalism and integrity to prevent a truly objective voice from entering the boardroom. The company's smear tactics and use of cherry-picked, out-of-context information is nothing more than a transparent attempt to deflect shareholders' attention from Brookdale's persistent failure to deliver value and mislead shareholders about Mr. Flaherty's reputation." This marks the latest development in a three-year proxy battle between Brookdale and Land & Buildings, whose founder and chief investment officer, Jonathan Litt, has sent several letters to Brookdale shareholders calling for structural changes and the sale or spinoff of Brookdale's real estate holdings to boost shareholder value.

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10/18/2019

Five Things to Know About Japan's New Foreign Investment Rules

Nikkei Asian Review (10/18/19) Suzuki, Wataru

On Oct. 18, Japanese Prime Minister Shinzo Abe's cabinet approved revisions to the foreign exchange law that impose tougher controls on foreign investment in companies operating in strategically sensitive industries. Currently, foreign investors must obtain approval from regulators for investments in a wide range of sectors when they plan to buy 10% or more of a Japanese company's issued shares, but the new rules will lower the threshold to 1% and apply not only to issued shares but also to all investments comprising 1% or more of a company's total voting rights. In addition, appointment of directors or proposals by foreign investors to sell important operations of Japanese companies operating in these sectors will require prior approval from regulators. Areas subject to the new rules fall into four broad categories—national security, public order, public safety, and smooth operation of the Japanese economy—each of which is broken down into individual sectors. The Finance Ministry has created exemptions for certain investors, including brokerages conducting proprietary trades, banks, insurance companies, and asset managers that invest passively—but only if they agree not to serve as directors, do not propose sales of key businesses, and do not seek access to confidential technology or information. The rules could come into force by the end of the next fiscal year in March 2021.

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10/17/2019

Dual-Class Shares: A Recipe for Disaster

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/17/19) Fleming, Rick A.

In a speech at the recent ICGN Miami Conference, Rick A. Fleming, an investor advocate with the Securities and Exchange Commission, discussed the increased use of dual-class shares by companies seeking to go public. "By going public with multiple classes of shares, a company allows the public an opportunity to participate in the company's growth, and the lack of voting rights for the public shareholders is advantageous because it allows the founders to guard against activists who demand short-term profits at the expense of long-term growth. It is true that a few well-known companies have thrived with long-term founders. But less noticeable are the hundreds of public companies that now have entrenched management," he said. "A growing body of research suggests that, over the long term, entrenchment of founders produces lower returns for investors. Specifically, companies with dual-class structures tend to underperform companies with dispersed voting power. And there is an even larger danger, from my perspective. Namely, without an appropriate level of accountability to shareholders, it is easy to predict that this trend will not end well. Investors will be hurt, and badly, if we continue down this path." Fleming noted that there is nothing that prevents the stock exchanges from addressing this issue and that the investor community has suggested "reasonable compromises for the exchanges to consider. These include, among other things, the sun-setting of super-voting rights, which would protect a visionary founder from activist investors for a reasonable length of time while preventing the harms that may occur over the long term due to poor corporate governance. I encourage the exchanges to quickly adopt these types of reforms in order to promote fair and efficient markets. It is in their interest to do so, for a market failure caused by weak corporate governance would implicate them as well."

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10/17/2019

Are Companies Rising to the Occasion? Why 181 CEOs Signed a Revolutionary Corporate Governance Pact

Forbes (10/17/19) Nicita, Camille

Signed by 181 prominent CEOs, the Business Roundtable's recent Statement on the Purpose of a Corporation dictates five pillars that all participating corporations pledged to support: delivering value to customers; investing in employees; dealing fairly and ethically with suppliers; supporting the communities they do business in; and generating long-term value for shareholders. This marks a real shift in corporate culture rather than merely a publicity move, according to this opinion piece, which notes that customer satisfaction scores across many industries are flat or down this year, and consumer trust is incredibly low, with brand loyalty spread among many choices. As many people lose faith in the ability of institutions to make a positive impact, some today believe that businesses have more latitude to effect change than do historic institutions. Many companies are realizing the shortcomings of basing perceived value on shareholders alone, because stakeholders like consumers and employees are critical to business success. More than 90% of consumers around the world say they "would switch brands if a different one was purpose driven and had similar price and quality," and companies with more engaged employees show 21% greater profitability than those with less-engaged employees. Moreover, short-term mindsets may no longer prevail with many shareholders, and the new mandate does not deprioritize shareholders who take a long-term view. Businesses can informally adopt the principles behind the statement by focusing on employees, bolstering consumer rights, and defining their commitment to these principles.

