Media Center

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

Progenics Investors Seek Changes at the Top as Shareholder Gains Traction
Boardroom Coup: Engineering Chaos at PSV Holdings
Updates From the 2019 Proxy Season
L Brands Can't Shake Victoria's Secret Woes
New Coalition Looks to Align Business Goals With Impact Investing
Citing 'Crisis' for Corporations, Marty Lipton Launches Feud With Investors' Council
Ferguson Risks Shareholder Rift With Talk of U.S. Move
Struggling Shopping Centre Owner Hammerson Names New Finance Chief
U.S. Regulator Votes to Propose New Guidelines on Shareholder Adviser
Uniper Workers Urge Fortum to Spell Out Future Plans to Allay Downgrade Fears
Months After Proxy Fight, Luby's Names New Chairman, Directors to Board
The 13F Parade: Syncopated, Frenetic, but Dull
Bramson Still Pushing for Barclays Overhaul
Knight Vinke Urges Alpiq Board to Call off Delisting, Squeezeout
Japanese Investor Ichigo Latest to Disclose Stake in Unizo
Bunge CEO Sees Optimization Plan in Place by Mid-2020
California Pension Fund Wants to Join Facebook Lawsuit
Shareholders Less Critical of CEO Pay at FTSE 100 Firms - Survey
Shareholder Adviser Supports Taking Merlin Private
Hudson's Bay Soars After Catalyst Buys Stake to Block Chairman
Investor Almost Triples Stake in GAM After Meeting CFO
Public Funds Taking the Lead in Spectacular Boom of ESG
Investors Demand Change at Imperial Brands
South Korean Fund KCGI Eyes Asiana Airlines Stake, Shares Soar
Saga Boss Patrick O'Sullivan Meets U.S. Investor That Bought 5% Stake in Crunch Talks Showdown
Starboard Cuts Perrigo Stake Under 5%
Starboard Value Shrinks Stake in Center
Mantle Ridge Buys Stake in Aramark, Eyes Talks With Management
Top-5 Shareholder Backs Scout24 Management in Clash With Elliott
A New Milestone for Board Gender Diversity
Dan Loeb Added More Netflix Shares to His Portfolio
Mick McGuire's Marcato Capital Loses 90% of Assets
Caligan Partners Built 10% Stake in Amag Pharma
Jeff Ubben's ValueAct Buys 5 Stocks in 2nd Quarter
China Plays Fast Catch-Up With the Global ESG Wave
Institutional Investors' Proxy Voting Responsibilities and Use of Proxy Advisory Firms
Big Business Is Beginning to Accept Broader Social Responsibilities
ISS, SEC Commissioners Push Back Against New Proxy Voting Rules
The Impact of Shareholder Value on Corporate Diversity and Inclusion
Sotheby's, the Billionaire, and the Reserve Price
What to Watch for Now That CEOs Have Rewritten the Purpose of the Corporation
Slowing Share Buybacks Remove a Pillar of Stock Market
Legal Implications of the Business Roundtable Statement on Corporate Purpose
Active Managers and Activism: A Multi-Faceted Relationship
Beyond Meat Stock and Campbell Soup Were Both Upgraded by JPMorgan. That's Not as Crazy as It Sounds.
Why Unizo Takeover Battle Could Unlock a Lot of Value in Japan
Why Germany Inc. Needs a Big Governance Reboot
Investors' New Weapon in Japan: Votes to Embarrass the Boss
The 'Stakeholder' CEOs
A Win in Proxy Fight for Universal Proxy Card
Maybe CEOs Are Fed Up With Shareholders
Business Roundtable's New Philosophy: It's Not All About Shareholders
Companies That Embrace Sustainable Investing See Their Sales — and Stocks — Rise
Audit Committee Disclosure in Proxy Statements—2019 Proxy Review
The Indoor Farmer Who Wants to Remake Appalachia's Agriculture
The Governance Implications of the Equifax and Facebook Settlements
Buffett, Icahn Know Crisis Means Money
Female Board Power and Delaware Law
Nelson Peltz's Trian Partners Makes Comeback After Punishing 2018

