Activist Database

Activist Deadline Calendar & Standstill Database

Featuring standstill agreement and nomination deadline windows, provisions and timelines

Media Center

Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.
Harbert Discovery Fund Sends Letter to Fellow Enzo Biochem Shareholders
ISS Recommends Against Instructure's Proposed Sale to Thoma Bravo: Note
Shareholder Krupa Urges GAM to Form Panel to Attract Strategic Investor
SEC Investor Group Seeks Rework on 2 Proposals
Goldman's Diversity Pledge Won't Apply to Boards in Asia
SEC Advisory Committee Pans Proxy Advisory Proposals
Prompted by New Regulation, South Korean Firms Scout Outside Directors
Sysco to Outsource Customer Service Positions in Latest Cost-Cutting Move
Xerox Escalates HP Takeover Fight With Push to Replace Board
Goldman Sachs Pushes for More Diverse Boards of Directors
HP Calls Xerox Board Slate a Proxy Tactic to Benefit Carl Icahn
Mason Morfit Takes Charge at ValueAct — 13 Years After Being Tipped
Carl Icahn Driving Xerox's Hostile Takeover Bids, HP Claims
AT&T Finds a New Way to Help Grind Down Its Debt Mountain
Atlas and Blue Wolf Correct Verso's Misleading Comments Regarding Settlement Discussions
Proxy Solicitor Morrow Sodali Hires Schulman From MacKenzie
Keith Meister's Corvex Shot the Lights Out Last Year
Gender Diversity on Corporate Boards Boosts Environmental Performance: U of C Study
Activist Investors Regain Their Appetite for Japanese Stocks
BlackRock's Climate Announcement Pales in Comparison to Proxy Advisor Influence and Advocacy
Shareholder Activism in 2020: New Risks and Opportunities for Boards
Hedge Fund ESG Engagement Helps Managers Drive Change
Inside RBC's Efforts to Improve Corporate Governance
Compensation Season 2020
Hedge Fund Investors Pivot to ESG
Podcast: Everything Is ESG Now
The World's Most-Profitable Hedge Fund Is Now a Climate Radical
How Carl Icahn Got in a Legal Spat With This Natural Gas Tycoon Over a $30 Billion LNG Export Terminal

Voting Database

A new searchable database featuring the comprehensive voting records of all top institutional investors. This includes every proposal that was up for a vote and how the investor voted.

2020 Conference

13D Monitor | In The Media

1/27/2020

Harbert Discovery Fund Sends Letter to Fellow Enzo Biochem Shareholders

Business Wire (01/27/20)

Harbert Discovery Fund LP and Harbert Discovery Co-Investment Fund I LP, the beneficial owners of more than 11.8% of the outstanding shares of Enzo Biochem Inc. (ENZ) on Jan. 27 sent a letter to shareholders in connection with its efforts to elect two highly qualified, fresh voices—Fabian Blank and Peter Clemens—to the company's board of directors at its 2019 annual meeting of shareholders, which will be held on Jan. 31, 2020. The letter says, "Enzo has indisputably destroyed value for its shareholders." Further, "in the context of this proxy campaign, the tactics Enzo's Board has resorted to in order to obfuscate, confuse, and distract shareholders are concerning, as well as disappointing. As Glass Lewis notes, the evidence, suggests 'there may be some foundational and atypical disconnect between the Company and investors.' First, Enzo has only addressed corporate governance issues when forced to do so. Nearly every single governance 'improvement' the Company cites occurred after public pressure from Harbert and other investors in the context of proxy campaigns. This includes the appointment of Rebecca Fischer to the Board on December 31, 2019, months after HDF launched its campaign and Barry Weiner stepping down as CFO so that he would not continue serving in that role while also being on the Board—a move Glass Lewis described as nothing more than 'another low risk, high optical upside modification intended to cultivate a more favorable impression of Enzo's governance.' Additionally, a close study of Enzo's filings reveals that the Company has only mentioned Board refreshment when under public pressure from shareholders. Enzo's 'proactive engagement process' with shareholders and the institution of a 'diversity policy,' as well as a proposed bylaw change to a majority voting standard, were first mentioned in December 2019, well after Harbert had gone public with its concerns. These facts demonstrate that the current Board does not take proactive, positive actions with regard to corporate governance unless it faces public criticism from large shareholders. That is at the root of the problem within this Company's boardroom."