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10/16/2019

Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/16/19) Larcker, David F.; Tayan, Brian

The recent paper, "Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance," by David F. Larcker and Brian Tayan of Stanford University, looks at corporate governance concepts that are often loosely defined and poorly understood. The concept of good governance refers to a set of practices that, on average, improve decision making and reduce the likelihood of poor outcomes arising from choices or lapses within an organization. Many observers incorrectly use the term "good governance" to mean the degree to which a company has adopted certain structural features that increase board independence and shareholder rights. The authors argue that these standards are not actually shown to improve governance quality, nor does their absence necessarily indicate poor governance. For example, there is no specific benefit from requiring an independent chair; staggered boards do not have a positive or negative impact on corporate governance; and while dual-class shares tend to be associated with poor governance, this is not always the case. The authors also examine pay for performance and why it is difficult to evaluate; board oversight and how attempts to evaluate it often rely too heavily on company performance; and sustainability, which is underestimated at many companies.

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10/15/2019

Do Paul Singer's Restructuring Engagements Lag the Market?

Institutional Investor (10/15/19) Celarier, Michelle

According to a new analysis of Elliott Management's returns by the Communication Workers of America (CWA), when the hedge fund tries to restructure the companies it has engaged, rather than selling them, the long-term returns are not favorable. The CWA, which represents 30,000 workers at AT&T (T), detailed its analysis in a Sept. 25 letter to AT&T Chairman and CEO Randall Stephenson. "Elliott's proposal represents the archetype ploy of vulture capitalists: boost earnings through headcount reductions, outsourcing, and reduced investment," CWA President Christopher Shelton wrote. "We can see from such long-lasting Elliott portfolio companies as Hess (HES) and Roadrunner (RRTS) that when Elliott principals hold multiple board seats and companies divest assets that Elliott identifies, the long-term performance is disappointing and significantly trails the S&P 500...Of the five companies that Elliott exited with a positive return [NRG (NRG), Alcoa (AA), Pulte (PHM), Cognizant (CTSH), and Marathon (MRO)], three subsequently underperformed the S&P 500. What seems clear to us is that Elliott's well-worn combination of operational cutbacks, asset sales, and increased payments to securities holders has not consistently produced improvements in long-term performance." In defending the analysis, Nell Geiser, assistant director of research for CWA, said, "It is based on categorizing all of Elliott's...engagements we were able to identify into groupings that provided an appropriate comparison point for Elliott's intervention at AT&T."

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10/15/2019

ESG and Executive Remuneration—Disconnect or Growing Convergence?

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/15/19) Reilly, Peter; Mahabier, Aniel

Mounting pressure on companies to enhance their environmental, social, and governance (ESG) frameworks has not had a meaningful impact on executive remuneration at U.K. and Irish companies. Despite an apparently relentless focus on ESG, such measures remain on the periphery for executive pay, even though all companies are expected to set out non-financial Key Performance Indicators (KPIs) in their annual reports. Only 27.4% of FTSE 350 and ISEQ 20 companies have included some form of measurable ESG criteria in incentive plans, and even at these companies, the proportion of pay driven by ESG performance is meager. If KPIs are not being replicated in incentive plans, it is possible that remuneration frameworks are becoming disconnected from corporate strategies, or else that boards and investors see ESG measures as risk management tools rather than opportunities to drive value. In their marketing materials and proxy voting guidelines, the world's largest asset managers emphasize the importance of ESG to their investing and issuer engagement strategies. As regulatory pressure grows on investors to demonstrate the ESG credentials of their investments, greater pressure from investors will be brought to bear on companies to align management incentives with ESG related metrics.