8/23/2019

Progenics Investors Seek Changes at the Top as Shareholder Gains Traction

Bloomberg (08/23/19) Darie, Tatiana

Some investors are siding with Velan Capital LP as it pushes for significant changes at Progenics Pharmaceuticals Inc. (PGNX). One top 10 investor said it has more confidence in Velan's team than Progenics' current management. However, the investor said it would still support the company if the board replaced CEO Mark Baker and stressed that the "botched" commercial launch of its sole wholly owned drug Azedra is cause for discontent. The company's shares have erased most of their 2019 gains after being up almost 50% in late June. A second investor is willing to give the company and its CEO another year to improve execution while waiting for Velan to put forward board nominations and more formal plans. The investor said the Progenics board has been in touch recently to ask for investor feedback, which is "good progress." A statement from Progenics read, "We take the views of our shareholders seriously. The board is working with urgency to make the changes necessary to improve the company's performance." Last month, shareholders voted against reappointing board members Michael Kishbauch and former chairman Peter Crowley. However, Velan said recently that, without an appropriate settlement, it could look to remove other members of the board. Sources say the firm could wait until next year's annual meeting or seek a vote earlier via consent solicitation from major shareholders.

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8/22/2019

Boardroom Coup: Engineering Chaos at PSV Holdings

Financial Mail (South Africa) (08/22/19) Rose, Rob

At engineering company PSV Holdings (PSV) in Johannesburg, founder Abie da Silva rallied enough shareholders to regain control of the company that forced his resignation as CEO in October. Resolutions to reappoint chair Anthony de la Rue, acting CEO Carlos Fernandes, CFO Roger Pitt, and nonexecutive Douglas Lorimer all failed to pass, getting just 43% of the vote. This is unprecedented in South Africa, and it is remarkable in part because Da Silva only owned 13.5% of PSV. Da Silva pulled off the coup by teaming up with Aldworth Mbalati, who had recently built a 25% stake in PSV. Mbalati, who bought his shares from private equity arm Calculus Capital, will become a director alongside Da Silva and Philip Peterson to fill the emptied board. PSV's share price has fallen 26% over the past three years, and it made a bottom-line loss of R25.9m for the year to June, burning through R20.3m in operating cashflow. Mbalati says PSV shareholders tried to raise concerns with the board for months, with little success, yet management seems to have been surprised by the coup. Mbalati says his shareholder group wants PSV to focus more on its liquefied natural gas (LNG) operations than its industrial supplies division. PSV is worth only R102m, even after a 22% rise in the share price last week, but Mbalati aims to leverage his uncommon import license for LNG to grow the company's value to R5bn within five years. If it wants to achieve that, PSV will need to get its governance right so that last week's events are not repeated.

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8/21/2019

Citing 'Crisis' for Corporations, Marty Lipton Launches Feud With Investors' Council

Reuters (08/21/19) Frankel, Alison

Corporate advisor Martin Lipton of Wachtell, Lipton, Rosen & Katz said in a recent memo and interview that corporations have awakened to "a critical moment for American business," acknowledging that they must be accountable not only to shareholders but also to their employees, customers, and communities. However, he said institutional investors have not, and "this will ultimately result in government regulation of institutional investors." His comments were in response to the Business Roundtable's recent announcement of a new corporate paradigm, and the Council of Institutional Investors' (CII) opposition to the move. CII said in a press release, "Accountability to everyone means accountability to no one. To achieve long-term shareholder value, it is critical to respect stakeholders, but also to have clear accountability to company owners." Lipton responded that CII's "failure" to join the Business Roundtable in abandoning shareholder primacy is "misguided." He added that CII's deference to the government to deal with issues such as wealth inequality and climate change "is an even more serious mistake" that "would lead to state corporatism or socialism." According to Lipton, "What's truly at issue here is the welfare of employees, the welfare of the environment. It's inconceivable that institutional investors, that CII, would not embrace that."

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8/21/2019

U.S. Regulator Votes to Propose New Guidelines on Shareholder Adviser

Reuters (08/21/19) DiNapoli, Jessica; Johnson, Katanga

The Securities and Exchange Commission (SEC) has released new guidance to clarify how investors and proxy advisory firms should vote in corporate elections on issues such as pay and diversity. The guidance, which adds to earlier 2014 guidance on shareholder voting in corporate ballots, deals with some of the concerns U.S. companies have long had about proxy advisors, like mistakes in reports the advisers issue on individual companies and conflicts of interest in their business models. The SEC voted 3-2 to issue the new guidance, with Democratic commissioners dissenting because doing so could add risks to shareholders' rights and costs for the proxy advisors. "What are the benefits to achieve here?" said Commissioner Allison Herren Lee, a Democrat. "We don't have investment advisers clamoring for advice or certainty on how to meet their fiduciary duties. We don't have (those) who use them—institutional investors—complaining that investment advisers are breaching those duties. So, what are we fixing by calling for increased issuer input and injecting cost into the process?" Corporate trade groups such as the U.S. Chamber of Commerce have argued that proxy advisors' recommendations are conflicted, and have been lobbying lawmakers and regulators to curb them. "We commended the SEC for taking a critical first step in bringing much-needed oversight to proxy advisory firms," said Tom Quaadman of the Chamber in a statement. "Proxy advisory firms have been riddled with conflicts of interest, failed to link advice with economic return or company-specific information, and lack process and transparency." For its part, proxy advisor Institutional Shareholder Services said in a statement that the firm is "concerned that the guidance will hamper our ability to deliver" research to investors.