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1/27/2020

ISS Recommends Against Instructure's Proposed Sale to Thoma Bravo: Note

Reuters (01/27/20) Herbst-Bayliss, Svea

Four entities that oppose the sale of U.S. educational software company Instructure Inc. (INST) to private equity firm Thoma Bravo on Jan. 27 garnered some support when Institutional Shareholder Services (ISS) came out against the planned all-cash deal of approximately $2 billion. ISS recommended that Instructure shareholders vote against the company's intended sale to the private equity firm at a Feb. 13 meeting. "Given legitimate concerns regarding the conduct of the process, a seemingly uncompelling valuation, and a strong standalone case, a vote AGAINST the transaction is warranted under the proposed terms," ISS said in a note to clients. Hedge funds Praesidium Investment Management, Rivulet Capital LLC, and Lateef Investment Management, as well as Oberndorf Enterprises, have said they intend to vote against the deal. They criticized the price and how the company located a purchaser. Instructure said in early December it intended to sell itself to Thoma Bravo for $47.60 per share or about $2 billion, succumbing to pressure from one of its shareholders calling for a sale. Thoma Bravo had increased its price from $47.00 per share to $47.60. Market reaction to the proposed sale, which represented a 10% discount to Instructure's closing share price on Dec. 3, was poor when it was announced on Dec. 4. From the day the deal was announced through Jan. 22—the end of a 35-day go-shop period during which Instructure had sought alternative bids—shares traded above Thoma Bravo's offer, with an "average closing price of $48.27," according to ISS. The proxy advisory firm said the sales process "began with a stutter-step" and was limited to a handful of financial buyers during the first 10 months of 2019. Instructure said it "conducted a comprehensive and deliberate process, lasting eleven months and ultimately involving 40 parties." ISS said Instructure did not treat all potential buyers alike, permiting Thoma Bravo to sign a confidentiality agreement within six days while waiting five months before permitting another party to sign one.

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1/27/2020

Shareholder Krupa Urges GAM to Form Panel to Attract Strategic Investor

Reuters (01/27/20) Hirt, Oliver; Shields, Michael

In a Jan. 27 statement, Krupa Global Investments (KGI) urged GAM Holding to create a shareholder committee to explore attracting a strategic investor for the struggling Swiss asset manager. Krupa, which said it controls about 3% of GAM stock, said it would propose a candidate for GAM's board of directors at the 2020 annual meeting if GAM does not present a convincing strategy update. KGI Chairman Pavol Krupa said GAM's forecast for a small underlying profit in 2019 was unsatisfying and called for management to clearly state GAM's future path. GAM Holding said last week it expected to break even for 2019 as its performance fees improved, though it saw a notable outflow of assets after a fight with its former star fund manager. In the past GAM has said that it would look at all options to maximize shareholder value.

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1/24/2020

SEC Investor Group Seeks Rework on 2 Proposals

Pensions & Investments (01/24/20) Bradford, Hazel

The Securities and Exchange Commission's (SEC's) investor advisory committee wants the agency to rethink its proposal to impose new requirements on proxy advisory firms and raise thresholds for submitting shareholder resolutions.  The committee has voted 10 to five to support a recommendation of the group's investor-as-owner subcommittee that SEC officials rework the two proposals.  The recommendation calls for in the meantime addressing more pressing issues such as "proxy-plumbing" reforms, including ways to correctly count votes and universal proxies.  Committee members supporting the recommendation also want the SEC to consider "reasonable alternatives" to address the issues raised, including ways to correct errors made by proxy advisers and adjustments to shareholder proposal thresholds.  The committee also recommended that SEC officials "do a better job of analyzing the issues" that led to the two proposed rule-makings, including following SEC guidance on cost-benefit analysis.  The planned rules "may collectively shift the balance in a manner that does not serve investor interests (and) as currently framed will not reliably achieve their stated goals, because the system is in need of more basic reform, and because it is necessary to establish a link between the actions and clearly identified problems," the group said.

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1/24/2020

Goldman's Diversity Pledge Won't Apply to Boards in Asia

Bloomberg (01/24/20) Wong, Kiuyan; Fioretti, Julia; Chan, Cathy

Goldman Sachs Group (GS) has announced that it will only handle initial public offerings (IPOs) in the United States and Europe for companies that have either a female or diverse director.  The bank's new policy will take effect in July.  CEO David Solomon recently revealed the policy, but did not mention Asia, Latin America, and the Middle East, where all-male boards are common.  Goldman will consider implementing the plan in Asia and other regions over time after consulting with its clients, as diversity awareness improves in those areas, according to a spokesperson.  Xiaomi (XIACF) and Meituan Dianping (MPNGY) were recent high-profile IPOs in Asia with no women on the boards.  The bank had a leading role in those offerings, which raised almost $10 billion combined in 2018.  Goldman was the biggest underwriter of IPOs in the United States and Europe last year.  The bank ranked sixth globally among underwriters, advising on 86 IPOs in 2019.

