Vanguard's annual proxy-season report, issued on Aug. 16, shows that it engaged with 721 companies in 2018, in which it had invested a total of $1.62 trillion, or 47% of its total equity fund assets under management (AUM), compared with 954 company engagements representing $1.138 trillion in AUM in 2017. The firm said conversations with company executives around board oversight and risk nearly doubled in the past year. The report also reveals that Vanguard voted in favor of four of nine shareholder proposals focused on board gender diversity and against 318 members of board compensation committees for failing to respond to shareholder feedback. Further, the firm supported 11 of 76 shareholder proposals focused on environmental disclosures, up from two out of 92 in 2017; supported one shareholder proposal calling for greater risk disclosure by a gun manufacturer; and supported activist investors in five out of 13 proxy contests that went to a vote in the United States in the past proxy season.

ASX CEO Dominic Stevens said the ASX Corporate Governance Council will strike a sensible final position in upgrading its governance principles, and it will maintain boards' discretion not to adopt parts of the guidance. "It's not the ASX—these are corporate governance principles put together by a broad church of investors, directors, and professionals working in the market, and we see that as a great forum for building the principles," he said. "As with all good consultations, it's shown a wide range of views, and has been a good discussion, and that's the point. ASX has confidence, as with the last three of these that have been done, we think it will come back down to an outcome where there will be broad consensus of all the members."

California lawmakers have introduced a bill that would require publicly traded companies based in the state to have at least one woman on their board starting in 2020. In 2022, companies with at least five directors would be required to have two female board members, and those with at least six directors would need at least three. Companies failing to meet those obligations could be fined “an amount equal to the average annual cash compensation for the directors of the corporation” for a first offense, with increasing penalties for subsequent infractions. The bill passed the state senate, and now needs the approval of the state assembly by Aug. 31 to advance to the desk of California governor Jerry Brown. While business lobbyists argue the measure will force companies to privilege women even above more deserving male minority candidates, businesses in Europe have been required to add women to boards since 2003. There's no evidence corporate governance has suffered in those countries, and there's reason to believe its improved by broadening the perspective around the board and by forcing companies to be more thoughtful about the talent they promote in their organization.

Countrwide Chairman Peter Long is facing a second shareholder revolt in as many months over a pay disagreement which could award its top three executives more than £20 million. Leading City institutions are reportedly planning to oppose a new incentive scheme the embattled estate agent wants to push through as part of a £140 million rescue fundraising to keep the company afloat. Countrywide's proposals to replace its existing long-term incentive plan with the new Absolute Growth Plan (AGP) has provoked a furious response ahead of the meeting to approve the capital-raising and pay arrangements on Aug. 28. A number of major shareholders have pledged to vote against the plans, although they are not optimistic about blocking them because Oaktree, a private equity group which owns 30% of Countrywide's shares, is expected to support them. The revised remuneration packages have stoked particular anger because Long also chairs Royal Mail Group, which saw more than 70% of shareholders rebelling against its remuneration report last month—one of the largest-ever such protest votes. Institutional Shareholder Services (ISS) said the estate agent's investors should oppose its new remuneration policy and the implementation of the AGP. ISS called the scheme "excessive" and "unduly complex," and warned that the "calculation of awards is not specified." It added, "No compelling explanation has been provided as to why the proposed arrangement is essential to effectively implementing the group's strategy and turnaround plan."

Starboard Value has disclosed a 5.8% stake in Symantec (SYMC) and plans to nominate five candidates to the board of directors. Only one of the fund’s nominees is employed by Starboard itself, and the others have leadership experience ranging from top competitor McAfee to IT specialty distributer Arrow Electronics (ARW). Each of the four non-Starboard nominees have bought at least $16,000 worth of Symantec shares. Nora Denzel is an experienced board member who spent almost five years as an executive at financial software company Intuit. She purchased 750 shares in Symantec on July 16. Peter Feld—the head of research and managing member of Starboard Value since 2011—owns 36 million shares in the company through his affiliation with the fund. He has significant experience serving as a shareholder representative on numerous tech company boards. Dale Fuller, who purchased 14,200 shares in late June, is a former interim president and CEO of McAfee. Richard Hill became CEO of semiconductor manufacturer Novellus Systems in 1993 and chairman in 1996, and held both positions until the company was acquired in 2012. He has also served as chairman of Starboard-owned semiconductor producer Marvell Technology Group (MRVL) for two years. Finally, Michael Strachan has served as a board member and audit committee chairman of Marvell since May 2016, and previously was employed by Ernst & Young for over three decades.