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8/21/2019

Months After Proxy Fight, Luby's Names New Chairman, Directors to Board

Houston Chronicle (08/21/19) Takahashi, Paul

Restaurant chain Luby's (LUB) has named a new chairman and two new directors to its board eight months after winning a proxy battle against investor Bandera Partners. Gerald Bodzy was named chairman, succeeding Gasper Mir, who will remain on the board as an independent director. John Morlock and Randolph Read were named independent directors, replacing Judith Craven, who is retiring, and Harris Pappas, who resigned from the board earlier in 2019. Harris Pappas' brother, Chris Pappas, is the chain's chief executive. Morlock is a veteran restaurant executive with more than 30 years experience in corporate turnarounds, operations, and franchising for major restaurant chains. Read is chief executive of Nevada Strategic Credit Investments and previously, he was an executive with International Capital Markets Group, Wynn Development, and Greenspun Corp. Bandera Partners, which had been a Luby's shareholder for more than a decade, fought unsuccessfully to replace the Pappas brothers, Mir, and board member Frank Markantonis with its own slate of candidates, including former Sen. Phil Gramm, the father of Jeff Gramm, a Bandera co-founder. Luby's reported a $5.3 million loss as it slashed six underperforming restaurants from its portfolio during the third quarter ended June 5, and reported $65.6 million in sales during the quarter, down 15.7% from a year ago. Same-store sales dropped by 4% year-to-year as guest traffic declined 1.2% at Luby's Cafeterias and 8.7% at the company's Fuddruckers restaurants.

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8/19/2019

Hudson's Bay Soars After Catalyst Buys Stake to Block Chairman

Bloomberg (08/19/19) Deveau, Scott

Catalyst Capital Group Inc. has acquired a 10% stake in Hudson's Bay Co. (HBAYF) as part of its efforts to block a proposed takeover by Chairman Richard Baker and his partners. The Toronto-based private equity firm said it had received and accepted about 18.5 million shares in Hudson's Bay for about C$187 million ($141 million) in cash at C$10.11 per share—a premium to the C$9.45 a share offer from the group led by Baker, which collectively owns about 58% of the company. The announcement pushed up the stock 9% in Toronto, marking its biggest gain in more than two months. The move adds to pressure on Baker to raise his bid, which also is opposed by investor Jonathan Litt. "We look forward to working with HBC, the special committee of the board, and the company's stakeholders to ensure that this iconic company and its substantial assets are positioned to unlock value and that any transaction or strategic alternative maximizes value for the benefit of all shareholders," said Catalyst managing director and partner Gabriel de Alba. Baker's push to take the company private by purchasing the remaining shares his group did not already own would require the support of the majority of the remaining minority shareholders, making Catalyst's move crucial. Catalyst and Litt were among the investors who purchased shares sold by Ontario Teachers' Pension Plan in June, though their stakes remain unknown.

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8/19/2019

Public Funds Taking the Lead in Spectacular Boom of ESG

Pensions & Investments (08/19/19) Bradford, Hazel

The U.S. SIF Foundation's biennial Report on U.S. Sustainable, Responsible, and Impact Investing Trends shows that sustainable, responsible, and impact investing assets rose 38% from 2016 to $12 trillion in early 2018, amounting to a compound annual growth rate of 13.6% since the foundation began measuring U.S. assets in 1995. Of these assets, $8.6 trillion are managed on behalf of U.S. institutional investors, with public pension funds and other publicly pooled portfolios accounting for 54% of that amount, followed by insurance companies at 37%, education-related organizations at 6%, and foundations and labor organizations at 1% each. Environmental, social, and governance (ESG)-related alternative investment assets tripled to $588 billion by the start of 2018. Asset managers considered ESG criteria in their analysis and decison-making for portfolios of $11.6 trillion by 2018, up from $8.1 trillion in 2016. The report also found that, based on the number of ESG-related shareholder proposals filed between 2016 and the beginning of 2018, the top issues were proxy access, corporate political activity, and climate change. During this period, U.S. SIF determined that 165 institutional investors and 54 investment managers controlling $1.8 trillion in assets under management filed or co-filed ESG shareholder resolutions, down from 225 institutional investors or money managers controlling $2.56 trillion in assets that did so from 2014 through 2016. This indicates that more asset managers are engaging in direct dialogue with companies before, or instead of, filing a proposal.