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1/24/2020

SEC Advisory Committee Pans Proxy Advisory Proposals

Politico Pro (01/24/20) Mejdrich, Kellie

The Securities and Exchange Commission's (SEC's) Investor Advisory Committee approved a letter on Friday that calls on the SEC to revise and reissue a rule proposed in November that would strengthen supervision of proxy advisers and revamp how shareholder proposals can come up for a vote. The letter says the SEC should resubmit the November proposals because the commission didn't meet its own standards for economic analysis and needed to "present a balanced assessment of proxy advisers and shareholder proposals." The letter also suggested that the SEC "revisit priorities" on proxy-related rulemaking overall and reconsider guidance issued in August clarifying oversight of proxy advisory firms that sparked a lawsuit.

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1/23/2020

Prompted by New Regulation, South Korean Firms Scout Outside Directors

Korea Herald (01/23/20) Ji-hye, Shin

After a recent change in regulations limiting tenures of outside directors, South Korean companies are quickly searching for new members prior to their general shareholders meetings in March. South Korea's cabinet on Jan. 21 approved revisions to the enforcement decrees of the Commercial Act, Capital Market Act, and National Pension Act. The revisions, which were designed to reinforce shareholders' rights, limit people who have worked at an affiliate within three years from becoming a member of a company. Meanwhile, outside directors are also banned from serving for six years at a single firm and nine years total when including an affiliate company. Experts said South Korean companies would have to scramble to be in compliance with the new laws by the spring shareholders meeting season. According to the Korea Listed Companies Association, a total of 566 South Korean companies must appoint at least 718 new outside directors by March. For 87.3% of those companies, it will be a tall order, because they are small or midsized and could have trouble attracting interest as they cannot pay as much as larger firms.

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1/23/2020

Sysco to Outsource Customer Service Positions in Latest Cost-Cutting Move

Houston Chronicle (01/23/20) Takahashi, Paul

Sysco (SYY) recently announced that it will outsource all of its U.S. customer service employees as part of its efforts to streamline its business amid rising operating costs. The company began looking for efficiencies after investor Nelson Peltz became a major shareholder and won two seats on the board in 2015. Peltz's Trian Partners is Sysco's fourth-largest stockholder. In an internal memo to employees, Sysco said it has partnered with Cognizant (CTSH) to manage its customer service as part of a new "centralized customer care model" allowing for extended hours and a single point of contact for customers. According to Sysco, this will result in the "difficult, but necessary action" to eliminate customer service positions from all of its U.S. subsidiaries and its customer service office in Cypress.

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1/23/2020

Xerox Escalates HP Takeover Fight With Push to Replace Board

Bloomberg (01/23/20) Deveau, Scott

On Jan. 23, Xerox Holdings Corp. (XRX) said it plans to nominate 11 directors to replace the board of HP Inc. (HPQ). The move comes after HP rejected Xerox's $22-a-share takeover offer and refused to engage in talks. Xerox hopes that replacing HP's entire board through a proxy fight will push the deal through. "HP shareholders have told us they believe our acquisition proposal will bring tremendous value, which is why we lined up $24 billion in binding financing commitments and a slate of highly qualified director candidates," said Xerox Vice Chairman and CEO John Visentin. The deal has the support of Carl Icahn, who owns about 11% of Xerox and has a 4.3% stake in HP. HP responded that "these nominations are a self-serving tactic by Xerox to advance its proposal, which significantly undervalues HP and creates meaningful risk to the detriment of HP shareholders." Xerox's director nominees are Betsy Atkins, CEO of Baja Corp.; George Bickerstaff, co-founder and managing director of M.M. Dillon & Co.; Carolyn Byrd, CEO of GlobalTech Financial; Jeannie Diefenderfer, formerly of Verizon (VZ); Kim Fennebresque, former CEO of Cowen Group; Carol Flaton, who has served as a managing director at AlixPartners; Matthew Hart, former president and COO of Hilton Hotels; Fred Hochberg, chairman and president of the Export-Import Bank of the United States during the Obama administration; Jacob Katz, who was chairman of Grant Thornton; Nichelle Maynard-Elliott, who most recently served as executive director of mergers and acquisitions for Praxair Inc.; and Thomas Sabatino Jr., who most recently served as executive vice president and general counsel of Aetna Inc.