President Trump said Friday he had asked the Securities and Exchange Commission (SEC) to examine moving financial reporting for publicly traded companies to a six-month schedule rather than the current quarterly system, saying this move would promote flexibility and savings. On Twitter, Trump said he had spoken with “some of the world’s top business leaders” on steps to create jobs and make business “even better.” He said one had told him, “Stop quarterly reporting & go to a six month system.” Trump's comments could reignite a debate over whether there is too much emphasis on quarterly results at the expense of a company's long-term performance. In an opinion article in The Wall Street Journal earlier this year JP Morgan Chase CEO and Business Roundtable Chairman James Dimon and Berkshire Hathaway Chairman Warren Buffett argued that companies should stop giving quarterly earnings guidance, saying it puts too much emphasis on reaching short-term targets and discourages longer-term investment. Yet the executives said they still supported quarterly reporting, noting transparency about results is an “essential aspect of U.S. public markets” and that quarterly and annual results let the public “reliably assess real progress.”

Sandridge Energy (SD) could reach a deal to sell its Oklahoma and Kansas operations to Midstates Petroleum (MPO) by the end of August. Company officials currently are negotiating with Midstates officials. The transaction hasn't been finalized and talks could fall through, according to people close to the situation. Carl Icahn's successful campaign to win control of the company's board prompted SandRidge to explore strategic options in recent months. In March, SandRidge rejected a stock-for-stock merger with Midstates. SandRidge entered into confidentiality agreements with 26 potential buyers for all or some of its assets, the Oklahoma City-based company said in a statement in June. Sixteen suitors were interested only in its operations in Colorado, SandRidge said. The company, which emerged from bankruptcy in 2016, is working with Royal Bank of Canada.

On the morning of Aug. 16, shares of Symantec (SYMC) rose more than 10% after confirming that Starboard Value sought to nominate five directors to the company's board. Observers say the move could lead to a shake-up at the computer security software maker, which reported quarterly results and full-year guidance that fell short of market expectations and has been investigating concerns regarding some of its historical financial results. Starboard has a 5.8% stake in Symantec and has indicated that its shares were "undervalued" and "represented an attractive investment opportunity." The hedge fund said it hoped to engage in discussions with management about "opportunities to unlock value." According to Symantec, it has held a dialogue with Starboard over the past several weeks and plans to continue those discussions.

London-based Janus Henderson recently reduced its stake in Smurfit Kappa from 3.9% to less than 3%, according to a stock market filing this week. In May, Janus Henderson threatened to mount a shareholder revolt over the Dublin-based company's decision to reject overtures from International Paper (IP). Janus Henderson sought to remove the directors of Europe's largest paper-based packaging group. The sale comes at a time when the stock of Smurfit Kappa is hovering close to record highs. Some investors believe the shares are reflecting an optimistic outlook just as clouds gather on the horizon for the global economy. Some are disappointed that Smurfit Kappa has not provided additional medium-term guidance and targets to those outlined in February, especially in light of the board's strong opposition to a takeover by International Paper. The shares also may be continuing to reflect an element of lingering takeover speculation, according to market sources.

The Stilwell Group announced Thursday it has penned an open letter to shareholders of Wheeler Real Estate Investment Trust Inc. (WHLR) and filed its definitive proxy statement for the election of three director nominees at the 2018 annual meeting. In the letter, Stilwell notes it is WHLR's largest shareholder and has over two decades of experience investing in financially related companies, including placing at least 20 representatives on company boards. "In our experience, bad corporate governance is a big, red flag for corporate problems. The red flag flies at WHLR—where the directors have an inflated view of themselves," the letter states. "While WHLR's common shares were plummeting, our board of directors deemed themselves deserving of outsized raises. Between 2016 and 2017, the board members voted themselves a disturbing jump in compensation." For example, board member Stewart Brown received a 228% increase, it notes. "We can't think of any reason why our Company's board deserved such a handsome reward for its abysmal performance," Stilwell says, adding that board members declined to respond to private requests for information about these numbers. "Do you think our directors deserve a raise? We think they deserve to be replaced. It's no wonder they don't want us on the board; we would have never permitted such behavior," the letter concludes.

