Media Center

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

Argo Chairman and Four Directors to Retire
Clock Ticking for GAM
SandRidge CEO Resigns as Icahn-Backed Board Eyes Spending Plan
Potbelly's Investor Is Still Lurking
Saga's New Boss Primed for Investor Tussle
Pimco, Elliott Group Press Newsom to Reject PG&E's Restructuring Plan
Elliott May Sell Altran Shares if Capgemini Sweetens Bid—Source
Ackman Reveals Agilent Stake—and More
Elliott Says PG&E-Backed Restructuring Plan Ignores State Mandates
Cevian's Tischendorf to Leave Thyssenkrupp Supervisory Board
De La Rue Can Print Money but Struggles to Make It
Investor Pressure on GAM Heats Up
Crystal Amber Withdraws Requisition of Allied Minds
Francisco, Elliott Are in Talks to Buy LogMeIn
Proxy Adviser Glass Lewis Urges HBC Shareholders to Back Richard Baker Bid
Elliott-Backed Triple Flag Scraps IPO, Signals Tough 2020 for Listings
Proxy Advisory Firms Glass Lewis and Egan-Jones Recommend HBC Shareholders Vote 'FOR' Privatization Agreement
Rolls-Royce Says ValueAct Executive Leaves Board, Shares Fall
Domino's Chair Steps Down After Investor Grabs Slice of Company
Toshiba Restructuring Plan Faces Hurdle as Investor Builds Stake in Unit
Japanese Watchdog Wants Asset Managers to Focus on ESG
Popular to Review Letter From Investor
AT&T's John Stankey: 'No Place Is Safe' From Company-Wide Cost Cuts in 2020
Hudson's Bay Quarterly Loss Widens on Discounts Amid Take-Private Battle
Starboard Value Has Nominated Majority Board Slate at Health-Services Company Mednax
Icahn's Firm Announces Layoffs Before Miami Move
Hudson's Bay Investor Says Will Vote Against Take-Private Deal
Fishy Comment Letters Are Being Investigated, SEC's Clayton Says
Hudson's Bay Special Committee 'Disappointed' With ISS Recommendation
Australia's Carsales.com Joins Groups Circling Scout24's Auto Unit
Investor Urges Colony Credit to Replace Investment Team
Xerox Woos HP Holders With $1.5 Billion Sales Growth Target
Bill Ackman's Pershing Square Reports Stake in Agilent Technologies
McAfee Considering a Combination With NortonLifeLock
Saga to Sell Care Operations Under Elliott Break-Up Threat
Alexion Pharmaceuticals Rejects Elliott Push for 'Proactive Sale'
Hudson's Bay Chairman's Take-Private Plan Dealt Blow by ISS
The Battle Over Green Investment Is Hotting Up
Lagardère Group Chairman Resigns 'For Personal Reasons'
Enzo Biochem Issues Open Letter to Shareholders
Investor to Oppose Instructure's Plans to Sell to Thoma Bravo
ABB CEO Says More Spin-Offs Possible
An Overwhelming Majority of Investors Expect Companies to Implement Effective Environmental, Social-Impact and Governance Practices
Moral Money: Davos Boss Tells Execs to Align Pay With Stakeholder Interests
Carl Icahn Blasts HP's Decision to Reject Xerox's Acquisition Bid
Carl Icahn Urges HP Shareholders to Reach Out to Board
'Significant Board Changes' Needed at Valaris, Shareholder Says
Pershing Square Raises Stake in Howard Hughes Corp.
Hudson's Bay Confident of Approval for Chairman's Buyout Bid
Amherst Is in Talks to Buy Front Yard After Investor Pressure
Microsoft Shareholders Defeat Two Investor Proposals
AT&T Aims to Cut 4% in Labor Costs Amid Effort to Bolster Financials, CFO Says
Paul Singer's Elliott Management Adds 4 Stocks to Portfolio in 3rd Quarter
Brexit Disruption 'to Spark Activist Investor Interest' in U.K.
Companies Vow to Improve Climate Disclosure After TCI Warning
Crystal Amber Bets on Britain's De La Rue
E.l.f. Beauty Shares Under Pressure as Marathon Partners Urges Company to Sell Itself
Netherlands to Force Companies to Have More Women on Boards
Icahn Urges HP to Move Forward With Xerox Merger Discussions
Third Point Posts Strong November Gain
Corporations Are Agreeing More to CalPERS Diversity Demands
Punish Directors Who Don't Make Climate Disclosures, Says Hedge Fund
TCI Hedge Fund Does More on Climate Action Than ESG Funds
Tribune Publishing Adds Two Board Seats for Alden; Hedge Fund's Stake Capped at 33% Until End of June
Ferguson First-Quarter Profit Rises as U.S. Residential Activity Picks Up
Crystal Amber to Double Stake in Banknote Maker De La Rue
Icahn Is Said to Push Ahead With Bid to Control Occidental Board
Toshiba, Once a Hedge Fund Target, Seeks to Become One
Elliott Calls Capgemini's $4 Billion Altran Bid Too Low
Vodafone Wins German Court Backing in Price Fight With Elliott
Catalyst Capital Group Makes Rival Takeover Offer for Hudson's Bay Co.; Land & Buildings Expresses Interest
Scout24 Is Exploring Sale or Separation of Auto Platform
In Oil and Gas, Activist Investors Lose Steam
An Investor Tries to Oust a Trump Confidant
Xerox Says It Will Take HP Buyout Offer Hostile by Going Directly to Shareholders
Crystal Amber to Buy More De La Rue Shares
Voce Calls for New Directors on Argo Board
Japan and Australia to Boost Asia M&A Activity in 2020, UFP Says
Starboard Takes Stake in CVS
Investor Presses Valaris for Broader Changes, Plans on Special Meeting
Investor Takes Step Back From Nashville Lender
The New NextEra? HECO Is Fighting This Mainland Firm's Bid for Control
Expected Effects of SEC Proposals on Public Companies & Proxy Advisors' Dialogue
Nestle CEO Mark Schneider's Top Deals Over the Past Three Years
Boards May Have a Hidden Bias Toward the CEOs They Chose
Big Investors Turn Screw Over Climate Pollution Disclosure
Governance Survey Grades Companies With C+
The Tricky Role of the CEO in a New Era of Social Responsibility
Shareholder Activism Redefined
Twenty-First Century Corporate Governance Moves Into Adulthood
Video: Goldman's Mehrotra on the Changing Trends in Shareholder Activism
Business Model Disruptions, Slowing Global Economy Top List of Corporate Directors' Concerns For 2020
Small U.S. Companies Slower to Add Female Directors to Their Boards: Study
Activism Is the No. 1 Way to Create Superior Returns, According to Hedge Fund Manager Jamie Dinan
Research: Gender Diversity on Start-Up Boards Is Worse Than You Think
Building an Effective ESG Engagement and Disclosure Plan
Corporate Governance and Corporate Agility
Thoughts for Boards of Directors in 2020
Singer Shows That Investors Can Be in Tune With Companies
Even 'Nice' Hedge Funds Aren't Miracle Workers
Investors Need More Clarity on Japan's 'Anti-Activism' Law
Momentum Builds for More Women on Boards
Board Action on ESG Needed to Ensure Long-Term Performance Gains
Korea Corporate Governance Forum Set to Debut Dec. 12
Graphic: In ESG Investing, Global Governance Matters
Enlightened ESG Investors Engage, but Retain Right to Divest
Battle Royale: SEC Locks Horns With Investors Over Proxy Advisers
Hedge Fund's Criticism Puts Spotlight on Emerson CEO's Pay — $162 Million Over a Decade
More Women on Singapore Boards but Diversity Still Lacking
Shared Investors Make HP-Xerox Deal 'More Likely'
Who Says You Can't Trust ESG Data? One of the Biggest Names in ESG.
The Ackman Surge Continues
Climate Change Has Made ESG a Force in Investing
Hedge Fund Activists Are 'Shepherds, Not Wolves'
Carl Icahn Just Needs Any Xerox-HP Deal
Hedge Fund Boss Pays Himself £200 Million Despite Fund's Profits Falling
Major Institutional Investors Say Zuckerberg's 'Totalitarian Grip' on Facebook Must End
Institutional Investors Watch for Volatility, Activism
Labor in the Boardroom
Code Green: Investors Are Coming for Environmental Offenders
ISS and Glass Lewis Policy Updates
ISS Benchmark Policy Updated—Executive Summary
ESG Reporting Best Practices
TCI Plays Outrider to Mark Carney's Climate Drive
Video: Copy That
Shadow Governance
A Common-Sense Approach to Corporate Purpose, ESG, and Sustainability
Gordon Singer — Elliott's Quiet Man Making Noise in Europe
Investors Lay Down Challenge to Corporate France
Investors and Issuers Aligned on Board Diversity
The Business Case for More Diversity
Arnaud Lagardère's Battle to Retain Grip on French Empire
Corp Fin Enters Brave New Shareholder Proposal World
Why Investors React Negatively to Companies That Put Women on Their Boards