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1/23/2020

Goldman Sachs Pushes for More Diverse Boards of Directors

Marketplace (American Public Radio) (01/23/20) Carino, Meghan McCarty

Goldman Sachs (GS) CEO David Solomon said Jan. 23 that beginning this year, his investment bank would refuse to help companies go public "unless there's at least one diverse board candidate, with a focus on women. He noted that almost 60 companies in the United States and Europe have gone public in recent years with all-male boards, adding that firms with at least one female director perform "significantly better." Erin Essenmacher, chief programming officer with the National Association of Corporate Directors, points out that a company's board of directors oversees major strategy decisions. Consequently having a diversity of perspectives in the boardroom often makes a difference. She reasons, "If you're not thinking differently about who's sitting around the table, then you're probably not thinking differently about other big questions that can really hurt your business." Although academic research on whether diverse boards boost company performance has been inconclusive, the move of a major firm like Goldman Sachs could change the calculus of many companies, says Allison Elias, senior fellow and lecturer at the University of Pennsylvania's Wharton School of Business. "I think that this Goldman decision is symbolic of the strength of the business case and the belief people have in it," notes Elias. As of 2018 less than a quarter of board seats at Fortune 500 companies were held by women, but things are gradually changing, says Lee Hanson, a vice president at executive search firm Heidrick & Struggles. "The market is clearly demanding it," she says. "It's the overriding thing we are being asked for, in boards."

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1/23/2020

HP Calls Xerox Board Slate a Proxy Tactic to Benefit Carl Icahn

MarketWatch (01/23/20) Witkowski, Wallace

HP Inc. (HPQ) said Jan. 23 that Xerox Corp.'s (XRX) proposal to name board candidates is a "self-serving" tactic from Carl Icahn to propel an acquisition that "significantly undervalues" the company. "We believe that Xerox's proposal and nominations are being driven by Carl Icahn, and his large ownership position in Xerox means that his interests are not aligned with those of other HP shareholders," HP said in a statement. "Due to Mr. Icahn's ownership position, he would disproportionately benefit from an acquisition of HP by Xerox at a price that undervalues HP." Icahn owns notable stakes in both companies. Earlier on Jan. 23, Xerox proposed a slate of 11 board members to replace HP's board. A proxy fight has been in the offing since Xerox offered $33 billion for HP, which HP spurned.

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1/23/2020

Mason Morfit Takes Charge at ValueAct — 13 Years After Being Tipped

Financial Times (01/23/20) Fortado, Lindsay

Mason Morfit will become CEO of investment fund ValueAct Capital after 13 years with the firm. Morfit has spent years travelling the country with Jeff Ubben, the former head of the fund, to "crash analyst meetings together" and help run the business. As early as 2007, Ubben had told Morfit that he would be his eventual successor as the head of ValueAct. Morfit's influence can be seen in the fund's four biggest current stakes: Morgan Stanley (MS), Citigroup (C), private equity giant KKR (KKR), and Seagate Technology (STX). The firm's Master fund was up about 32% last year, roughly in line with the return on the S&P 500, enough to make ValueAct one of the best-performing shareholder activists. ValueAct pioneered a constructive style of activism, shunning public battles in favor of gaining board seats and working with management to turn around companies it considers undervalued, and under Morfit the firm may move even further in that direction. In 2013, the board of Microsoft (MSFT) negotiated a deal with ValueAct that it could join the board after then-CEO Steve Ballmer's successor was decided, and that the seat would go to Morfit. One board member spoke highly of Morfit, saying he was "pleasantly surprised" to find Morfit patient and fair as a director. Executives at some of ValueAct's portfolio companies, including Citigroup and KKR, say they have appreciated Morfit's input.

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1/23/2020

Carl Icahn Driving Xerox's Hostile Takeover Bids, HP Claims

Forbes (01/23/20) Klebnikov, Sergei

HP Inc. (HPQ) is accusing investor Carl Icahn of pushing for a hostile takeover at Xerox (XRX). Xerox officially launched its hostile takeover on Thursday by announcing plans to nominate 11 new directors to replace HP's entire board at an upcoming shareholder meeting. In response, HP called Xerox's nominations to its board a "self-serving tactic" and reiterated its rejection of Xerox's $33.5 million takeover bid, noting that "value creation for HP shareholders is not dependent on a Xerox combination." HP also said that Icahn is trying to force a merger between Xerox and HP because he stands to profit from ownership stakes in both companies, blaming him for the hostile nature of the takeover. HP emphasized Icahn's "meaningful influence" over Xerox and its board, pointing to his role in the appointment of current CEO John Visentin, a former Icahn consultant, as well as his ties to various members of the Xerox board including its chair. Carl Icahn holds an 11% stake in Xerox and almost a 5% stake in HP, and he has repeatedly urged HP shareholders who agree with the merger to push for immediate action.