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8/15/2019

Jeff Ubben's ValueAct Buys 5 Stocks in 2nd Quarter

GuruFocus.com (08/15/19)

At the end of the second quarter, Jeff Ubben's ValueAct equity portfolio contained 23 stocks, five of which represent new positions, including the addition of 13.63 million shares of gaming company The Stars Group (TSG), giving it 2.43% equity portfolio weight. The gaming company's interest coverage and debt ratios underperform more than 74.72% of global competitors. ValueAct also purchased 35,000 shares of Booking Holdings (BKNG), giving the position 0.69% portfolio weight. The company's Ebitda growth rate of 15.80% outperforms only 54.84% of global competitors, but its operating margin has increased approximately 0.40% per year over the past five years and it is outperforming more than 90% of global competitors. Like Third Point Management investor Daniel Loeb, ValueAct built a stake in Parsons (PSN) this quarter, acquiring 1.805 million shares to give the stake 0.69% equity portfolio space. The defense company has reported strong results in both its federal solutions and critical infrastructure markets, with revenues up 10% from second-quarter 2018. Like Baupost manager Seth Klarman, ValueAct purchased shares of transport company XPO Logistics (XPO), giving the holding 0.60% weight in its equity portfolio. The company has weak financial indicators including a debt-to-equity ratio that underperforms over 90% of global competitors, although its Piotroski F-score ranks a solid 5 out of 9. ValueAct also purchased 700,000 shares of electric company Edison International, giving the position 0.49% equity portfolio space. Edison International's debt ratios are underperforming over 72% of global competitors, and its long-term debt has increased by $5.5 billion over the past three years.

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8/23/2019

China Plays Fast Catch-Up With the Global ESG Wave

Business Times (Singapore) (08/23/19) McAdam, Matthew; Rogers, Jonathan; Wagner, Daniel

In this opinion piece, Matthew McAdam, director of Asia-Pacific for the Principles for Responsible Investment; Jonathan Rogers, CEO of Singapore-based consultancy Ostinato Associates; and Daniel Wagner, CEO of Country Risk Solutions, note that the "environmental, social, and governance (ESG) movement has swept the globe," but "until recently, it had barely registered as a ripple in China, despite Beijing being a major global investor." They point out that about 25% of all professionally managed assets are now invested in accordance with ESG criteria, and "China is now playing catch-up in the ESG stakes with speed, narrowing the gap between the government's global aspirations and the conventional mindset of its international investors and corporate boards." They attribute the change in mindset at the corporate level to government regulation and the internationalization of China's capital markets. Next year, ESG disclosure will become mandatory for 3,000 of China's listed companies and bond issuers. "China presently scores 21.6 in Bloomberg's average ESG disclosure score, less than half of the top rank scorer, France," they write. "That is set to change as disclosure becomes mandatory, but also as the country aims to attract international capital." They also note that seven Chinese asset managers signed up to the UN-supported Principles for Responsible Investment last year, bringing the total number of signatories in the country to 18, more than double the 2017 total.

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8/22/2019

Big Business Is Beginning to Accept Broader Social Responsibilities

Economist (08/22/19)

On Aug. 19, the Business Roundtable said it now believes that firms should serve stakeholders as well as shareholders. This reflects the rise of environmental, social, and governance (ESG) criteria in modern economic thinking, which is gradually taking precedence over notions of shareholder primacy. Assets managed under ESG criteria grew from $22.9 trillion in 2016 to $30.7 trillion at the start of 2018, and the concept has only risen further on investor agendas. In the face of climate change and growing economic inequality, workers, politicians, and the public at large are becoming more insistent that companies work to solve these problems. Some economists argue that shareholder primacy applies to a simpler time, noting that now, the externalities that businesses impose on society are sometimes impossible for shareholders to mitigate as individuals. Others say the idea of shareholder value, while still central, must be updated with a new measure of "firm value" that explicitly reflects what workers and suppliers invest in a company. So far, firms' voluntary ESG measures have applied mostly to consumers and the workforce. The world has not yet seen a situation where ESG issues come into a material, systemic conflict with profits. Many influential investors and bosses imagine a return to something like the "managerial capitalism" of earlier times, but not all are enthusiastic. Paul Singer of Elliott Management says that the current debate over corporate purpose "risks obscuring the fact that earning a rate of return for pension plans...is itself a social good."