12/12/2019

Elliott Says PG&E-Backed Restructuring Plan Ignores State Mandates

Wall Street Journal (12/12/19) Scurria, Andrew

Elliott Management Corp. is digging in against PG&E Corp.'s (PCG) strategy for exiting bankruptcy. On Thursday, Elliott, which leads a group of bondholders seeking to take over PG&E, said that a restructuring strategy developed by shareholders, management, and wildfire victims would jeopardize "both the immediate-term and long-term health of the company and its critical infrastructure." The bondholders are fighting to keep their own restructuring plan viable after wildfire victims that had previously backed it reached a $13.5 billion settlement with PG&E and switched to supporting the utility's shareholder-backed strategy. Settling with fire victims gave PG&E critical support for its proposal, which would protect the ownership stakes of large shareholders such as Knighthead Capital Management LLC and Abrams Capital Management LP. Elliott's plan involves using most of PG&E's equity to pay off wildfire debts, while the company would rely more heavily on debt financing. According to Elliott, that strategy could leave PG&E with $10 billion more in debt on its books than when it entered bankruptcy and eat up an additional $1 billion annually in excess interest and shareholders payments, limiting its ability to invest in critical infrastructure and safety upgrades. By contrast, Elliott said its plan would overhaul governance and management, limit debt to a moderate level, and maintain strong cash flow for "investment in critical wildfire safety mitigation." Gov. Gavin Newsom has raised concerns about aspects of PG&E's strategy and whether it adheres to a California law passed over the summer to help investor-owned utilities in the state handle future wildfire liabilities. He is expected to weigh in by Friday on whether he supports PG&E's proposal and the wildfire-victim settlement. A spokesperson for the governor said recently he wants the state to be able to appoint public board members at PG&E once it exits bankruptcy and have a "mechanism" to increase their authority within the utility if it fails to meet safety metrics.

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12/12/2019

Cevian's Tischendorf to Leave Thyssenkrupp Supervisory Board

Reuters (12/12/19) Steitz, Christoph

Jens Tischendorf, a partner at investor Cevian, plans to exit the supervisory board of Thyssenkrupp (TKAMY) after his term ends in January, according to the conglomerate. Cevian invested in Thyssenkrupp in 2013 and is now the conglomerate's second-biggest shareholder, with a stake of 18%. Tischendorf, who has been a member of the board since 2015, will not stand for re-election at the Jan. 31 annual meeting, the conglomerate said. The supervisory board has suggested selecting Friederike Helfer, head of Cevian's Swiss office, as a member. "Friederike Helfer has earned a reputation as an analytical, experienced industrials portfolio manager," Thyssenkrupp Supervisory Board Chairman Siegfried Russwurm said in a statement. Cevian has long argued that the beleaguered conglomerate's set-up, which includes manufacturing submarines, elevators, and car parts, is too complicated and should be simplified. Although recent management changes have sparked a de-facto breakup plan for the conglomerate, previous leadership has resisted for years calls to make structural changes for its individual units. Bernhard Pellens and Carola von Schmettow will also not stand for re-election to the supervisory board, the conglomerate said. It has suggested selecting Innogy finance chief Bernhard Guenther and Birgit Behrendt, supervisory board member of Ford Werke GmbH, as new members.

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12/11/2019

Investor Pressure on GAM Heats Up

Institutional Investor (12/11/19) McElhaney, Alicia

Investors continue to engage GAM Holdings (GMHLF) more than a year after it announced that it would liquidate certain bond funds, leading to outflows of assets and staff members. Krupa Global Investments, which owns a nearly 3% stake in the investment firm, said it is now communicating with Bluebell Capital Partners, another investor in GAM. Krupa is giving GAM's new CEO, Peter Sanderson, until February 2020, when GAM's full-year results are due, to show a path to restoring profitability. If Sanderson fails to do so, Krupa has threatened to join forces with Bluebell and other investors in an effort to replace GAM's board in 2020. GAM's problems began in July 2018, when it announced that it would liquidate its unconstrained/absolute return bond funds, and later fired the director of those funds for allegedly failing to conduct enough due diligence on certain investments. Krupa has argued that GAM did not effectively handle the communications surrounding the bond fund redemptions, which led to a large drop in the company's share value. Giuseppe Bivona, partner and chief investment officer at Bluebell, shared similar complaints about the redemptions, adding that Bluebell wants to replace the board because it thinks the board mishandled the communications surrounding the bond fund situation and that trust in the firm had eroded following the redemptions. The size of Bluebell's stake has not been disclosed.

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12/11/2019

Crystal Amber Withdraws Requisition of Allied Minds

PRNewswire (12/11/19)

Crystal Amber Fund notes the announcement made Dec. 11 by the board of Allied Minds plc (ALM) in response to Crystal Amber's general meeting requisition announced on Nov. 21. In light of Allied Minds'  appointment to its board of Mark Lerdal, the director candidate proposed by Crystal Amber and the other announced changes to the Allied Minds board and to executive compensation, Crystal Amber has formally withdrawn the requisition notice. "Actions such as the announced board changes and the focus on maximising cash returns to shareholders—not least from the recent sale of Allied Minds' stake in HawkEye 360—demonstrate the value of Crystal Amber Fund's activist investment approach," according to Crystal Amber's press release. Richard Bernstein, investment adviser to Crystal Amber Fund, said: "We have always attempted to engage positively in a private manner with our investee companies in an effort to effect change in the interests of all shareholders. This is one of a small number of cases where we have felt obliged to take public action to ensure that shareholder interests are being properly considered. We are pleased that the Board of Allied Minds has engaged with us and the outcome of this process is an acknowledgment that Allied Minds can do more to maximise the realisation of shareholder value. We are also encouraged about the progress we believe can now be made in this regard."

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12/11/2019

Proxy Adviser Glass Lewis Urges HBC Shareholders to Back Richard Baker Bid

Globe and Mail (12/11/19) Younglai, Rachelle; Jones, Jeffrey

Hudson's Bay Co. (HBAYF) shareholders are being advised by proxy adviser Glass Lewis & Co. to accept Hudson's Bay Executive Chairman Richard Baker's $1.1 billion privatization bid instead of waiting for a higher offer from private equity fund Catalyst Capital Group Inc. Catalyst, which has a 17.5% stake in Hudson's Bay, has proposed paying $11 per share for the company, higher than Baker's bid of $10.30 per share, though Hudson's Bay's special board committee has rejected Catalyst's offer. Glass Lewis questioned whether Catalyst had "obtained sufficient funding commitments" and said the private-equity company had not shown that it would be able to secure support from Baker's group of shareholders, which control 57% of Hudson's Bay's stock. The value offered by Catalyst is "illusory," Glass Lewis said. A vote on the Baker offer is scheduled for Dec. 17, and for it to succeed, the majority of the remaining shareholders must back the bid. Catalyst says it has sufficient backing from other dissident minority shareholders to block the offer. Meanwhile, Institutional Shareholder Services (ISS) has urged shareholders to oppose Baker's offer, saying that Hudson's Bay's sale process had "significant defects." ISS said the committee in charge of evaluating the offer handcuffed itself by recommending an agreement that defines a superior proposal as something that could never happen—prompt the majority shareholders to sell. Glass Lewis recognized that there were concerns the Baker offer bid would clear the 75% super majority hurdle but said it saw "no viable path" for Catalyst to win support from Baker's group, which includes Rhone Capital LLC, Hanover Investments (Luxembourg) SA, and Abrams Capital Management LP. "We believe it would be nonsensical for the board to terminate" the Baker bid and "imprudent" for HBC shareholders to spurn it, "simply for the opportunity to consider an alternative proposal that would ultimately stand no chance of being approved," Glass Lewis said in its report. Catalyst says the Glass Lewis report failed to address its concerns about Baker's acquisition group, such as the announcement of the plan to buy out minority shareholders on the same day in June that the company disclosed it had agreed to sell the remainder of its European holdings to its partner for $1.5 billion. "Glass Lewis ignored all of the issues related to the creation of the Baker Group and buys into the threat that the take under proposed by that group is the only option," Catalyst partner Gabriel de Alba said in a statement. "It is somewhat shocking that they would turn a blind eye to all of the conflicts, manipulations, and intentionally misleading and incomplete disclosures, particularly in this day and age."