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1/22/2020

AT&T Finds a New Way to Help Grind Down Its Debt Mountain

Bloomberg (01/22/20) Moritz, Scott

At the end of 2019, AT&T (T) took a collection of cell-tower rent payments that it will receive in the future, rolled them into a subsidiary, and sold shares of the unit to investors for $6 billion. The new entity is called AT&T Investment & Tower Holdings LLC, and the preferred shares pay as much as 5% annually. The move is part of an ongoing effort to turn various assets into cash that it can use to pay down debt. AT&T's debt reached $200 billion after its 2018 purchase of Time Warner in an attempt to become a modern media colossus. AT&T has promised shareholders including Elliott Management Corp. that it will lower its leverage ratio to between 2 and 2.25. With the tower receivables, AT&T raised $6 billion up front, which requires an interest payment of about 5%. While that is a higher interest rate than nearly any loan AT&T could have received, it does mean that the $6 billion will not add to the company's $165 billion debt pile. One analyst said the move is "a bit of a surprise" for a high-grade debt company like AT&T, but noted that its timing is ideal if AT&T wants the action to stay below the radar.

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1/22/2020

Atlas and Blue Wolf Correct Verso's Misleading Comments Regarding Settlement Discussions

PRNewswire (01/22/20)

Lapetus Capital II LLC (Atlas) and BW Coated LLC (Blue Wolf), which owns 9.43% of the outstanding stock in Verso Corp. (VRS), have issued a statement to clarify recent comments made by Verso regarding settlement negotiations. The statement says that while Atlas has sought to resolve its dispute with incumbent directors in a consensual manner, Verso "continues to try to misdirect stockholders by diverting attention from the Board of Directors' abysmal governance practices, indefensible capital allocation strategy, and poor operational track record." Two days ago Verso proposed increasing the board size "yet again" in an attempt to manipulate Verso's governance without stockholder approval. Atlas believes Verso's proposal to expand the board is an attempt to dilute the impact of the stockholder vote, noting that Verso has already nearly doubled the size of the board since Atlas and Blue Wolf nominated director candidates and has agreed to sell a significant portion of the company's assets. The statement cites comments by Institutional Shareholder Services and a ruling by the Delaware Court of Chancery that underline the presence of poor governance and entrenchment motives at the board level.

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1/22/2020

Proxy Solicitor Morrow Sodali Hires Schulman From MacKenzie

Reuters (01/22/20) Herbst-Bayliss, Svea; DiNapoli, Jessica

Proxy solicitor Morrow Sodali has hired Paul Schulman from rival MacKenzie Partners. Schulman reportedly will serve as co-head of Mergers & Acquisitions, Activism and Contested Situations, along with Morrow veteran Michael Verrechia. Morrow worked with Newell Brands (NWL) during its battle with Starboard and Luby's (LUB) when it was engaged by Bandera Partners.

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1/22/2020

Keith Meister's Corvex Shot the Lights Out Last Year

Institutional Investor (01/22/20) Taub, Stephen

Keith Meister's Corvex Management posted its best-ever gains in 2019, up 40% from the year before. It is not clear exactly what investments drove returns or how much leverage it used, but it appears that MGM Resorts International (MGM) played a significant role in driving performance. The hospitality giant accounted for about 22% of Corvex's U.S. common stock portfolio for most of last year, and shares of MGM surged about 37% in 2019. Corvex also benefited from a stake in Madison Square Garden (MSG), acquired in the third quarter; its shares rose 18% after a decline in August and gained 10% for the year. Zendesk became Corvex's fourth-largest position in the third quarter, and the stock gained 5% in the fourth quarter. In October, Corvex teamed up with Jericho Capital Asset Management to take a combined 14.5% stake in Forescout Technologies (FSCT), which it said was undervalued. Corvex said that it and Jericho "believe that combining their complementary expertise, skill sets, and perspectives will be beneficial in discussions" with the company. Forescout's stock finished the year at $32.80, up around 30% from the recent purchase price. On the other hand, shares of Diamondback Energy (FANG), Corvex's second-largest common stock long for most of last year, fell about 1% last year.

