Media Center

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

Amber Capital Locks Horns With Lagardere Over Lawsuit
Aecom Nears $2.4 Billion Deal to Sell Management Services Unit
Elliott and Blackstone Enter Hostile Territory in Japan
UTC, Raytheon Investors Block Merger
Box Tries to Escape the Curse of the Silicon Valley Midcap
Australia Makes Big Strides in Closing Gender Gap, Global Survey Finds
Citigroup Names New Global Co-Heads of Equity Capital Markets
Elliott Ranks as Busiest Hedge Fund in Third Quarter, Again
Uniper Remains Independent for Now Despite Fortum Push: CEO
N.Y.C. Official Calls for Mandatory Diversity Effort in the Boardroom
Lagardere Sues Amber Capital, Claims 84 Million Euros of Damages
Progenics Inked a Merger to Avoid Negotiating a Proxy War. One Investor Still Wants to Fight
U.K. Regulator Tells Companies to Improve Financial Disclosures
Victoria's Secret Head of Stores Is Stepping Down
SAP CEO Steps Down
'Sustainable' Investors Match the Performance of Regular Investors, New IMF Research Finds
Most Companies Avoid Putting ESG Metrics in Incentive Plans
PG&E Bankruptcy Judge Gives Outside Group's Plan a Chance
Auto1, Private Equity Firms to Bid for Scout24's Cars Unit: Sources
AT&T to Sell Puerto Rico Business as It Looks to Pay Down Debt
Stockholder Withdraws Other Nomination for Brookdale Board
Elliott Questions Japan Firm Unizo's Actions in Bidding War
Bed Bath & Beyond Picks Target Executive as New CEO
Norway Oil Fund to Publish All Voting Plans
At Least 70 Companies Still Need a Female Director to Comply With California State Law, Report Says
Finland's Fortum to Gain Control of Uniper in $2.5 Billion Deal
Hedge Fund Standard General Returns to Media Dealmaking Roots
Two Hedge Funds Dodge a Russian Poison Pill
Amag Settles With Caligan, Adds Two Board Directors
Fortum CEO Demands Uniper Chairman Seat After Shareholder Deal
Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff
Argo Group Gets SEC Subpoena Over Executive Compensation
Neuberger Berman Takes a Victory Lap. Saba Says Not So Fast.
Investor Wins Seats on Tix Board
Aramark Announces a New CEO, Investor Becomes Vice Chair of the Board
Germany's Aareal Conducts Strategic Review Following Calls From Investor
ISS Seeks Input for 2020 Proxy Season Votes
Emerson Faces Pressure to Split Itself in Two
New Glass Lewis Chief to Expand Abroad Amid U.S. Regulatory Clamp-Down
Proxy Solicitor Okapi Hires Harnett From Strategic Governance Advisors
Brookdale Says Board Nominee Made 'Derogatory' Comments About Rival Female CEO
Lantheus Strikes Deal to Buy Progenics, Sparking Investor Backlash
Brookdale Calls Investor's Nominee 'Unfit' for Board
FTI Consulting Hires ISS Executive for Governance and Activism Team
Paddy Power Owner in $6 Billion Deal to Create Global Betting Giant
Andersons, Marathon, Merge Four Ethanol Operations Into One Company
Hunting the Hunter: Following Elliott's Lead
Recent Trends in Shareholder Activism
The Evolving Boardroom: Signs of Change
Having More Female Executives Correlated With Better Performance at Companies, New Research Finds
Virtual Shareholder Meetings in the U.S.
Japan's Foreign-Investor Screening Risks Undoing Years of Reform
ESG Incorporation Starting to Take Hold in U.S. – Callan Survey
Time for Corporations to Get Their Houses in Order
We Talked to 24 People About the Hedge-Fund Wunderkind at Elliott Who Wants to Shake Up AT&T. Here's Why Management Should Be Terrified.
Corporate Board Elections Getting a Little Less Cozy
Spotlight Thrown on Japan Inc.'s Stakeholder-Focused Model
Men Agree That Gender Diversity on Boards Is Important—But They're Sick of Hearing About It
Shareholder Activism and Governance in France
Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads
Shareholder Activism Is a Balancing Act for Sias
Brexit and Shareholder Activism Could Be Behind CEO Exodus From FTSE 100 Companies, Experts Suggest
The Breakup of Another Industrial Giant Is Coming
AC Milan and Elliott: The Hedge Fund Trying to Crack Italian Football
How Boards Can Equip Themselves for Rapid Change
Investors Are Worried About AT&T's Content Game
Response to CII Proposal to Amend DGCL
Investors Are Getting Closer to a Climate Change Tipping Point
ComScore: A Hard Sell
Video: Lack of Diversity Puts Companies at Risk of Going Under, Says Ariel Investments Co-CEO Mellody Hobson
United Technologies' Merger With Raytheon Is Complicated. Three Ways to Play It.
There's a New Hedge Fund for Badly Governed Companies in Japan
Why Sustainability Reporting Needs Governance Perspective
Ackman Flat in September, But Still Crushing 2019

10/13/2019

Elliott and Blackstone Enter Hostile Territory in Japan

Bloomberg (10/13/19) Ren, Shuli

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

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10/9/2019

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

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

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

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10/9/2019

Elliott Questions Japan Firm Unizo's Actions in Bidding War

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

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

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10/8/2019

Norway Oil Fund to Publish All Voting Plans

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

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

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10/8/2019

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

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

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

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10/8/2019

Two Hedge Funds Dodge a Russian Poison Pill

Bloomberg (10/08/19) Hughes, Chris

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

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10/8/2019

Telecom Italia CEO Accelerates Overhaul With Data Center Spinoff

Bloomberg (10/08/19) Lepido, Daniele

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

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10/4/2019

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

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

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

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10/3/2019

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

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

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

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10/13/2019

Hunting the Hunter: Following Elliott's Lead

Forbes (10/13/19) Conrad, Roger

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

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10/11/2019

Recent Trends in Shareholder Activism

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

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

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10/10/2019

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

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

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

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10/9/2019

Time for Corporations to Get Their Houses in Order

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

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

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10/8/2019

Corporate Board Elections Getting a Little Less Cozy

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

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

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10/8/2019

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

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

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

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10/8/2019

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

Fortune (10/08/19) Hinchliffe, Emma

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

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10/8/2019

Pragmatism Key to Proxy Voting Decisions, Say Corporate Governance Heads

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

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

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10/7/2019

Shareholder Activism Is a Balancing Act for Sias

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

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

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10/6/2019

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

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

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

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10/4/2019

Response to CII Proposal to Amend DGCL

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

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

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10/4/2019

Investors Are Getting Closer to a Climate Change Tipping Point

CNBC (10/04/19) Maier, Stephanie

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

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10/3/2019

Why Sustainability Reporting Needs Governance Perspective

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

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

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