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12/10/2019

Hudson's Bay Investor Says Will Vote Against Take-Private Deal

Reuters (12/10/19) DiNapoli, Jessica

Hudson's Bay Co. (HBAYF) investor Ortelius Advisors LP intends to vote against the retailer's C$1.9 billion ($1.4 billion) take-private transaction because of what the hedge fund sees as lapses in the sales process. Ortelius is one of several investors that contend the sale of the company to Executive Chairman Richard Baker and a group of Hudson's Bay shareholders with total voting control of 57% is not sufficiently generous. Hedge fund Land & Buildings and buyout firm Catalyst Capital Group Inc. oppose the transaction, which will be voted on Dec. 17 by minority shareholders. A Hudson's Bay special board committee that negotiated the sale to Baker's group spurned a different C$2.03 billion offer for the company from Catalyst Capital Group last week on the grounds that the consortium made it clear that it would not back a sale to another party. The take-private transaction must win support from a majority of the minority shareholders. Catalyst has a stake of approximately 17.5% in Hudson's Bay, and Ortelius has a stake of about 0.5%. Ortelius said that the special committee's move to make near-simultaneous announcements of a real estate deal and Baker's take-private earlier in 2019 harmed the company's share price. The move made Baker's offer look better, according to a statement from Ortelius. "We contend that Mr. Baker knew that coupling these transactions would impose an artificial ceiling on the stock price,"said Peter DeSorcy, Ortelius' managing member. "It is incredulous that the special committee could reasonably determine that near simultaneous announcements would maximize shareholder value for minority investors." The special committee said in a statement Dec. 9 that Baker and other directors on Hudson's Bay's board involved in his bid recused themselves from approving the real estate transaction earlier in 2019.

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12/9/2019

Xerox Woos HP Holders With $1.5 Billion Sales Growth Target

Bloomberg (12/09/19) Deveau, Scott

In a presentation to HP Inc. (HPQ) shareholders, made public on Dec. 9, Xerox Holdings Corp. (XRX) argued that its proposed takeover of HP would create as much as $1.5 billion in potential revenue growth. In outlining its case for a tie-up between the companies, Xerox said the combined firm will be worth about $31 a share to HP investors on a pro-forma basis, and the merged entity will generate more than $4 billion in free cash flow in the first year before taking any synergies into account. "The value of the transaction goes beyond economics. In consolidating industries, first movers not only win but also have an opportunity to reshape the competitive landscape in an enduring way," said Xerox CEO John Visentin in the presentation. The company has said it believes the combination would create roughly $2 billion in synergies, which it claims could be achieved in 24 months. Xerox says it has a three-year roadmap that includes generating $540 million to $750 million from pitching complementary products to existing clients, $50 million to $100 million from manufacturing and distribution efficiencies, and $350 million to $400 million from integrating HP products into Xerox's office-as-a-service offerings. Visentin expects to begin meeting some HP shareholders this week to sell the plan. Last month, HP rejected an unsolicited, cash-and-stock offer from Xerox worth $22 per share, but investor Carl Icahn is calling on HP to move head with talks on the deal, which he calls a "no-brainer." Icahn—who holds a nearly 11% stake in Xerox, making him its biggest shareholder, and a 4.2% stake in HP, making him its fifth-largest shareholder—says HP's directors and management are seeking to preserve their own jobs instead of protecting shareholders' interests.

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12/9/2019

McAfee Considering a Combination With NortonLifeLock

Wall Street Journal (12/09/19) Lombardo, Cara; Driebusch, Corrie; Gottfried, Miriam

Software company NortonLifeLock Inc. (NLOK) has attracted deal interest from companies including rival McAfee LLC, the antivirus-software company owned by Intel Corp. (INTC) and private-equity firms TPG and Thoma Bravo LLC. Starboard Value LP owns a 7% stake in NortonLifeLock and has a board seat it will retain until after the annual meeting. NortonLifeLock, which has a market value of around $15.8 billion, was Symantec Corp. until November, when the company sold its enterprise-security business to chip and software producer Broadcom Inc. (AVGO). Permira and Advent had made approaches before the Broadcom deal closed, proposing a takeover that would have handed them the consumer operation while preserving the sale of the enterprise to Broadcom, but they failed to reach an agreement. Broadcom had previously considered a deal for all of Symantec and was close to one before the talks fell apart at the last minute. Any deal is unlikely to happen before the first quarter of next year given that six of NortonLifeLock's 12 directors, including its chairman, will leave after the company's annual meeting Dec. 19. On Nov. 7, NortonLifeLock named Vincent Pilette as CEO, and he will be elected at the next annual meeting alongside a new independent director. Starboard Value had built a stake in NortonLifeLock in August 2018 and nominated directors to what was then Symantec's board, arguing that the company needed to make operational changes to improve margins, especially in its enterprise segment. Symantec had lost billions of dollars in value following profit warnings and issues with financial reporting, and it had spent heavily on two high-profile acquisitions that did little to jumpstart growth.

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12/6/2019

Hudson's Bay Chairman's Take-Private Plan Dealt Blow by ISS

Bloomberg (12/06/19) Deveau, Scott

Shareholder advisory firm Institutional Shareholder Services (ISS) has urged Hudson's Bay Co. (HBC) shareholders to vote against Chairman Richard Baker's plans to take the company private. The advisory firm said the company offered no clear reason why shareholders should accept the deal when private equity firm Catalyst Capital Group Inc. has offered a higher share price. Catalyst managing director Gabriel de Alba alleged that a group led by Baker had engaged in an "egregious pattern of conflicts, misrepresentations, and self-serving games," raising concern about "what additional actions and agreements remain undisclosed." Baker and his partners, who collectively own 57% of Hudson's Bay, reached an agreement to buy the retailer for C$10.30 a share in October. The deal was supported by the company's board and will be subject to a vote on Dec. 17 that requires most minority holders to support it. Catalyst Capital, which owns a 17.5% stake, says the offer undervalues the company, and last month it put forth a rival C$11-a-share proposal, which a special board committee rejected. Baker and his allies have said they weren't interested in any transaction that would result in the sale of their interest in Hudson's Bay, and the committee said that the Catalyst offer cannot be completed because it requires at least three-quarters of shareholder votes. However, Catalyst owns 32% of minority shareholder votes, posing a significant hurdle to Baker's group. Another minority shareholder, Ortelius Advisors, which owns a 0.5% stake in Hudson's Bay, has launched a separate lawsuit against Baker and the company, accusing them of suppressing the value of the stock to help the bid by Baker's group.

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12/5/2019

The Battle Over Green Investment Is Hotting Up

Financial Times (12/05/19) Tett, Gillian

Christopher Hohn, founder of TCI hedge fund, entered the climate debate this week, announcing that he would engage companies like Airbus (EADSY) and Moody's (MCO) if they failed to improve their standards of disclosure and action over climate risks. Hohn then criticized BlackRock (BLK) for failing to impose equally strict disclosure requirements in its own investments. BlackRock responded to Hohn's attack by saying it "has the largest stewardship team in the world, and engaged 370 companies globally on the topic of climate risk in the past two years." The tussle has generated questions about whether it is possible for the asset management world to fight climate change while the sector is so dominated by passive funds that track indices, rather than active managers. BlackRock has grown largely on the back of exchange traded funds (ETFs) and other forms of passive investing that track the performance of a particular market or sector. Moreover, the ETF sector recently passed the $6 trillion mark, and BlackRock projects this will double by the end of 2023. BlackRock officials argue that if climate activists want to attack finance for its lack of "green" credentials, they should start with the index companies and proxy advisers. However, Hohn contends that asset managers should still insist on screening ETFs for climate issues, possibly using the metrics developed by the Carbon Disclosure Project. Changes at BlackRock are unlikely to be made immediately, and observers say investors should keep an eye out for BlackRock's comprehensive internal analysis of all its operations in relation to climate change, covering both active and passive funds. Further, the World Economic Forum plans to push the world's biggest asset managers to agree on joint standards and commitments for active and passive funds in Davos next month, and European regulators are raising pressure for reform as well, with Brussels preparing a lengthy taxonomy of green standards.