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1/26/2020

Gender Diversity on Corporate Boards Boosts Environmental Performance: U of C Study

Living Architecture Monitor (01/26/20)

According to a new University of Calgary study, companies with more women on their boards of directors have better environmental performance. Researchers looked at 857 companies in the S&P's 1500 Composite Index. They compared the gender diversity of each company's board with their performance on environmental, social, and governance (ESG) metrics rankings conducted by Sustainalytics.  The results indicate that especially in resource extraction industries like oil and gas, firms with more female board directors perform better on environmental issues, observed study co-author Irene Herremans. "We're not saying women make better decisions in this area," she remarked. "What we're saying is women bring different skills to the board." The study further found that women corporate directors often have backgrounds that give them direct expertise on environmental issues.

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1/26/2020

Activist Investors Regain Their Appetite for Japanese Stocks

Nikkei Asian Review (01/26/20) Miyamoto, Takenori; Noguchi, Tomohiro; Sakabe, Yoshinaru

Despite an overall decline in activist shareholdings around the world, activist investors held roughly 3.4 trillion yen worth of Japanese shares at the end of 2019, twice the level as when Japan introduced a corporate governance code in June 2015. Foreign investors are looking for value in Japan as stocks in the United States hover at record highs. This month, longtime Japan investor James Rosenwald will launch the Nippon Active Value fund in the United Kingdom with the aim of raising 200 million pounds. The fund will push for share buybacks, dividend increases, and more efficient use of capital at about 20 mid-size Japanese companies. Domestic institutional investors are also more willing to disagree with company executives, who are increasingly open to the kind of changes that investors favor. There is evidence that activism can be effective in Japan. According to a Nikkei analysis, among 37 companies that have been partly owned by activists for five years, return on invested capital has improved about two points to 12% from six years earlier, while shareholder returns rose 270% and interest-bearing debt rose 40%. This compares to flat return on invested capital and a 160% rise in shareholder returns at 2,664 companies that did not count activists among shareholders. Critics say U.S. shareholder activism has encouraged the pursuit of short-term profits, and some young tech companies have stepped up their defense against bids for larger stakes through dual-class shares. However, activism can serve as a catalyst for industrial consolidation and improved corporate governance, two areas where corporate Japan is said to need greater progress.

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1/24/2020

BlackRock's Climate Announcement Pales in Comparison to Proxy Advisor Influence and Advocacy

Forbes (01/24/20) Brannon, Ike

BlackRock (BLK) has announced that sustainability and climate change will be the focus of its corporate strategy and mission.  The shift in policy will have a big impact on BlackRock's portfolio, considering the firm is the world's largest asset manager, according to this opinion piece.  But BlackRock's sway over corporate America does not compare to the influence of proxy advisory firms on shareholder resolutions. Large asset managers like BlackRock and proxy advisory firms like Institutional Shareholder Services and Glass Lewis appear to share an agenda of pressuring companies to take steps to address climate change and advance various social agendas.  This agenda is one reason why the Securities and Exchange Commission (SEC) introduced new guidance along with a proposed rule to make sure that asset managers are not simply relying on these advisors without ensuring that their recommendations are in the best interest of their investors.  According to a recent survey of more than 5,000 investors with $10,000 or more in the U.S. stock market by the Spectrem Group and George Mason University law professor J.W. Verrett, the vast majority of investors stated that their return on investment was the most important factor in their investment and other related financial decisions and supported the SEC's proposed rules.  The SEC is correct in examining such advocacy and proposing rules that give retail investors the best possible return on their savings, according to the opinion piece.

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1/24/2020

Shareholder Activism in 2020: New Risks and Opportunities for Boards

Harvard Law School Forum on Corporate Governance and Financial Regulation (01/24/20) Langston, James E.

James E. Langston, a partner at Cleary Gottlieb Steen & Hamilton LLP, expects stakeholder activism—or the convergence of shareholder activism and social activism—to move beyond the realm of environmental, social, and governance (ESG) issues, and at the same time, he notes that activism by traditional long-only investors also has increased. "The takeaway for directors from this sort of activism is clear—no longer will institutional investors be content to sit on the sidelines or express their views privately," he says. "The question for boards in this new environment is not just whether institutional investors will be a source of ideas for an activist or side with the board or the activist in the event of a campaign, but also whether its institutional investors are likely to themselves 'go activist.' Shareholder engagement efforts will continue to be crucial in building support for a strategic plan and counteracting activist tendencies among long-only investors. But in the course of such efforts, directors must be mindful of the fact that not all institutional investors will have the same objectives and be careful to structure their interactions with investors accordingly." Among other trends, Langston expects certain brand-name activists to succeed in "settling" large-cap campaigns without committing to a settlement agreement with a standstill undertaking, and he anticipates that shareholder activism will continue to expand globally.