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10/15/2019

Board Oversight of Corporate Compliance: Is It Time for a Refresh?

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/15/19) Biskup, Robert; Parsons, Krista; Lamm, Robert

Twenty-five years ago, the Delaware Chancery Court established that corporate boards have "a duty to attempt in good faith to assure that a corporate information and reporting system, which the board concludes is adequate, exists, and...failure to do so under some circumstances may...render a director liable for losses caused by non-compliance with applicable legal standards." Since this decision, a board's fiduciary duties have been seen to include the establishment and oversight of an effective corporate compliance program for management. Despite this long-standing view, a recent survey found that around 40% of responding public company boards said their company's chief compliance officer does not regularly attend audit committee meetings, and 70% reported that this officer does not regularly attend board meetings. Only 17% of respondents said the chief compliance officer is in charge of managing culture risk, and only 50% reported that their board training includes content on ethics and compliance. These statistics imply that some boards do not fully understand the importance of their compliance oversight duties. This is troubling because risk oversight is one of the board's most important roles, and neglecting compliance oversight can have disastrous results. Corporate boards may benefit from reviewing how they exercise their duty of diligent oversight around compliance. As part of any such review, boards should seek to identify the areas where recent history has shown that corporate compliance programs have experienced breakdowns.

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10/15/2019

Eight Corporate Jets: What Is This, the '80s?

Bloomberg Opinion (10/15/19) Sutherland, Brooke

On Oct. 15, D.E. Shaw Group released a letter calling for industrial company Emerson Electric Co. (EMR) to spin off its climate division, make improvements to its productivity and corporate governance, and reduce its fleet of eight corporate jets and one helicopter. The letter criticizes a lack of tangible commitments and deadlines for Emerson's strategic review, which it said it would undertake last month after D.E. Shaw first started pushing for a breakup of the company. It stresses that some of its recommendations, like making all board directors subject to annual elections, should not require lengthy deliberation. While change is bound to be slow at the 129-year old company, Emerson will need to reckon with its out-of-date corporate habits and old-school sprawl, according to this opinion piece. Calling attention to these practices will resonate with other shareholders frustrated by Emerson's weak returns, and the move should ramp up pressure on management to move more quickly. D.E. Shaw's plan to break up Emerson, which consists of two essentially unrelated units, may or may not pay off in the stock price. The real value comes from combining a breakup with cost-cutting initiatives, which could drive Emerson's valuation from $73 a share to about $101 a share. The cost-cutting opportunities that D.E. Shaw has identified become especially urgent when considering the prospect of a deepening downturn in the industrial sector.

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10/13/2019

Hunting the Hunter: Following Elliott's Lead

Forbes (10/13/19) Conrad, Roger

Elliott Management's latest 13-F filing shows positions in 37 different companies. In recent months the firm has engaged energy conglomerate Marathon Petroleum (MPC), where it has the support of hedge fund D.E. Shaw in pushing to oust the current CEO and split the company's businesses into separate entities. Elliott has engaged Marathon before: in 2016 it brought about some changes that led the shares to return nearly 35% in 2017, and it was able to exit the stock in February 2018. Elliott's August re-entry with Marathon coincided with its successful exit from utility Sempra Energy (SRE), where in June 2018 it had proposed a board shakeup and the sale of non-utility assets. In all of these cases, Elliott did not get everything it wanted, but it succeeded because it knew when to walk away. This is a sharp contrast to Elliott's engagement at Telecom Italia (TIT). Though Elliott successfully fought off French media giant Vivendi SA (VVU) and gained control of the company, Telecom Italia shares have fallen roughly 35% and its Elliott-picked CEO resigned last month. Going forward, Elliott seems likely to steer away from taking full control of companies. Marathon shares are up 42% from mid-August, and it is likely to spin off its Speedway convenience store chain. Elliott's engagement at AT&T (T) seems to be going well so far, although it is still in early stages. At PG&E (PCG), Elliott leads a creditor group that was recently granted the right to file its reorganization plan in competition with the company's own. Despite having the upper hand, the creditors would likely drop the plan in favor of a rich settlement, because winning would leave them with an unwieldy amount of the company's stock.