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12/5/2019

Lagardère Group Chairman Resigns 'For Personal Reasons'

Financial Times (12/05/19) Pooler, Michael

Citing personal reasons, Xavier de Sarrau has resigned as chairman of the supervisory board of Lagardère Group (MMB), a position he had held since 2010. De Sarrau will remain a member of the supervisory board and be replaced as its chairman by Patrick Valroff, who has served on the board for about 10 years. The development comes as the French group crosses swords with Amber Capital, a London-based hedge fund that recently became the group's third-largest shareholder by increasing its stake to 6.8%. Lagardère has shrunk considerably under the leadership of Arnaud Lagardère, who took over the group after the sudden death of his father Jean-Luc Lagardère in 2003. Amber has criticized the firm's corporate governance and tried to oust de Sarrau as chairman at its last annual shareholder meeting, which failed. In the past Amber has pointed to what it sees as a breach of independence at Lagardère's supervisory board. Valroff, the new chairman, has strong links with Crédit Agricole (CRARY), the main lender to Arnaud Lagardère's personal holding company, Lagardère Capital & Management. LC & M, through which Arnaud Lagardère holds a 7.3% stake in Lagardère, had €204 million of debt at the end of 2017, which exceeds the current value of his shares in the group that bear his family's name. In October a French commercial court demanded Arnaud Lagardère publish a decade of annual accounts for LC & M, another of Amber's demands. Arnaud Lagardère has defied the court order and is appealing the decision. Meanwhile, four members of Lagardère’s supervisory board have their mandates coming up for renewal by shareholders next year, and Arnaud Lagardère's own mandate as the group's managing partner is up for renewal by the supervisory board in March 2021.

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12/4/2019

An Overwhelming Majority of Investors Expect Companies to Implement Effective Environmental, Social-Impact and Governance Practices

PR Newswire (12/04/19)

According the 2019 Edelman Trust Barometer Special Report, which surveyed 600 institutional investors in six countries, 84% of investors agree maximizing shareholder returns can no longer be the primary goal of the corporation, preferring a multi-stakeholder approach.  Seventy percent of respondents say they believe companies that place too much emphasis on shareholder return will be partially responsible for consumer or employee activism, and 74% say that companies with employee activism are less attractive investments. Almost all respondents expect the board of directors to oversee at least one environmental, social, and governance (ESG) topic, and 52% say tying executive compensation to ESG target performance would positively impact their trust in a company. In addition, 54% of investors say ESG practices positively impact trust, and 61% have increased their investment allocation to companies that excel with regard to ESG factors. Board diversity is also a topic of interest, with 55% of investors saying it has a significant positive impact on trust. Seventy-nine percent of respondents stated that most companies are not prepared to handle activist campaigns, with the main issue an inability to define and specify new and emerging areas of risk and value creation. Ninety-six percent of investors use one or more social platforms on a weekly basis, and 82% of investors consult a company's social media channels when evaluating an investment. Top strategies for underperforming companies to shore up trust with investors include announcing a change to business strategy (52%), conducting a business or strategic review process (51%), and implementing significant cost cuts (46%).

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12/4/2019

Moral Money: Davos Boss Tells Execs to Align Pay With Stakeholder Interests

Financial Times (12/04/19) Tett, Gillian; Nauman, Billy; Edgecliffe-Johnson, Andrew

World Economic Forum founding Chairman Klaus Schwab has issued a new "Davos manifesto" ahead of January's annual meeting in the Swiss mountain resort. The document unveiled in 1973 stated that "the purpose of professional management is to serve clients, shareholders, workers, and employees, as well as societies, and to harmonize the different interests of the stakeholders." The new document says the purpose of a company "is to engage all its shareholders in shared and sustained value creation." And multinationals must do nothing less than "improve the state of the world." One line may catch the attention of Davos attendees: "executive remuneration should reflect stakeholder responsibility." Meanwhile, a survey of more than 600 investors in the United States, United Kingdom, Canada, Germany, Japan, and the Netherlands by public relations and marketing consultancy Edelman reveals that 84% agreed that companies should balance shareholders' needs with those of their customers, employees, suppliers, and communities. Some 71% of investors said that overemphasizing shareholder returns exposed a company to consumer or employee engagement. More than 60% said they were investing more in companies that excel on ESG standards, 52% said that linking executive pay to ESG targets boosts their trust in a company, and 86% said they would accept lower returns to invest in a company that addressed sustainability or impact investing considerations.

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12/2/2019

TCI Hedge Fund Does More on Climate Action Than ESG Funds

Financial Times (12/02/19) Vincent, Matthew

Hedge fund TCI has vowed to punish company directors that do not address climate change. This is remarkable because a hedge fund has been able to do what most specialist environmental funds do not attempt, which is remaining a shareholder to bring about change from within. TCI will vote against company directors if they fail to disclose their carbon dioxide emission and reduction targets. As asset manager Sarasin & Partners recently noted, directors of the world's biggest fossil fuel groups were reappointed with an average 97% investor support. Conventional fund managers do not vote for change, because their investors do not demand it, their quarterly returns do not depend on it, or their notion of "fiduciary duty" does not extend to it. Managers of so-called environmental, social, and governance (ESG) funds do vote for change, but only by divesting from high-emission companies or buying shares in companies trying to tackle climate change. In doing so, those ESG firms are preaching to and investing in the converted. TCI argues that those engaging with steel and oil groups have failed to wield their power as owners, because their championing of ESG concerns has not been matched by support for climate-related shareholder resolutions. By contrast, TCI's threat to vote against directors already appears to be having an effect, as, for example, Charter Communications (CHTR) looks set to follow TCI's disclosure demands in its first emissions report, despite TCI being only a 4.7% shareholder.

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12/1/2019

Crystal Amber to Double Stake in Banknote Maker De La Rue

Financial Times (12/01/19) Thomas, Daniel; Pooley, Cat Rutter

Investor Crystal Amber has built a nearly 14% stake in De La Rue (DELRF), up from its previously disclosed 7% position, making it one of the struggling banknote maker's biggest investors. Shares in De La Rue plummeted to an all-time low last week after the company warned that that there was "material uncertainty" over its future as it swung to a £12 million loss. The company warned on profits twice this year before last week's announcement as it suffers from falling earnings and rising debt. One source says that Crystal Amber has held discussions with the company's new management over the past week, being met with approval for a “common sense” approach to fixing the problems facing the company. Crystal Amber chief Richard Bernstein had been highly critical of the company's previous management, many of whom have since left the company, since building a stake in 2017. De La Rue's latest struggles have been caused by the breakdown of a lucrative contract printing banknotes for Venezuela, which has been unable to pay banknote suppliers despite needing a high volume due to hyperinflation. The company is also facing a Serious Fraud Office investigation into possible corruption in South Sudan, where it won the contract to print the country's banknotes. De La Rue has said it is too early to put an estimate on any potential liabilities arising from the investigation.

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11/27/2019

Catalyst Capital Group Makes Rival Takeover Offer for Hudson's Bay Co.; Land & Buildings Expresses Interest

Canadian Press (11/27/19)

Investment firm Catalyst Capital Group Inc. is making a competing takeover offer for Hudson's Bay Co. (HBAYF). Catalyst Capital, which has approximately a 17.5% stake in Hudson's Bay, is offering $11 a share in cash, besting an offer of $10.30 made by a group of investors led by Hudson's executive chairman Richard Baker. Investor Land & Buildings has voiced interest in the new proposal. Catalyst announced in October that it and other minority shareholders that together control a 28.24% stake of the company's common shares intend to vote in opposition to the offer by the Baker-led group. Baker's offer, which is subject to court and regulatory approvals, must obtain the support of a majority of Hudson's shareholders, excluding the shareholders behind the bid and their affiliates, as well as approval by a 75% majority vote at a special meeting of shareholders that HBC intends to hold in December. Catalyst's offer is better in terms of both value and treatment of shareholders and can be finalized in a timely manner, said Gabriel de Alba, managing director and partner of Catalyst. "Catalyst is committed to taking the necessary steps to ensure that its superior offer is evaluated on its merits and that the board is able to liberate itself from the coercive influence of Richard Baker and act for us all," de Alba said in a statement. "We continue to believe that the offer from the Richard Baker Group woefully undervalues Hudson's Bay and its real estate," said Land & Buildings founder Jonathan Litt in a statement. "Land & Buildings is interested in financially participating in this transaction with Catalyst should it move forward."