Bill Ackman acquired a nearly 1% stake in Lowe's Cos. Inc. (LOW) during the second quarter, and more than doubled his holdings in United Technologies Corp. (UTX). Ackman said in a letter to shareholders this month that the Lowe's and UTC investments "have been positive contributors to year-to-date performance and are well aligned with...core investment principles." Ackman said Lowe's competitive struggles with Home Depot (HD) is the primary reason for his decision to take a stake. "Lowe's profit margins and sales productivity are substantially lower than Home Depot's, and it trades at a substantially lower earnings multiple," he said. He supported naming Marvin Ellison, a former Home Depot executive, to be Lowe's president and chief executive. "We expect that Mr. Ellison can close the performance gap, and the market will revalue Lowe's accordingly," he said. Meanwhile, UTC is waiting for final regulatory approval for its $30 billion purchase of Rockwell Collins Inc. (COL). Ackman wants UTC to consider splitting itself into three or four parts. UTC Chairman and CEO Greg Hayes says the company's board of directors and management are reviewing options. UTC's four primary operating segments are Climate, Controls, and Security; Pratt & Whitney aviation equipment; UTC Aerospace Systems (which Rockwell would join); and Otis elevators. Ackman says the four segments "all benefit from favorable long-term growth trends and recurring long-term cash flows. Each of these businesses has materially different capital requirements, competitive characteristics, and investor constituencies, and we believe that they will be more likely to achieve fair value as independent companies." Daniel Loeb's Third Point also has communicated with UTC, the company confirmed May 4. Loeb has called for UTC to split the company into three parts, according to media reports.

A filing with the Securities and Exchange Commission reveals that Elliott Management has built a small stake in Rupert Murdoch's 21st Century Fox (FOXA). The hedge fund took a stake of just under 2.1 million class-B voting shares in the final quarter of 2017-18 for more than $100 million. It remains uncertain whether the stake is passive or active, and the hedge fund's intentions are unclear. After building a stake in Fox's class-B shares in 2015, ValueAct Capital Management's Jeffrey Ubben joined the company's board. Although he stepped down from the board in April, ValueAct still holds 23.6 million shares, or about 3% of class-B stock.

Bill Ackman's hedge fund has reduced its stake in Automatic Data Processing (ADP), according to a filing with the Securities and Exchange Commission. Pershing Square Capital Management now holds 4.2 million shares of the Roseland, N.J.-based human resources company, down from 8.8 million shares at the end of March. Ackman had built up a stake in the company as part of a failed proxy contest to win three seats on its board. However, his four-month campaign was dealt a blow in November when ADP investors voted to re-elect the entire 10-person board. Ackman's relationship with the company's top executives, including CEO Carlos Rodriguez, was strained at the time. Pershing Square also built a position in United Technologies (UTX) of 4.5 million shares at the end of June and increased its stake in Nabisco's parent company, Mondelez International (MDLZ), to 16.4 million shares.

Starboard Value LP has acquired a 5.8% stake in Symantec (SYMC) and nominated five directors to the company's board. The hedge fund revealed the moves in a regulatory filing Thursday, but provided little detail about the changes it would seek at the cybersecurity firm. It only said that it viewed the stock as cheap and would seek to “unlock value.” Symantec, which is conducting an internal accounting investigation, has been slashing jobs in an effort to boost margins and its shares have dropped 34% this year. Starboard reportedly believes its board nominees could help fix any financial-reporting issues and improve operations. Symantec said it was evaluating Starboard's nominations. “Over the last several weeks, we have had a dialogue with Starboard and we plan to continue these discussions,” it said. The investment makes Starboard the company's fourth largest shareholder, according to Thomson Reuters data. Its nominees to Symantec's board include directors from analytics firm Comscore and chipmakers AMD (AMD) and Marvell Technology (MRVL). Starboard also nominated its own head of research.

Bill Ackman has acquired a major new position that accounts for about 10% of Pershing Square's portfolio, but declined to reveal the details. “We're not yet ready to disclose the company, but it certainly meets our standards,” Ackman said in a call with investors Wednesday, adding that the mystery investment is “quite undervalued” and has “lots of opportunity for improvement.” Ackman's fund could use some upside. Although it is up 13.6% this year, assets stand at about $8 billion, down from a peak of $20 billion in July 2015. Departing investors forced Pershing Square to sell down some of its winning position in Automatic Data Processing (ADP), Ackman said. We “are not saying we don't like the investment. In fact, we like it a lot, but we do need to manage the portfolio overall,” he said. ADP shares are up almost 27% since Pershing Square unveiled its stake in the company last August. Ackman was unsuccessful in wining board representation in November but said he is “pleased” with his conversations with management since then.