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1/23/2020

Hedge Fund ESG Engagement Helps Managers Drive Change

Hedgeweek (01/23/20)

Increasing support for hedge fund engagement and responsible investing by institutional investors and large asset managers has been a key driver for the convergence of the two investment strategies.  Hedge funds are tapping into growing investor sentiment for sustainability as they engage companies on environmental, social, and governance (ESG) issues.  According to a 2019 poll by Cerulli Associates, nearly three-quarters of asset managers indicate that they exercise active ownership as part of their investment decision-making process to minimize risks and maximize returns, up from 54% in 2017.  It is estimated that within 20 years, the three largest index investors could vote as much as 40% of the shares in S&P 500 companies.  As these shares become increasingly concentrated, hedge funds could help engage, monitor, and raise managers' concerns across the companies they own.  Currently, nearly half (46%) of asset managers are leveraging the power of stock ownership in publicly traded companies to promote change through shareholder engagement, according to Cerulli.

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1/23/2020

Inside RBC's Efforts to Improve Corporate Governance

Corporate Secretary (01/23/20) Maiden, Ben

Revised corporate governance guidelines issued by Canada's Office of the Superintendent of Financial Institutions in September 2018 granted boards at financial services firms greater discretion over how they meet its corporate governance expectations. In response, Royal Bank of Canada's (RY) corporate secretariat and the corporate and oversight functions used this increased flexibility to improve board oversight of strategy and corporate governance practices. Martin-Pierre Boulianne, senior legal counsel, special governance adviser, and assistant secretary, said the secretariat reviewed what is required of the board and each committee and interviewed committee chairs and other board members to determine where they wanted to make improvements. The result was enhanced board and committee effectiveness via meetings, forward agendas, and materials; an increased focus among directors on key issues like strategy, risk, and talent; and continued improvements in board and committee reporting on conduct and culture matters. For instance, in the past year, the board has overseen improvements in RBC's approach to climate change, including the creation of an enterprise climate-change strategy and enhancing climate-related disclosures. RBC also performed a significant revamp of its proxy circular to engage institutional investors and make the circular more accessible to retail investors.

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1/23/2020

Compensation Season 2020

Harvard Law School Forum on Corporate Governance and Financial Regulation (01/23/20) O'Brien, Jeannemarie; Wahlquist, Andrea; Shapiro, Adam

The article reviews several significant practices and trends in compensation arrangements that emerged or continued to evolve in the past year. Proposed rules issued by the Internal Revenue Service in December clarify, among other things, that the limitation on compensation deductibility (updated in 2017) will apply to executives of successor entities in merger and acquisition transactions if the executives were previously covered by these limits. Institutional Shareholder Services (ISS) made relatively few updates to its compensation-related voting guidelines for 2020, but it is worth noting updates to its policy on excessive director compensation. Starting in February 2020, ISS may issue a negative recommendation for board members responsible for approving non-employee director pay if it identifies a pattern of "excessive" non-employee director pay, defined as exceeding the pay received by the top 2% to 3% of directors within the same index and sector. Elective deferred compensation plans remain a staple of executive compensation programs at many companies, but the authors' recent experience has included several situations "in which directors and executives were surprised by the lack of flexibility to modify payment elections and the risks inherent in a deferred compensation arrangement." The upcoming proxy season will also be the first time that most public companies must comply with the new rule under Item 407(i) under the Dodd-Frank Act, which requires a company to describe any employee or director hedging policies or the absence thereof. Broadly there remains a strong focus on environmental, social, and governance issues, including as they relate to compensation and human capital, such as gender pay equity and diversity. While employee noncompetition covenants continue to come under pressure, reasonably tailored restrictions are still an appropriate way for an employer to protect its investment in talent.