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11/26/2019

Voce Calls for New Directors on Argo Board

Royal Gazette (Bermuda) (11/26/19) Kent, Jonathan

Voce Capital Management is pushing for five new independent directors to replace incumbents on the board of Argo Group (ARGO), saying the governance situation at the Bermudian re/insurer has "significantly deteriorated" since its annual meeting this year. The hedge fund cited an investigation by the U.S. Securities and Exchange Commission into executive compensation and subsequent ratings agency actions. Voce, which owns about 5.8% of Argo, also criticized the "lucrative package" given to former CEO Mark Watson on his "sudden retirement" this month. The hedge fund said it has launched a process to call a special meeting of shareholders as it seeks support for the replacement of directors. It has been fighting a proxy battle with Argo since February, when it accused the company of having a "spendthrift culture" and misdirecting corporate assets to support Watson's "lifestyle and hobbies." Voce said in a statement, "There are crucial leadership, governance, and strategic choices which are being made in real time and will have lasting and potentially irreversible effects once rendered." It is calling for the replacement of five of Argo's existing board members with "highly qualified, fully independent directors." Voce said, "Once we file our definitive consent solicitation statement, we will simply be asking shareholders to consent to the calling of a special meeting, which is permitted by Argo's bylaws and will require the concurrence of holders of at least 10% of Argo's common stock. Consents at this stage will not determine if any Argo directors are removed or replaced, only whether a shareholder meeting to consider and vote on such proposals will occur."

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11/25/2019

Starboard Takes Stake in CVS

Wall Street Journal (11/25/19) Driebusch, Corrie

Investor Starboard Value LP has taken an ownership interest in CVS Health Corp. (CVS) and has held discussions with the drugstore-and-insurance giant's corporate management. The stake appears to be relatively small, according to the sources, while the talks held recently have been "amicable." What is not known as of press time is exactly how much Starboard currently owns and what specifically it has discussed with the company. But Starboard's presence in a stock usually causes a company to pay attention. Indeed, Starboard has a history of ushering in change at companies ranging from Darden Restaurants Inc. (DRI) to eBay Inc. (EBAY). CVS shares have been fluctuating since the company purchased health insurer Aetna Inc. (AET) for approximately $70 billion nearly a year ago. The stock declined significantly after CVS in February issued a downbeat earnings projection for the year due to challenges in its pharmacy-benefits and long-term-care units. The shares eventually rebounded as the company reported a series of unexpectedly robust financial results, and research analysts have taken a more favorable view. But some investors have privately voiced frustration about increasing costs from the company's Omnicare nursing-home pharmacy operation, the lack of a clear plan for a successor to CEO Larry Merlo, and the big size of its 16-member board, which is a legacy of the Aetna purchase.

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11/25/2019

Investor Presses Valaris for Broader Changes, Plans on Special Meeting

Reuters (11/25/19) Herbst-Bayliss, Svea; Osterman, Cynthia

Hedge fund Luminus Management has said it plans to call a special shareholder meeting at Valaris PLC (VAL) and press for broader improvements at the offshore contract drilling services company. Valaris' stock surged 12% after Luminus called on the company to improve operations, refresh the board, and shore up governance. The fund also wants management to "take a holistic and balanced approach to managing its capital structure, with a specific focus on ensuring liquidity, pushing out debt maturities, and effectively monetizing debt discounts." Luminus now owns 18.7% of Valaris, up from 4.5% a few months ago, and has enough shares to meet the threshold to call a special meeting. Its recent demands are far broader than its earlier requests when it had pushed for changes to the company's balance sheet, including a push to sell bonds in order to pay out a $2.5 billion special dividend. Luminus and Valaris management had agreed to a standstill wherein Valaris undertook an additional $100 million in cost cuts and shook up its board, in exchange for Luminus not buying more shares. The agreement expired in late October when the company rejected the hedge fund's settlement proposal. Some restrictions still remain, and the hedge fund is not permitted to own an economic stake of 20% or more. Luminus, which invests more than $2.5 billion for clients in energy and power investments, has delivered an average return of 11.8% a year since its launch in 2002.

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12/12/2019

The New NextEra? HECO Is Fighting This Mainland Firm's Bid for Control

Honolulu Civil Beat (12/12/19) Yerton, Stewart

When ValueAct Capital's Jeff Ubben in November issued a letter criticizing management of Hawaiian Electric Co.'s (HAWEL) parent company, it seemed to be a first step in a campaign to control HECO by the investor. "We just kind of felt we needed to toss the hot potato into the community, for the community to think about, because everybody in the community is affected by the rates," said Allison Bennington, chief global affairs officer of ValueAct Capital. On Dec. 10, the company announced Scott Seu, a senior vice president, would replace Alan Oshima as chief executive of HECO next year. Seu pledged to make changes at the company. Although Seu is not the type of outsider Ubben had said the company needs, Bennington characterized Seu as "a pretty good choice." ValueAct's involvement comes at a critical time. Under state law, the electricity sold in Hawaii must be produced using renewable resources by 2045, but HECO management has delayed shifting away from fossil fuels, according to critics. ValueAct wants the board of HECO's parent company to replace Constance Lau with someone from outside the company when Lau steps down as the parent company's chief executive. How much influence ValueAct ultimately will have over the company remains to be seen. Bennington recently conducted a conference call and reviewed a lengthy presentation outlining what the investor said were problems with the company's management. In some respects, the report merely stated complaints often made about HECO—that its electricity rates are the highest in the United States, for example, and that it has at times moved too slowly to adopt renewables. But what was unusual was the breadth and depth of ValueAct's research. For example, ValueAct noted that HECO aims to generate 48% of its electricity from renewables by 2020—ahead of the 30% required by law—but admits it won't meet the 48% goal. This is the type of thing that concerns ValueAct. "There's a long way to go, and based on past performance, it makes us nervous they're going to achieve it," Bennington said. ValueAct also is concerned about operations and maintenance costs.

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12/12/2019

Expected Effects of SEC Proposals on Public Companies & Proxy Advisors' Dialogue

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/12/19) Seelig, Steve; Myers, Brian; Chase, Gary

Willis Towers Watsons' Steve Seelig, senior director, Executive Compensation, Brian Myers, consultant, Executive Compensation, and Gary Chase, director, Retirement & Executive Compensation, discuss in a recent memorandum the anticipated impacts of recent proposed regulations from the U.S. Securities and Exchange Commission that would change how proxy advisory firms interact with public companies and their institutional investor clients regarding proxy voting recommendations. Regarding the proposal requiring proxy advisors to disclose conflicts of interest, they "expect proxy advisors would provide their clients a disclosure of fees for consulting services provided to the company for which it is making recommendations, which is a prevalent situation. Less prevalent, but perhaps more important, proxy advisors whose owners may be proponents of shareholder proposals would need to disclose these interests and how they believe providing voting recommendations on these matters are not material conflicts." As for the proposal that would expand companies' ability to have a dialogue with proxy advisors beyond what currently exists, they note that "this dialogue will permit companies to focus on the substance of existing proxy advisor policies and whether their application to specific business circumstances is appropriate to formulating a voting recommendation. We expect this will lead to lively discussions about whether these policies can and should be applied to all situations, and whether the policies themselves are properly designed to reflect the concerns of all institutional shareholders, regardless of their investment philosophies."