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8/22/2019

The Impact of Shareholder Value on Corporate Diversity and Inclusion

Forbes (08/22/19) Gaudiano, Paolo

In an Aug. 19 statement on the purpose of a corporation, the Business Roundtable suggested that shareholder value is not the sole purpose of a corporation. The statement lists five stakeholders to whom every corporation should be committed: customers, employees, suppliers, communities, and shareholders. The statement bodes well for those who aim to increase diversity and inclusion, a goal it explicitly endorses, and marks a welcome departure from dogmatic adherence to an older notion of shareholder primacy. This opinion piece supports the Business Roundtable's statement and argues that diversity and inclusion, among other environmental, social, and governance matters, are key elements to corporate success. Beyond quantitative data analysis, that conclusion is supported by the fact that there is no reason to believe that homogeneous companies are optimal. Moreover, inclusion has a direct impact on company performance. If a company does anything that has a negative impact on its employees as a result of its personal characteristics, it is essentially shooting itself in the foot. Skeptics of inclusion should acknowledge that economists like Milton Friedman (who championed shareholder primacy) based their theories on a simpler understanding of the relationships between workers and company performance. Now that we can understand this relationship more accurately, it is irresponsible to ignore the profound impact that customers, suppliers, community members, shareholders and, employees have on a company's success.

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8/21/2019

Sotheby's, the Billionaire, and the Reserve Price

Bloomberg Opinion (08/21/19) Hughes, Chris

Auctioneer Sotheby's (BID) board did a poor job of handling a takeover bid from billionaire Patrick Drahi, even if it led to a generous offer relative to where the stock was trading, according to this opinion piece. The board should have been on alert to repel opportunistic approaches as shares fell and private equity investors started approaching it for a takeover. A private equity buyout consortium valued the auctioneer at a mere $50 a share, which the board rejected, though it did so weakly, offering to help the bidder raise the price. The board couldn't agree on a proper share price. Initially, Sotheby's largest shareholder, Taikang Asset Management, suggested $100 a share, but the board started bidding at $65 a share and lowered it from there, ultimately hitting $57.50 a share to draw Drahi's attention. An intermediary was told that Third Point LLC, which owns 14% of Sotheby's and controls several board seats, was ready to sell at the right price, but Drahi called the bluff, returning with a $57 a share offer in June. Sotheby's agreed to that price, which offered a 61% premium to the then-share price, but largely because the stock had fallen further. Sotheby's indecision and weakness throughout the process reflects poorly on its board. While the board was right to not try to get an auction going or solicit a firm offer from Taikang, Sotheby's really should not have tried to sell itself in the face of bad offers. If a deal is too cheap, an auction will follow, but the break fee is expensive at 3% of Sotheby's enterprise value. Still, an auction is not impossible, and if one gets going, the board's tactics would look better.

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8/21/2019

What to Watch for Now That CEOs Have Rewritten the Purpose of the Corporation

Washington Post (08/21/19) McGregor, Jena

On Aug. 19, the Business Roundtable issued a statement updating how it views the purpose of a corporation, but not providing much detail on how shifting away from the dogma that shareholders should come first would change behavior in the future, what shifts in policy or practices can be expected, or how success in a stakeholder-driven approach to capitalism might be measured. The group of nearly 200 CEOs of large companies was called on by presidential candidates, academics, and others to explain how they would meet the commitments of the statement. The Council of Institutional Investors (CII) said it "respectfully disagree[d]" with the statement, arguing that it "undercuts notions of managerial accountability to shareholders" and that the government is responsible for making decisions in society's best interest. However, corporate lawyer Martin Lipton, a founding partner of Wachtell, Lipton, Rosen & Katz, responded, "Shareholder primacy was ill-conceived in the first place and has utterly failed to provide for the needs of all stakeholders." Meanwhile, Jonas Kron, director of shareholder advocacy at Trillium Asset Management, said boards should significantly increase how much of CEOs' compensation is tied to goals outside of financial metrics, and Lawrence Mishel, a distinguished fellow at the Economic Policy Institute, hopes big corporate CEOs are willing to engage with unions and work with employees toward a new system of collective bargaining. Further, Joseph Bower, a Harvard Business School professor, said he will look for shifts in how companies think about their overall strategy in terms of climate change, wages, working conditions, and executive pay. "Shareholder value should be a result, not a goal, a result of a business serving its customers, serving its employees, serving its communities. And if they do that well, shareholders will do fine," he said.