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10/11/2019

Recent Trends in Shareholder Activism

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/11/19) Grossman, Richard J.; Berg, Alexander J.

Lazard's Shareholder Advisory Group reports that about 46% of all activist campaigns in the first half of 2019 were in some way related to mergers and acquisitions (M&A). However, the role that M&A plays in a campaign can be positive or negative. Approximately 65% of all activist campaigns with an M&A goal revolved around the divestiture of a noncore business line or a sale or breakup of the company. Conversely, 35% of activist campaigns with an M&A focus engaged companies to oppose a pending deal, generally as an effort to boost the value of their positions in a proposed transaction. Some deal-challenging activists did so on the grounds that they are not in the best interests of shareholders, as Starboard Value did regarding the Bristol-Myers Squibb (BMY)-Celgene (CELG) deal and Third Point did for the United Technologies (UTX)-Raytheon (RTN) merger. In addition, frequent investors like Elliott Management and Starboard Value have started to engage in a more traditional private equity strategy. Private equity is a logical next step for activists, who often seek to identify and expose a company's weaknesses for profit. Moreover, the ability to engage in private equity increases an activist's credibility when approaching a company, because the threat exists that the activist itself can bid to acquire or invest in the company as a long-term interest. Meanwhile, "reluctivists," or traditionally long-only institutional investors, are increasingly engaging in activist campaigns.

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10/10/2019

Japan's Foreign-Investor Screening Risks Undoing Years of Reform

Wall Street Journal (10/10/19) Bird, Mike

The Japanese government's proposals published this week to more carefully screen foreign investors may make the nation a bit safer, but at the cost of undoing years of difficult work to shore up the investment climate. If the proposals go into effect, foreign shareholders would have to disclose to regulators when their stake in certain listed companies reaches 1%, down from the current level of 10%. The current notification process, which is done only in the Japanese language, is paper-based and burdensome. Investors tell the government when they cross the threshold, triggering a review that can result in the trade being canceled. A decision currently takes 30 days, although the Ministry of Finance says it wants to cut the number of days. Japan's system already produces an average of 607 notifications annually, far more than does the Committee on Foreign Investment in the United States, for example, and the Ministry of Finance expects that to increase by 700% as the shareholding threshold drops. Western brokers working for Japanese investors would be at a disadvantage to their Japanese competitors, because the proposed rules don't distinguish between end investors and intermediaries. Activists trying to build a stake also could be frustrated. Japan currently ranks lower on the basis of foreign investors' rights than almost all other developed markets, according to index firm MSCI. The new rules would exacerbate that shortcoming.

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10/9/2019

Time for Corporations to Get Their Houses in Order

The Australian (10/09/19) Gill, Abigail; Tuck, John; Whittaker, James

Corporate governance, risk management, and compliance issues have risen to greater prominence in Australia over the last few months. Key developments include heightened external scrutiny of corporate practices following a royal commission, growing emphasis on non-financial risks, a growing appetite for corporate regulation, and new protection and accountability laws. Australian corporations and financial service providers must reassess their culture, internal policies, and processes. Moreover, there is a growing consensus that current models of liability are insufficient and a company's criminal responsibility should be linked to the effectiveness of its internal policies. Similar trends have been observed in other democracies, such as the United Kingdom, where regulators have suggested extending the successful "failure to prevent" model for bribery and tax evasion offenses to other offenses. In Australia, the Crimes Legislation Amendment Bill of 2017 sought to introduce a "failure to prevent" bribery offense modeled after the approach of the U.K. Bribery Act. This offense would impose strict liability on corporations for bribery offenses committed by an organization's "associates" unless a company can show it had "adequate procedures" in place to prevent the crime. Though the bill lapsed in the Senate due to the 2019 federal election, the re-elected government will likely seek to reintroduce it. There is also a heightened focus on identifying and informing on wrongdoing, with recent reforms passing in February 2019 that expanded protections for private-sector whistleblowers. These reforms impose a significant compliance burden that organizations will have to address in order to avoid penalties. It is important that organizations pinpoint and resolve internal weaknesses before the information becomes public in order to maintain stakeholder confidence.