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12/12/2019

Nestle CEO Mark Schneider's Top Deals Over the Past Three Years

Reuters (12/12/19) Cavale, Siddharth; Balu, Nivedita

Nestle (NSRGY) CEO Mark Schneider has made some major strides in positioning the food company for the future with aggressive deal-making since taking over in January 2017. Under pressure from investor Dan Loeb, whose firm Third Point owns a $3 billion stake in the company, Schneider has vowed to replace as much as 10% of Nestle's existing portfolio with products in fast-growing categories like coffee and pet food by the end of 2020. On Wednesday, Nestle agreed to sell its U.S. ice-cream business for $4 billion to Froneri, its ice-cream joint venture with private equity firm PAI Partners. Earlier in the year, Nestle agree to sell its Herta lunch meat business and its skin health unit. In January 2018, Schneider had his first big sale in selling the company's U.S. confectionary business for $2.8 billion, handing over brands Butterfinger, Crunch, and Baby Ruth to Ferrero. That May Nestle entered a $7.2 billion deal to license U.S. coffee chain Starbucks Corp. (SBUX)'s packaged coffee globally, and in September 2018, Nestle sold its Gerber Life Insurance Unit to Western and Southern Financial Group for $1.55 billion in cash. In September 2017, Nestle acquired majority interest in Blue Bottle Coffee, marking its first step into the fast-growing premium coffee shop segment, and agreed to buy plant-based foods manufacturer Sweet Earth. In December 2017, Schneider signed a deal to buy vitamin maker Atrium Innovations from a group of investors led by Permira Funds for $2.3 billion.

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12/12/2019

The Tricky Role of the CEO in a New Era of Social Responsibility

Wall Street Journal (12/12/19) Wartzman, Rick

Many are calling for CEOs to address the interests of all stakeholders instead of just shareholders, a sharp contrast with historic attitudes. Exemplifying this shift is the Business Roundtable's August statement on the purpose of a corporation, wherein 181 CEOs pledged "a fundamental commitment" to "deliver value to all" stakeholders. The article examines the consequences of this new stance for CEOs, expecting it will lead to heightened scrutiny of their actions and require them to draw on more personal traits in order to juggle many priorities. While many CEOs speak out on an assortment of important subjects, they can be warier in taking on the issues that are most core to their business, such as environmental and labor reforms that may impact their immediate bottom lines. The article tracks the shift toward shareholder primacy that began in the 1970s, and notes that the "new" stakeholder-focused attitude is actually more of a return to the 30 years after World War II, when CEOs routinely emphasized "the balanced interest of all." Some parties, including the Council of Institutional Investors (CII), have opposed the Business Roundtable statement and argued that this attitude could end up leaving company leadership free to act without consequence. CII director Ken Bertsch concedes that while too many investors "pay excessive attention to what's happening to share price day to day," there still needs to be a "north star" of long-term shareholder value. Institutional investors have been insisting that companies spell out how environmental and workforce matters translate into longer-term opportunity and risk. Despite some concrete positive actions, those in the "corporate engagement" department preach a lot about these things but the individuals actually in charge of portfolios are still often fixated on shorter-term financial gains. Executive compensation is another issue—in addition to being excessive, there is no universal structure for linking CEO compensation to a full range of stakeholder metrics.

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12/11/2019

Building an Effective ESG Engagement and Disclosure Plan

IR Magazine (12/11/19)

A recent IR Magazine and Q4 webinar addressed the most effective ways for companies to approach engagement and disclosure with regard to environmental, social, and governance (ESG) issues.  Panelist Karen Greene, investor relations partner at Q4, said investor relations should play a key role in helping companies understand any changes taking place with the buyside, and in communicating to the market that their company is managing ESG issues well.  But a cross-departmental approach is needed to get on top of ESG issues, panelists added.  Companies are adopting a variety of approaches toward sustainability ownership, with some placing it in the hands of the corporate secretary, and others leaving it to a sustainability officer or investor relations, said Chad Spitler, founder and CEO of investor advisory firm Third Economy.  On the topic of best practices for ESG engagement, Spitler said companies should focus on securing approval for resolutions during proxy season, and on relationship building the rest of the year.  Panelists said when developing ESG communications, companies will need to determine which of the reporting frameworks to focus on, but Greene also noted that they should not think of ESG engagement as a one-off event.  Companies risk being marked down severely by ratings agencies for not disclosing information on a particular area, added Katrina Rymill, vice president of IR and sustainability at Equinix.

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12/11/2019

Corporate Governance and Corporate Agility

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/11/19) Lehn, Kenneth

Financial economics literature on corporate governance has generally examined the issue from the perspective of agency theory and focuses on three measures of governance that are easy enough to measure: ownership structure, board size and structure, and executive compensation. In a forthcoming paper, the author suggests "corporate agility" as a dimension of governance, which he defines as "the extent to which governance facilitates or impedes a firm's ability to adapt to changes in its environment." He argues that from an evolutionary perspective, this agility will likely be a critical determinant of a firm's long-run success and survival. A large amount of anecdotal evidence suggests the importance of corporate agility as a determinant of firms' success and survival. The topic of corporate agility has been featured prominently in several recent proxy contests, such as Trian Partners' contest with Procter & Gamble (PG) in 2017. The author states that corporate governance, in effect, defines how decision rights are allocated among various stakeholders within organizations, and the mitigation of agency is only one consideration when allocating decision rights. Citing a 1992 paper that discusses the distribution of "specific knowledge" within organizations, the author notes that this paper's framework has implications for our analysis of governance structures that are often portrayed as "weak or strong." For example, the literature frequently presumes that dual-class stock structures with different voting rights are bad, but the author argues that dual class structures are likely to foster agility, because controlling shareholders can make decisions more quickly—i.e. without the consent of outside shareholders and directors.

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12/10/2019

Investors Need More Clarity on Japan's 'Anti-Activism' Law

Financial Times (12/10/19) Lewis, Leo

New disclosure rules imposed by the Japanese government have put Shinzo Abe's administration at odds with shareholder activists, who have emerged in the country over the past three years. Under the amendment to the Foreign Exchange and Foreign Trade Act (FEFTA), foreigners must notify officials before their holdings in potentially sensitive sectors—such as nuclear power, IT, agriculture, and marine transport—reach 1%, down from the previous threshold of 10%. The change was presented as a national security-driven measure to bring Japan in line with the United States and close loopholes that experts say had never been exploited. Financial Times columnist Leo Lewis argues that "the new version of FEFTA not only gives Japanese companies a theoretical shelter from criticism by getting early warnings that a foreign activist is building a stake. In the extreme, it also potentially criminalizes investors who fail to spot that the company whose shares they are buying fall under the protection of the new law." He adds that "the exemption from pre-notification will not apply either if a foreign investor proposes themselves or 'related parties' as board members of a company on the sensitive list, or if they propose that a company close or divest a business unit. Both of these are moves that—even if only threatened—form part of the activist fund's arsenal and have helped the progress of better governance." The Ministry of Finance says it will divide the stock market into three baskets—one for companies with no sensitivity, one for companies where exempted investors did not need to pre-notify, and one for which there were no exemptions—but Lewis points out that "investors still do not know how big each basket will be and who, precisely, will qualify for the exemptions...[and] without simple, transparent definitions of which companies would fall into which categories...the framework does not make investors feel secure that they will not stray into activities the law has criminalized."

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12/10/2019

Momentum Builds for More Women on Boards

Forbes (12/10/19) Banham, Russ

While women make up 47% of the working population, they represent only 27% of board positions at S&P 500 companies. Several states have passed bills to jumpstart gender parity on boards; for example, the state of California has passed laws requiring companies to have at least one female board member by the end of 2019 and at least two by 2021. The legislation has been effective, and other states have taken note and put forth bills with similar intent. New Jersey, Pennsylvania, and Michigan have bills that essentially duplicate the California legislation, while New York and Maryland seek amendments to state filing requirements to collect more data on board gender diversity, and a bill in Illinois called for at least one woman and one African-American on the board of each publicly traded company in the state. Following backlash, the Illinois bill was modified and signed by Governor J.B. Pritzker in August 2019 to require publicly traded companies to disclose the demographics of their boards in their annual reports. Several studies have found that companies with one or more women on their boards were likely to have much better environmental, social, and governance (ESG) practices. While the studies are correlative and not causative, their results are worth considering, and many shareholders seem to agree. Institutional investors and proxy advisory firms frequently oppose homogeneous boards in their proxy votes, and a growing number of shareholders advocate for ESG measures out of financial self-interest. As more data becomes available about the demographics of corporate directors and the business value of having diverse boards, greater parity may be on the horizon.