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8/21/2019

Legal Implications of the Business Roundtable Statement on Corporate Purpose

Harvard Law School Forum on Corporate Governance and Financial Regulation (08/21/19) Huber, Betty M.; Hall, Joseph A.; Goldberg, Louis

The Business Roundtable has endorsed stakeholder capitalism in its Statement on the Purpose of a Corporation, which breaks from the long-held concept that a corporation's primary purpose is that of maximizing shareholder value. Some members of the Business Roundtable chose not to sign the statement, which calls for signatories to commit to (1) delivering value to customers, (2) investing in employees, (3) dealing fairly and ethically with suppliers, (4) supporting the communities in which they work, and (5) generating long-term shareholder value. The statement also incorporates environmental, social, and governance (ESG) concepts. Much of the ensuing media coverage about the statement has focused on its political implications, but there also are legal implications. The statement does not alter the business judgment rule, which gives directors wide latitude in discharging their duty of care to the company and its shareholders. So long as directors are acting in good faith, on a fully informed basis, directors should be protected under the business judgment rule. Directors also owe a duty of loyalty to the company and its shareholders that is not shielded by the business judgment rule. Further, the statement considers a number of ESG topics with respect to which some investors have been calling for more disclosure, including through corporate engagement, shareholder proposals, and petitions to the Securities and Exchange Commission (SEC). These topics include (1) human capital and employee attraction, development, and retention; diversity and inclusion; and gender pay disparity; (2) supply chain management; (3) human rights; (4) political lobbying and spending; and (5) climate change. Many corporations during this past proxy season have won withdrawals of shareholder proposals on these matters by agreeing to provide additional ESG disclosures. The SEC recently proposed a rule that if adopted would mandate additional human capital management disclosures.

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8/20/2019

Beyond Meat Stock and Campbell Soup Were Both Upgraded by JPMorgan. That's Not as Crazy as It Sounds.

Barron's (08/20/19) Root, Al

JPMorgan analyst Ken Goldman has upgraded and raised price targets for Beyond Meat (BYND) and Campbell Soup (CPB). The companies are in different stages. At Campbell Soup, Third Point's Dan Loeb is pushing the company to go beyond selling assets like Australian cookie maker Arnott, which it is selling to private-equity firm KKR (KKR), and invest in categories such as soup to boost sales growth. Beyond Meat, on the other hand, is growing rapidly and pioneering a new food category, with sales expected to increase more than 60% in 2020. Goldman cited multiple reasons for the upgrades, one being valuation. Further, he noted that Beyond Meat's founder "trimmed only a tiny portion of his holdings" after a secondary offer that spooked investors, and said "we cannot blame anyone involved pre-IPO for locking in some gains." Beyond Meat shares are down about 35% since the secondary offering was announced, so Goldman thinks it is a good time to get back in. For Campbell, Goldman thinks there is less price risk in the shares now, because the stock trades for a little less than 17 times estimated 2020 earnings, slightly below other food stocks in the S&P 500. Goldman also thinks that more innovation and better marketing could boost soup sales. Overall, Beyond Meat shares are up about 480% from their $25 initial public offering (IPO) price, making it the best performing IPO of the year, while Campbell Soup shares are up more than 30% year-to-date, better than the 12% change seen in the Dow Jones Industrial Average.

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8/20/2019

Why Germany Inc. Needs a Big Governance Reboot

Financial Times (08/20/19) Storbeck, Olaf

A large part of Germany's corporate sector is struggling due to managerial incompetence and corporate blunders. Volkswagen (VWAGY), Daimler (DDAIF), BMW (BAMXF), and automotive supplier Continental (CTTAY) have clung to increasingly obsolete technology, while Bayer (BAYZF) is reeling from its acquisition of Monsanto. Thyssenkrupp (TYEKF) continues to look for new options after posting its fourth profit warning in a year, but Deutsche Bank (DB) has finally given up on the idea of becoming the European Goldman Sachs. Wirecard (WCAGY) delayed its 2018 annual report amid a police probe in Singapore. The eight companies represent about one-quarter of the Dax's total value, and excluding Wirecard—which has seen a strong rally in its shares this year—the companies have lost nearly a combined 100 billion euros in their stock market value over the past five years. The worst offender, K+S (KPLUF), which is not on the list, dropped out of the Dax after its market cap collapsed in the wake of rejecting a takeover bid by PotashCorp (POT). The clustering of woes among Dax companies suggests that the situation is more than just a coincidence and may be linked to Germany's distinctive model of corporate governance. There are insufficient checks and balances for supervisory boards and shareholders that engage with entrenched management. German corporate law also does not prescribe a shareholder vote on mergers and acquisitions.