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10/8/2019

Corporate Board Elections Getting a Little Less Cozy

Wall Street Journal (10/08/19) Francis, Theo

In the past, elections for corporate boards weren't very suspenseful. Most candidates were unopposed and won handily. But in 2019, 478 public-company directors failed to win the support of a majority of voted shares, up 39% from 2015, according to the ProxyPulse report produced jointly by Broadridge Financial Solutions Inc. (BR) and PricewaterhouseCoopers. Some 1,726 directors failed to win support from at least 70% of voted shares, the report indicates. Still, despite the increase in rejections, just a small portion of directors were rebuffed by shareholders. There were 22,520 directors who stood for election during the 2019 period covered by the report, and directors won 95% of the vote. At some companies, boards can select to keep directors who fail to win majority support, but the practice is disliked by investors. Increasingly, investors have called for rules mandating that directors win a majority of shares voted to keep their seats. Most directors who lose shareholder support aren't at companies involved in proxy battles with activist investors. Usually, investors vote against incumbents without looking to replace them directly. Among the 500 most widely held public companies, 50 directors failed to win a majority of shares voted in 2019, compared with 15 in 2015. The number of directors failing to win at least 70% of the vote more than doubled to 170, from 69. When directors lost shareholder support, it tended to reflect lack of confidence from institutional investors rather than individual shareholders, the report said. Investors seem most likely to withhold support for members of board nominating and governance committees, says Paul DeNicola, principal of PwC's Governance Insights Center. That apparently reflects the rising interest among institutional investors in diversity and other board-composition issues.

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10/8/2019

Spotlight Thrown on Japan Inc.'s Stakeholder-Focused Model

Financial Times (10/08/19) Inagaki, Kana

Last month, the Tokyo-based property group Unizo Holdings invoked employee protection as a reason for withdrawing its recommendation for Fortress Investment's $1.3 billion white knight bid, emphasizing how the idea of shareholder supremacy is not as ingrained in the minds of Japanese CEOs as it is elsewhere in the world. Senior executives at Unizo argued that its concept of corporate value that considers both shareholder interests and employee well-being should merit global acceptance. The matter began in July when HIS made an unsolicited bid, and the following month Unizo turned to Fortress to defend itself. Unizo ultimately turned against Fortress rather than seek a higher offer, setting forth conditions that must be accepted by any existing and future bidder. The plan aimed to protect the interests of Unizo's staff by forming a new entity, controlled by employees, to acquire a stake in the company after a takeover was completed, and the "employee stock ownership management company" would be given veto power over the nomination of directors, management strategy, employment conditions, and the sale of its properties. Investors said the conditions are similar to a "stealth" management buyout to entrench current management. Observers note that Unizo could undermine efforts by companies to align their management goals with maintaining profitability and meeting their societal responsibilities by using the broader stakeholder view as a shield to push management's own interests.

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10/8/2019

Men Agree That Gender Diversity on Boards Is Important—But They're Sick of Hearing About It

Fortune (10/08/19) Hinchliffe, Emma

PwC's Annual Corporate Directors Survey reveals that 63% of board directors believe their investors devote too much attention to board gender diversity, up from 35% in 2018. According to Paula Loop, leader of PwC's Governance Insights Center, "They're saying, 'We heard you, we've taken a lot of measures and we're focused on it—now go away and focus on something else.'" While no company in the S&P 500 had an all-male board as of this summer and 20% of board seats at Russell 3000 companies are held by women ahead of the 2020 goal, observers say these accomplishments make directors feel like enough has been done. The survey says 72% of male directors believe too much attention is paid to gender diversity, but only 25% of female directors say the same. Another 76% of male directors believe boards will naturally become more diverse over time, but just 33% of female directors agree. Further, 46% of women, but only 9% of men, support laws mandating board diversity. "Men are more tired of the topic than women, clearly. Men are saying, 'Look we've heard you.' Women are saying, 'We need to continue to focus on this to really make it happen,'" Loop says. However, 62% of directors polled strongly agree that diversity brings unique perspectives to the boardroom, and 52% strongly agree that gender diversity is very important in achieving diversity of thought.