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12/8/2019

Enlightened ESG Investors Engage, but Retain Right to Divest

Financial Times (12/08/19) Rajan, Amin

Environmental, social, and governance (ESG) investors who favor divestment over engagement argue that big energy producers have been too slow to respond to climate change for fear of ending up with stranded assets. By contrast, those who favor engagement say that it is better to adopt a pragmatic "carrot and stick" approach to improve companies, exemplified by the Church of England Pensions Board, which has divested investments in thermal coal and tar sands while intensifying engagement with other big energy producers to develop renewable power sources. It does this in partnership with Climate Action 100+, a global coalition of more than 370 investors with $35 trillion in assets, which aims to ensure that the world's 100 largest corporate greenhouse gas emitters take the necessary action against climate change. Notably, this mobilization has not aimed to punish climate villains but to galvanize them into action to deliver a low-carbon future, and unlike divestment, it is effective at fossil fuel companies with enough free cash flow to meet their capital needs. By contrast, many individual asset owners and asset managers are focused on securing decent investment returns and catalyzing change on the most materially disruptive ESG issues. For example, when the Canada Pension Plan Investment Board (CPPIB) acquires a significant minority stake in companies that face material ESG risks, it acquires commensurate governance rights. CPPIB sees engagement as a long-term, resource-intensive, but effective tool to build insight into management's approach to navigating ESG risks and opportunities. If its concerns are not addressed, it will escalate by collaborating with other investors and exercising its voting rights, but it retains the option to divest where it concludes management will fail to navigate ESG risks. CPPIB emphasizes that its focus on ESG is not about advancing a social agenda but achieving return targets over the long term by investing in businesses that are future-proofing themselves against ESG risks.

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12/8/2019

Battle Royale: SEC Locks Horns With Investors Over Proxy Advisers

Financial Times (12/08/19) Mooney, Attracta; Temple-West, Patrick

The proxy advisory industry is dominated by Glass Lewis and Institutional Shareholder Services, and these companies have considerable sway over how investors vote. But next year, the companies will find themselves the subject of a Securities and Exchange Commission (SEC) vote designed to cut them down, which they warn risks damaging corporate governance across America. U.S. regulators are looking to pass new rules that would force proxy advisers to reveal their voting recommendations to a company's management before they are sent to its shareholders. The SEC vote would cap a lengthy fight that pits proxy advisers and asset managers against some of America's biggest companies, including ExxonMobil (XOM) and Chevron (CVX), which claim the groups are too powerful, make mistakes, and are beset by conflicts of interest. The prospect of the new rules, which were championed by the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM), has galvanized some institutional investors who rely on proxy advisers. Groups including the Council of Institutional Investors (CII) say the SEC seems to be rushing to the new rules based on shaky evidence, suggesting their motives are politically geared. The U.S. Chamber of Commerce and NAM have paid for a six-figure advertising campaign about the "growing risk" proxy advisers pose. Last year, a report commissioned by the American Council for Capital Formation (ACCF) found 139 purported "proxy adviser errors" across 94 different companies. However, CII told the SEC last month that when it delved into the ACCF report, it found that "most of the claimed errors were actually disagreements on analysis and methodologies." There is also concern that the higher costs brought by the new regulations could hurt smaller players and deter new entrants to a market in need of competition. In a letter to the SEC last month, Scott Stringer, New York City's comptroller, said that "in light of the harm and costs that the Proposal is likely to impose on investors, and the benefits it will bestow upon the corporate management who have aggressively lobbied for it, investors are left to wonder as to the problems that the SEC is seeking to remedy with its proposal."

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12/7/2019

Hedge Fund's Criticism Puts Spotlight on Emerson CEO's Pay — $162 Million Over a Decade

St. Louis Post-Dispatch (12/07/19) Nicklaus, David

David Farr has been paid nearly $162 million in the last 10 years for running Emerson (EMR), nearly three-fourths of which (excluding pension gains) was in stock. In October, shareholder D.E. Shaw wrote a letter accusing Emerson of having bloated costs and a poor record of capital allocation, implying that Farr is significantly overpaid. D.E. Shaw has since reached a truce with Emerson, but the engagement highlights a tension that is worth considering. D.E. Shaw's complaint was that Farr was rewarded while shareholders were not, saying the company "has provided incentives for management to grow the company even if returns...suffer as a result of value-destructive growth." Emerson says its compensation committee "used discretion" in setting Farr's bonus, which Chris Brindisi of consulting firm Pay Governance says is unusual, because most companies use a fixed formula based on performance to determine bonuses. For the stock that makes up the bulk of Farr's pay, Brindisi says Emerson uses fairly standard measures. Emerson slightly exceeded its 2017-2019 targets, so Farr got 107% of his $7.7 million stock award for 2017. Emerson's position is that management and shareholder interests are aligned. It sets tough goals, and the bosses earn less if they miss them. When Emerson reached a truce with D.E. Shaw, the hedge fund said the company agreed to review its pay program.

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12/5/2019

Who Says You Can't Trust ESG Data? One of the Biggest Names in ESG.

Institutional Investor (12/05/19) Segal, Julie

A new white paper published by Generation Investment Management indicates that although the sheer volume of data available tracking companies' environmental, social, and governance (ESG) standings has exploded in recent years, the ESG conclusions that can be drawn from the information are still limited. "The risk is that it puts the spotlight on what is available, rather than what is most important," said the paper. Felix Preston, the firm's director of research, said in an interview, "We need better data that connects with the scale and urgency of the problems we face." Generation said organizations want data that can be easily used to screen companies. "We believe that bridging the gap between the value of rich contextual information and the need to 'plug values into the spreadsheet' is where ESG data needs to go," according to the paper. While vendors are collecting data on environmental and social risks in supply chains and breaches of environmental regulations and allegations of corruption, among other things, Generation argues that the information is spotty and does not indicate whether a company is changing or what is on management's mind. "Last year's greenhouse gas emissions data for a company's operations is a commonly used metric. A more complete picture of how the company is doing would depend on understanding its supply chains, interactions with customers, opportunities to innovate and more," the paper said. Preston noted that the kind of contextual information that Generation's investment teams discuss and implement in their processes is broadly available. "Start weaving [that] into mainstream data," he said. "At the moment in the ESG world, it seems like [machine learning] is focused on filling gaps and standardizing. But it could be used to bring in all this rich context that would be beneficial and better reflect sustainability risks and opportunities that companies face."

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12/5/2019

Climate Change Has Made ESG a Force in Investing

The Economist (12/05/19)

Environmental, social, and governance (ESG) standards are becoming ever more important in the world of investing and capital markets, because at least $3 trillion of institutional assets now track ESG scores and the share is quickly rising. In America and Europe, some regulators, companies, and investors want to move away from measuring corporate performance based mainly on shareholder returns. Such calls are fueling demand for ESG ratings, which create a single score from disparate non-financial indicators, such as a firm's carbon emissions or its board diversity. However, these ratings are not yet ready for the weight they are being asked to bear. The most obvious sign of this is that—unlike credit ratings—ESG scores are not well-correlated with each other, frequently disagreeing about which companies are good or bad. Moreover, ratings are often based on business models rather than businesses themselves, meaning that it does not matter what firms sell as long as it is done sustainably. Tobacco and alcohol companies feature near the top of many ESG rankings, and many funds marketed on their green credentials invest in fossil fuels. The scoring systems sometimes measure the wrong things and rely on patchy figures, because only half the 1,700-odd companies in the MSCI world index reveal their carbon emissions, and penalizing non-disclosure can lead to strange results. Bigger firms tend to get better ESG scores because they are able to afford better disclosure. Even when figures are disclosed, they may be too out-of-date to be useful. ESG data have the potential to hold bosses and fund managers truly accountable, but right now the ESG rating industry is in its infancy.

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12/4/2019

Institutional Investors Watch for Volatility, Activism

Advisor.ca (12/04/19)

In a recent survey of global institutional investors, 53% of respondents cited volatility as the top risk to portfolios, while 50% cited interest rates and 37% cited a credit crunch. Investors also said they were preparing for an upcoming year of slower economic growth, rising public debt, and Brexit complications. More than half (58%) predicted that the next global financial crisis would occur within one to three years. In response, institutional investors are looking to protect on the downside through active management and diversification instead of making major changes to their portfolios. About 74% of respondents said the 2020 market environment will be favorable for active management, and their current allocation split has gone from 64% active and 36% as of 2015 to 71% active and 29% passive. In addition to downside protection, another survey indicates that investors are reconsidering shareholder primacy. The 2019 Edelman Trust Barometer, also release Wednesday, indicates that 91% of Canadian investors agreed that maximizing shareholder value should not be the only goal of a corporation. One reason that consideration of all stakeholders is important is to circumvent employee activism, as 81% of respondents said companies with activist employees were less attractive as prospective investments. Almost half of survey respondents said they look for companies that maintain a healthy company culture, and more than one-third said they wanted companies to showcase how they actively address social issues. Furthermore, 86% of respondents said they would support a reputable activist investor if they believed change was needed at a company.