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1/23/2020

Hedge Fund Investors Pivot to ESG

Institutional Investor (01/23/20) Whyte, Amy

A new Cerulli Associates report describes a small but growing niche of "hedge fund activists" that have adopted environmental, social, and governance (ESG) issues as a focus. It gives the example of Impactive Capital, launched last year by Blue Harbour Group alumni with a $250 million anchor investment from the California State Teachers Retirement System (CalSTRS), whose main strategy is ESG advocacy. Elsewhere, it notes, Jana Partners partnered with CalSTRS in 2018 to pressure Apple's (AAPL) board to address the potential negative effects of iPhone use on children, while Trian Partners has pushed several companies to promote workplace diversity, adopt supplier codes of conduct, and reduce emissions and waste. In addition, TCI Fund Management warned public company directors last November that it will vote against them if they do not disclose their carbon dioxide emissions. Hedge funds are taking up ESG issues as more institutional investors incorporate ESG factors into their investment process. A recent survey found that 42% of 89 U.S. institutional investors had included ESG in their investment decision-making process, nearly doubled from 2013. Cerulli found that 98% of asset managers expect moderate-to-high ESG demand from endowments and foundations. According to Cerulli director Michele Giuditta, "hedge fund activists are likely to play a particularly important role for large asset managers and institutional investors that...may not be positioned to engage, actively monitor, or have their voices heard at every company." Although ESG activism by hedge funds is currently "niche," Giuditta suggested that these existing players are likely to attain capital and shareholder support, which could encourage other hedge funds to follow suit.

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1/23/2020

Podcast: Everything Is ESG Now

Bloomberg (01/23/20)

In his yearly communication to CEOs earlier in January, BlackRock's (BLK) Larry Fink urged business leaders to prioritize climate change as a "defining factor in companies' long-term prospects." BlackRock itself plans to double the number of sustainable ETFs it offers and pressure index providers to develop more environmental, social, and governance-related (ESG) benchmarks. ESG investing will be discussed in this podcast with guests Annie Massa, a finance reporter with Bloomberg News; Shaheen Contractor, an analyst with Bloomberg Intelligence; and Graham Sinclair, an ESG strategy consultant.

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1/22/2020

The World's Most-Profitable Hedge Fund Is Now a Climate Radical

Bloomberg (01/22/20) Robinson, Edward; Kumar, Nishant

TCI Fund Management, the world's best-performing large hedge fund last year, is now pushing companies to reduce greenhouse gas emissions and disclose their carbon footprint.  In November, TCI sent letters to the CEOs of the 17 companies in its portfolio with specific instructions for addressing shortcomings.  For example, the top stakeholder in Canadian Railway Pacific (CP), with an 8% stake, told the railroad that it must come up with a "credible, publicly-disclosed plan" to reduce emissions that meets seven objectives, including offsetting emissions from corporate travel and making facilities more energy efficient.  TCI called on Ferrovial (FRRVF), the Madrid-based conglomerate that runs airports, to support measures such as a carbon tax and a mandate that airlines shift to greener jet fuel.  TCI said it will vote against directors of companies that do not meet its targets or sell all of its shares.  Chris Hohn, who started the $30 billion-asset hedge fund, says it is more productive to engage with carbon-heavy companies than to ignore them.

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1/22/2020

How Carl Icahn Got in a Legal Spat With This Natural Gas Tycoon Over a $30 Billion LNG Export Terminal

Forbes (01/22/20) Helman, Christopher

Investor Carl Icahn is suing liquefied natural gas (LNG) tycoon Charif Souki. Icahn and Souki first tangled in 2015 when the investor acquired a 15% stake in Cheniere Energy (LNG), gaining two board seats and getting Souki fired from his position as CEO because he had "no interest" in reducing spending. Cheniere has alleged that on his way out, Souki stole early plans for a new megaplant called Driftwood LNG and used them to found his new company, Tellurian Energy (TELL), which exists to engineer, finance, and build Driftwood. When Cheniere fired Souki, it also broke off the joint venture Souki had made with consultancy Parallax Energy, owned by his friend Martin Houston, which had received $47 million to work on new ideas. Cheniere claims that Houston stole Parallax's nascent LNG projects when they launched Tellurian, and it also wants to be repaid the $47 million loan that it made to Parallax under Souki. Souki's side holds that the loan is void because Houston and Souki had already agreed on terms of a joint venture between Cheniere and Parallax, which would have recharacterized the loan into an equity investment. While the joint venture was not finalized by the time Souki was fired, the Cheniere board did agree to it, and Houston's attorneys believe he has a solid breach-of-contract claim against Cheniere for discontinuing funding without notice after Icahn got involved. A settlement is possible before trial—likely one wherein Houston would drop his claim against Cheniere in exchange for Cheniere walking away from its loan. Shares in Cheniere are up 150% since Souki was fired, and Icahn's 9% stake is worth $1.5 billion, but even so, Souki's firing may have cost Cheniere an important foothold in the growing LNG export market.

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