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10/8/2019

Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads

Citywire Selector (10/08/19) Benstead, Sam

Asset managers should vote at annual general meetings based on pragmatism, say a number of corporate governance leaders at asset managers with a strong focus on environmental, social, and governance (ESG) issues. Senior officials at the asset managers say that every shareholder proposal should be analyzed on an individual basis and not approached with a one-size-fits-all ESG voting protocol. Melanie Adams, head of corporate governance at RBC Global Asset Management, says the company typically will vote against items if the company is already providing sufficient disclosure for it. "If a shareholder proposes that the company put together a report, such as on median gender pay differences, we would look at what the company is already disclosing. Generally we would support that type of a report, but if the company is already disclosing it then we are mindful that we don't want to bring an extra burden on the company," Adams says. She notes that they don't want to burden companies with unnecessary reporting that may not be material to their sector. "Some ESG issues are more material in some sectors than others," she points out. Lisa Beauvilain, head of sustainability & ESG at Impax Asset Management, says excessive automation of voting is a trap for asset managers. "In order for voting to be consistent with stewardship and ESG policies and to be able to explain a voting decision, analysis of resolutions is often necessary," Beauvilain says. "This is very much the case as well for shareholder resolutions, which need to be analyzed case by case. Most shareholder resolutions are reasonable and merit the support by shareholders in order to fulfill fiduciary duties, and many resolutions are essential to support for stewardship consistency. But some may not merit support, but that is more unusual. Voting requires attention and analysis."

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10/7/2019

Shareholder Activism Is a Balancing Act for Sias

Business Times (10/07/2019) Shiao, Vivien

David Gerald of the Securities Investors Association Singapore (Sias) describes shareholder governance as a balancing act for Sias, which works to drive home the need for transparency and accountability in corporate governance. The Sias Investors' Choice Awards aimed to highlight companies with exemplary corporate governance, and as the industry watchdog celebrates its twentieth anniversary, it is looking at how to prepare for the future. Gerald argues for Sias' approach to resolving issues "in the boardroom and not the courtroom," which he says is better-suited to Asia than a more confrontational approach. He gives the example of Isetan, where minority shareholders called an extraordinary general meeting in January 2007 to replace the independent directors and table resolutions to distribute tax credit and royalties. After the bid failed, Sias contacted the independent directors to work toward a resolution that would benefit all stakeholders. The negotiations led the Japanese directors to declare a final and special dividend of S$1.50 per share, demonstrating that a conciliatory approach can bring value to minority shareholders. Gerald emphasized that Sias is an industry watchdog and that serious regulatory breaches are reported to the Singapore Exchange, the Monetary Authority of Singapore (MAS), or the Commercial Affairs Department. He also refuted claims that Sias cannot be objective because it traditionally relies on corporate funding, noting that the MAS is stepping in to fund the organization. Going forward, Sias will focus on investor education, corporate governance workshops, and providing timely guidance to retail investors through equity research reports.

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10/6/2019

AC Milan and Elliott: The Hedge Fund Trying to Crack Italian Football

Financial Times (10/06/19) Ahmed, Murad; Massoudi, Arash

In October 2018, Paolo Maldini, former captain of AC Milan and now its technical director, called on Gordon Singer, head of Elliott Management's London office, to pony up the €35 million fee to acquire Brazilian forward Lucas Paquetá. Earlier that year, the hedge fund had taken control of the seven-time European club football champions in a move considered its most high-profile venture since battling Argentina's government over its sovereign debts. Although the figure is small by Elliott's standards, it was more than the budget that the hedge fund's executives had earmarked for a club in financial trouble, but Singer agreed. The transaction has generated interest in whether Elliott can find a formula to crack the volatile football industry. According to Elliott executives, its plan is to win matches on the pitch and raise revenues off it to boost the club's value and sell for a healthy return. However, observers say that is easier said than done, and failure at AC Milan would be a reputational blow for Elliott, particularly in Italy, where the hedge fund is active in battles over the future of Telecom Italia (TIAJF) and CNH Industrial (CNHI). According to a club insider, "If they turn it round in a couple of years, no one will care. But in terms of bad press, there's a huge liability here...The risk/reward of owning a club like AC Milan for a company like Elliott seems really bizarre." Nevertheless, Elliott portfolio manager Giorgio Furlani said, "You'll see the fruits of this work at the end. Whenever the end will be."