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12/2/2019

ISS Benchmark Policy Updated—Executive Summary

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/02/19) Mishra, Subodh

Institutional Shareholder Services (ISS) has updated its benchmark proxy voting guidelines for the upcoming year. The main updates for the United States address problematic governance structures at newly public companies, independent board chair shareholder proposals, and share repurchase program proposals. When assessing time-based sunset requirements, ISS will consider the company's lifespan, its post-initial public offering ownership structure, and the board's disclosed rationale for the specific duration selected. ISS will not consider a sunset period of more than seven years from the date of the IPO to be reasonable. ISS will likely support well-crafted independent chair shareholder proposals at companies where boards rely on a weak lead independent director role or there is evidence that directors failed to oversee material risks facing the company or did not adequately respond to shareholders' concerns. With regard to share repurchase program proposals, a grant of authority to the board to engage in a buyback generally will be warranted unless it is used for an abusive practice, such as to reward company insiders, boost compensation metrics to increase payouts to executives, or threatens a company's long-term viability. The policy updates will be effective for meetings that occur on or after Feb. 1, 2020.

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12/2/2019

TCI Plays Outrider to Mark Carney's Climate Drive

Reuters (12/02/19) Hay, George

Chris Hohn of hedge fund TCI said his firm will vote against directors of companies that do not disclose how their balance sheets would be hit by climate change. Doing so would help outgoing Bank of England Gov. Mark Carney's push for greater transparency about the financial risks of global warming. Carney has championed the Task Force on Climate-related Financial Disclosures, which wants companies to disclose their carbon emissions and issue a climate risk analysis. The Task Force on Climate-related Financial Disclosures is founded on the notion that more information makes markets more efficient. Carney, who on Sunday was appointed as UN special envoy for climate action and finance, asserts that companies representing assets worth $120 trillion already support the idea of transparency, but in most sectors, full disclosure on strategic resilience is limited. Despite warnings by Carney and others about government action to make it mandatory, this is still uncertain and at least a year away. The link between disclosure and investment success is not yet straightforward, because even if all companies disclosed more information, share prices would still depend in part on whether politicians collectively decide to tackle climate risks through carbon taxes and other green measures. For Hohn, meanwhile, presenting activist investment as part of the solution to the climate problem is good marketing, especially because it is true.

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12/1/2019

A Common-Sense Approach to Corporate Purpose, ESG, and Sustainability

Harvard Law School Forum on Corporate Governance and Financial Regulation (12/01/19) Glassner, Frank B.

America's top business and financial leaders have acknowledged that environmental, social, and corporate governance policies are linked to business risk, value creation, financial performance, and sustainability. The central concept at the heart of the Business Roundtable's "Statement on the Purpose of a Corporation" is "while each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders." This assertion suggests that each company can determine how to tell its ESG and sustainability story, how to deal with its stakeholders, and how ultimately to define its purpose and achieve sustainability. Companies now must consider the skepticism and criticism that the statement has drawn, the confusing terminology surrounding sustainability, how to deal with different sustainability metrics and standard-setters, whether to fit sustainability reporting into their legal disclosure obligations, and whether customized sustainability reporting undermines comparability in the marketplace. Investors are now working to integrate sustainability issues into their investment decisions as well as their stewardship duties and proxy voting policies. Companies will need to take a holistic approach to defining their purpose and integrating ESG and sustainability issues into their financial reporting, shareholder communications, investor relations, board engagement, and proxy solicitation campaigns. They should consider publishing a statement of corporate purpose; looking closely at the content of corporate reporting; tailoring shareholder communications to address the interests of all stakeholders; and organizing a systematic, annualized approach to shareholder relations and communication. Meanwhile, investors must devote more resources toward evaluating ESG issues at companies, develop deeper expertise about the risks and value drivers, and push third-party ratings and advisory firms to develop better methods of assessment.

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11/29/2019

Investors Lay Down Challenge to Corporate France

Financial Times (11/29/19) Keohane, David; Agnew, Harriet

French boards, regulators, and politicians are wrestling with how to respond to the arrival of activist investors who are testing the country's reputation for protectionism. The past year has seen investors including Elliott Management, Third Point, and CIAM challenging some of France's biggest companies, including Capgemini (CGEMY), Pernod Ricard (PDRDY), EssilorLuxottica (ESLOY), and Renault (RNLSY). In March, finance minister Bruno Le Maire said France would seek more measures to thwart activists, including the option of using taxpayers' money to defend companies of strategic interest. Despite this, investors and corporate governance experts say the French establishment's protectionist reflexes may prove less effective or even counterproductive in 2019. Analysts also say the eruption of activism in France is part of a wider trend across Europe thanks to the combination of corporate governance climbing the agenda and conglomerates falling out of fashion. Activist activity is stirring tensions in the upper echelons of the business world. For example, media company Lagardère (MMB) has sued Amber, its third-largest shareholder, for €84 million in damages, alleging the London fund had sought to destabilize it. Last month, a French parliamentarian committee called for more transparency around the borrowing and lending of a company's shares, an examination of when a given level of short selling prevents a market functioning properly, and the fast-tracking of investigations by the French markets regulator. U.S. short seller Muddy Waters says the committee's report "takes a myopic view of corporate governance and communication issues," and that "instead of addressing these issues, the report targets those whose job is to spot them—short sellers."

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11/26/2019

Arnaud Lagardère's Battle to Retain Grip on French Empire

Financial Times (11/26/19) Agnew, Harriet

Since taking over Lagardère (LGDDF) from his father in 2003, Arnaud Lagardère has attracted a great deal of criticism for his management style and the performance of the business. Lagardère has been lax in his duties as CEO and the company's share price has substantially underperformed its benchmarks, while management and restructuring costs have soared. Now Lagardère is facing his moment of truth in the form of a battle with investor Amber Capital, in which a French court recently ruled that the CEO must publish a decade's worth of accounts for Lagardère Capital & Management (LC&M), a private holding company. The new ruling threatens to lift the lid on Lagardère's personal debt levels and put his empire under renewed scrutiny, as previous reports have established that LC&M had €204 million of debt at the end of 2017. It remains to be seen whether investors and the supervisory board continue to support Lagardère once they have a better sense of his true financial situation. Lagardère SCA's dated "commandite" structure means that despite only owning a 7.2% stake in the group through LC&M, Lagardère's position is highly protected. Shareholders cannot remove Lagardère as they could in a normal company; instead, the supervisory board votes to renew his mandate every six years. The counterbalance to Lagardère's unlimited powers as general partner of the SCA is that he also has unlimited responsibility for the company's liabilities, which Amber uses to argue that shareholders need to know what Lagardère's financial guarantee is worth. Four members of the supervisory board who have so far supported the status quo have their mandates coming up for renewal by shareholders next year, and Lagardère's own mandate comes up for renewal by the supervisory board in March 2021.

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11/26/2019

Corp Fin Enters Brave New Shareholder Proposal World

Bloomberg Law (11/26/19) Rasmussen, Peter

Starting in 2020, Securities and Exchange Commission (SEC) staff may respond orally instead of in writing to some no-action requests. The Division of Corporation Finance policy shift will slightly restrict the flow of information to the public, but will be less consequential because staff responses have not historically been a source of extensive useful analysis by the staff. SEC staff will also make some information about the disposition of exclusion requests available in chart form, identifying the company, proponent, relevant dates, staff action taken, regulatory basis for exclusion, and whether the staff issued a written response. Currently, the staff has included only two dispositions in the chart: one with a written letter and one that was orally communicated. Glass Lewis & Co. addressed the new policy by saying it believes that companies should only omit proposals in cases where the SEC staff has explicitly concurred with the company's asserted basis for exclusion. Similarly, in instances where the SEC has orally permitted a company to exclude a shareholder proposal and there is no "written record" provided by the SEC about the determination, Glass Lewis believes that the company should provide "some disclosure" concerning the staff action. The SEC has also proposed extending the stockholding period required for shareholders to submit a proposal from one year to three years. It would also raise requirements for excluding proposals based on vote totals. The proposals have generated a significant number of comments, including comments from leading shareholder advocates and investment managers, who urge the SEC to extend the current 60-day comment period to 120 or 180 days.

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