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8/20/2019

Investors' New Weapon in Japan: Votes to Embarrass the Boss

Wall Street Journal (08/20/19) Bhattacharya, Suryatapa; Davis, River

In Japan, shareholders have become increasingly vocal amid a push to improve companies' profitability and corporate governance. While embarrassing bosses once was rare in Japan, shareholders are now using it as a new weapon, in some cases to get their nominees onto boards. Seth Fischer, founder and chief investment officer of Oasis Management Co., said the hedge fund was using Japan's stewardship code to push for change, noting that writing letters and meeting with senior managers at one company led to share buybacks, higher dividends, investment in new information technology, the removal of two directors, the addition of an external director that it nominated, and the retirement of the chairman. "Our general policy is that we will always try to work with management first," Fischer said. "In this case, we were not making progress initially, but as things continued privately, and we were on the verge of announcing a public campaign with proxies, the company went forward with our proposals." According to IR Japan, a record 355 listed companies saw at least one significant rebellion during this year's annual general meetings, meaning a result where at least 20% of votes were cast against the appointment of one or more directors or in favor of a shareholder proposal not endorsed by management. Satoshi Iwanaka of IR Japan's research unit said, "Behind the scenes, a lot of movement by various activists is going on." While progress has been slow, given that the corporate-governance and stewardship codes are voluntary, Third Point inked an early victory in 2016 in a battle over succession, which led to the resignation of Toshifumi Suzuki, chairman and CEO of 7-Eleven operator Seven & I Holdings (SVNDY). Iwanaka expects activists and shareholders to make themselves heard even more often going forward.

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8/19/2019

A Win in Proxy Fight for Universal Proxy Card

Harvard Law School Forum on Corporate Governance and Financial Regulation (08/19/19) Thomas, Lizanne; Profusek, Robert A.

The Rice brothers' (about a 3% stake in EQT Corp., with their allies) victory at EQT Corp. (EQT) marks the first time that a dissident shareholder group won board control in a proxy contest using a "universal proxy card" that included the names of both the company's and the dissident's slates. In a typical proxy contest, the company and dissident shareholder send separate proxy cards to shareholders, who must then choose whether to use the dissident's proxy card or the company's, neither of which provides a complete list of director candidates. In this case, the parties elected to use a universal ballot that listed all nominees after the Rice brothers went to court against EQT for its requirement that all nominees consent to appearing in its proxy materials. Ultimately, the Rice brothers' campaign won the support of large EQT shareholders, including T. Rowe Price (about a 10% stake) and D.E. Shaw (about a 5% stake), and each dissident nominee received more than 80% of shareholder votes. The EQT case is a reminder of the importance of a corporate ballot in director elections, whether or not it is contested. In a proxy fight, completed ballots dictate the election results, and the form and wording of the proxy card can be critical to this. Companies that wish to preserve a two-card format for a contested election should be wary of any requirement that applies solely to dissident candidates. When companies decide to use a universal proxy card in a contested election, they should list the director nominees separately, clearly identified as the management slate, and distinguished from the dissident slate by being listed first. Proxy cards should always be clear and concise, and voting options should be presented in a manner that presents ease of use by shareholders.

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8/19/2019

Business Roundtable's New Philosophy: It's Not All About Shareholders

Wall Street Journal (08/19/19) Benoit, David

The heads of some of the nation's largest corporations are chipping away at the long-held notion that corporate decision-making should revolve around what's best for shareholders.  Led by JPMorgan Chase & Co. CEO James Dimon, the Business Roundtable has announced that it's changing its statement about "the purpose of a corporation."  No longer should decisions be solely based on whether they will yield higher profits for shareholders, the group stated.  Instead, executive management should take into account "all stakeholders"—everyone from employees to customers to "society writ large." This marks a major philosophical shift for the association, which counts the CEOs of dozens of the biggest American firms among its membership and has emerged as a powerful voice in Washington for U.S. business interests.  "Each of our stakeholders is essential," the new statement reads. "We commit to deliver value to all of them, for the future success of our companies, our communities, and our country." A company's view on the issue of corporate purpose can influence issues as diverse as worker pay and environmental impact. Further, it plays a central role in discussions about stock buybacks, corporate spending, and how companies respond to activist investors calling for changes geared toward improving returns. Some activist investors and academics say encouraging companies to concentrate on a host of stakeholders amounts to grandstanding that misdirects resources. They make the case that shareholders, not companies, should be the ones influencing society.