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10/4/2019

Response to CII Proposal to Amend DGCL

Harvard Law School Forum on Corporate Governance and Financial Regulation (10/04/19) Berger, David; Simmerman, Amy

The Council of Institutional Investors' (CII) latest attempt to obtain a mandatory prohibition against dual-class stock is flawed in several respects and demonstrates a lack of understanding of basic principles of Delaware corporate law, according to this opinion piece. CII wants Delaware's legislature and governor to amend the state's corporate code to effectively prohibit publicly traded Delaware corporations from having multi-class stock unless the multi-class structure ends no later than seven years after the company's initial public offering. The proposal conflicts with the principle that the Delaware General Corporation Law (DGCL) is an enabling statute, designed to provide investors and other corporate stakeholders broad flexibility to determine among themselves how a corporation should be governed. Moreover, it runs counter to the idea that there are very limited distinctions in the DGCL between public and private corporations, a second core principle of Delaware law. CII's proposal also represents bad policy because the most recent empirical research shows dual-class companies have out-performed their single-class peers for at least a decade. The proposal comes at a time of intense debate over corporate purpose. CII's narrow understanding of stockholder primacy is not required by Delaware law and is inconsistent with the broader understanding of corporate purpose.

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10/4/2019

Investors Are Getting Closer to a Climate Change Tipping Point

CNBC (10/04/19) Maier, Stephanie

Stephanie Maier, director of responsible investment at HSBC Global Asset Management, said climate change "poses a business-critical risk for global companies and a systemic challenge to the financial system" and "will increasingly impact all economies, asset classes, and industries, whether directly or indirectly." To avoid an "estimated $23 trillion in global losses over the next 80 years in line with a 4°C rise in global temperatures," Maier says, "it is incumbent on companies to embrace necessary changes in corporate strategy. Those that do have opportunity to thrive." She points out that more than 370 investors with more than $35 trillion in assets under management are working through Climate Action 100+ to engage 161 global companies that are collectively responsible for more than two-thirds of global industrial greenhouse gas emissions. "Supported by five investor networks—AIGCC, Ceres, IGCC, IIGCC, and PRI—as partner organizations behind the initiative, this is unparalleled shareholder muscle at work in looking to ensure the world's largest corporate emitters align their business strategies with the goals of the Paris Agreement on climate change," Maier notes. "The benefits that collaboration with investors offers are clear and to be embraced. Strengthening corporate governance, bringing emissions in line with the goals of the Paris Agreement, and improving climate-related financial disclosures all help build stronger, more resilient companies...Just as companies need to double down on progress, so too do investors in pressing the case for, and benefits of, necessary transition. This must be broader than any one initiative alone, however large. This is why broader collaboration is key."

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10/3/2019

Why Sustainability Reporting Needs Governance Perspective

Corporate Secretary (10/03/19) Genovese, Alyson; Saltman, Hannah

Corporate sustainability reporting isn't useful in decision-making unless it is considered within the context of a company's corporate governance protocols. A 2018 Ceres report shows that corporate sustainability disclosures are more and more common—but aren't necessarily meaningful. Eighty-six percent of S&P 500 companies in 2018 issued a sustainability report, and more than 70% of big global companies disclose data using the Global Reporting Initiative standards. However, the Ceres report reveals that the explanation of how companies' sustainability and business strategies tie together often is lackluster. Investors want to understand how management is held accountable for boosting sustainability performance. Institutional investors say board oversight of business-relevant sustainability issues—especially climate risks—is a leading area of engagement, because companies with robust governance protocols for environmental, social, and governance issues outperform the MSCI ACWI benchmark. These protocols are indicators of future performance due to their ability to measure progress toward sustainability goals. Thus, more than 80% of mainstream investors rely on sustainability data to inform their decision-making. Investors want companies to demonstrate board-level accountability for material sustainability issues; focus on materiality but also keep track of emerging trends; and externally assure material sustainability disclosures.

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