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8/16/2019

Audit Committee Disclosure in Proxy Statements—2019 Proxy Review

Harvard Law School Forum on Corporate Governance and Financial Regulation (08/16/19) Arthur, Leeann; Parsons, Krista; Lamm, Robert

According to Leeann Arthur, senior manager; Krista Parsons, managing director; and Robert Lamm, independent senior advisor—all at Deloitte's Center for Board Effectiveness—there was an increase in certain disclosures relating to the independent auditor in the 2019 proxy statements of S&P 100 companies. A greater percentage of these companies disclosed that the audit committee evaluates the independent auditor, the reasons why the committee decided to reappoint the independent auditor, the tenure of the independent auditor, and that they discussed the scope and plan for the audit with the independent auditor. Other voluntary disclosures have plateaued, but they contend that these gains may have been in preparation for new and upcoming regulatory requirements. The percentage of S&P 100 companies disclosing the role of the audit committee in overseeing cyber risk surged from 43% in 2018 to 58% in 2019. Of the companies disclosing the role of the audit committee in oversight of cyber risk, 51% delegate cyber risk oversight to the audit committee, and 7% said cyber risk oversight responsibilities are shared between the audit committee and either the full board or another committee. Deloitte offered several suggestions for audit committees to enhance the transparency and usefulness of the proxy: provide more granular information on key topics on the audit committee agenda, specify independent auditor evaluation criteria, discuss issues encountered during the audit and how they were resolved, and enhance readability by using graphics to depict important information or personalize the audit committee with photos or other messages tailored to readers.

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8/14/2019

The Governance Implications of the Equifax and Facebook Settlements

Harvard Law School Forum on Corporate Governance and Financial Regulation (08/14/19) Peregrine, Michael W.

Privacy settlements in late July involving Equifax (EFX) and Facebook (FB) should send an important message to corporate boards about the regulatory expectations of board oversight of consumer privacy concerns. Themes arising from the settlements that are worthy of board-level discussion include enterprise risk, board engagement, the privacy committee, compliance oversight, and individual accountability. There is an increased risk of government enforcement response to privacy failures by corporations that have special access to consumer information. The call for enhanced board oversight of information security programs suggests increased government expectations of board oversight of information security and privacy matters. A board level privacy committee is key to the Facebook settlement and raises the question whether a board privacy committee will become a best practice. The focus on an internal privacy compliance function suggests value in re-evaluating how information security compliance is addressed within the context of current corporate compliance programs. Provisions requiring certifications by the board and the CEO are consistent with a broader regulatory focus on individual accountability and attributing greater responsibility to boards for corporate wrongdoing. Rather than dismiss the settlements as one-off regulatory resolutions of egregious fact patterns, boards should give more thought to the heightened expectations of governance oversight of information security.

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8/14/2019

Buffett, Icahn Know Crisis Means Money

Forbes (08/14/19) Wade, Chet

Warren Buffett and Carl Icahn have vastly different investing styles, but both know how to profit from corporate crises, demonstrated most recently in the case of Occidental Petroleum (OXY). Buffett's Berkshire Hathaway (BRK) financed a $10 billion loan to help Oxy outbid Chevron (CVX) for Anadarko Petroleum, quietly responding to its urgent need for cash. Meanwhile, Icahn has been saying that the Anadarko acquisition was a "travesty" and management performed poorly in taking on the loan, saying Buffett took Oxy CEO Vicki Hollub "to the cleaners." Icahn admitted he couldn't stop the Anadarko acquisition with his 4.4% stake, so he started a proxy fight instead, looking to replace four Oxy directors with a slate he supports. In this situation, both investors benefited from crisis: one "by being the lender of last resort," the other "by being the prophet of last retort." Buffett's loan grants him an 8% interest rate on $10 billion of preferred shares, as well as warrants to buy 80 million shares of Occidental at $62.50 a share, well above Oxy's current price but worth as much as $5 billion by some estimates. Buffett has made similar preferred-stock deals at companies like Goldman Sachs (GS) and Mars/Wrigley, which offered good premiums and relatively low risk. This contrasts sharply with Icahn, an investor whose strategy centers around pressuring management to unlock value. But if Buffett is right on the warrants, both stand to benefit from the Anadarko deal.

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