Cevian may pursue a second supervisory board seat at German engineering group Thyssenkrupp to better reflect its ownership and to help push for restructuring measures, according to sources. However, the shareholder will first focus on the search for a CEO and chairman, the sources said. The Swedish investor, which has repeatedly called for a greater restructuring of the conglomerate, is Thyssenkrupp's second-largest shareholder with an 18% stake. The Krupp foundation owns a 21% stake and is represented by two board directors. Board representation could be added to the agenda once a replacement for interim CEO Guido Kerkhoff is found and the vacant chairman position is filled permanently, the sources said. Daily Boersen-Zeitung on Thursday cited sources close to the board as saying that Cevian was seeking to win a second board seat by next January's annual meeting.

Engaged Capital upped its holding in Aratana Therapeutics Inc. (PETX) to 6.8% in early August, becoming the company's third-largest shareholder. In March, the fund revealed a 4.7% stake in the animal health company and nominated three of its own candidates to the board. However, the two sides agreed to a deal ahead of Aratana's annual shareholder meeting that installed two of Engaged Capital's nominees on the board and increased the number of board seats from nine to 10. "We invested in Aratana as we see significant value to be realized in the company's innovative therapeutic portfolio," said founder Glenn Welling in a release. He added that Engaged Capital’s nominees, Lowell Robinson and Craig Barbarosh, "will bring an objective and valuable perspective into the boardroom for shareholders with a disciplined focus on cost and capital allocation, along with a sense of urgency in delivering on the value of Aratana's unique assets." Per the agreement, Engaged Capital cannot increase its stake beyond 9.9% without board approval. It also agreed to vote for the directors recommended by Aratana's board during the 2018 shareholder meeting. However, both of those stipulations will end next year, a month before the deadline to nominate directors at Aratana's 2019 shareholder meeting. Separate from the deal, Aratana agreed in July to establish a strategic review committee that includes Aratana CEO Dr. Steven St. Peter, one of Engaged Capital's nominees. He said in the company's second quarter earnings call that "Aratana has been exploring a wider set of business opportunities and outcomes."

Shares of Diamondback Energy Inc. (FANG) fell 10% early on Aug. 15 following the announcement of its all-stock, $9.2 billion deal for shale rival Energen (EGN). The oil and gas producer agreed on Aug. 14 to pay about $84.95 per share for Energen, whose shares rose 3.8% to $75.95 on the following morning. Corvex Management LP, which holds about 8.3% of Energen and had pushed for a sale of the company, indicated that it will support the deal. "The transaction is strategically compelling and delivers significant financial accretion to Energen shareholders," said Corvex managing partner Keith Meister. "The pro forma company should be poised for many years of growth at an industry leading cost structure."

Starboard Value sold half of its stake in Newell Brands (NWL), some 9.8 million shares, in the second quarter, according to a filing with the Securities and Exchange Commission. The hedge fund called for CEO Michael Polk and the entire board to be replaced earlier in the year when it held a 3.8% stake in Newell. Starboard struck a deal that gave it two board seats in April. Since January, Newell's stock price has declined 34%, and in the last five days, it has fallen 10%. Starboard also has sold half of its stake in mall operator Macerich (MAC), after nominating directors for the firm in April, and has sold 60% of its position in drugmaker Depomed (DEPO), after winning board seats last year.

In a regulatory filing on Aug. 14, Trian Fund Management said it had omitted confidential information from its quarterly filings that would indicate a new active position in an unidentified company, and that the information would be "filed separately with the U.S. Securities and Exchange Commission." Trian also disclosed a new stake worth $441 million in nVent Electric Plc (NVT); increased positions in Bank of New York Mellon Corp. (BK), General Electric Co. (GE), and Mondelez International Inc. (MDLZ); and a decrease in its positions in Pentair Plc (PNR), Wendy's Co. (WEN), and Sysco Corp. (SYY). Among other things, the hedge fund disclosed that its investment in Procter & Gamble Co. (PG) has declined 5.5% since it launched a proxy fight at the company in July 2017.

The Council of Institutional Investors (CII) is criticizing a recent editorial in The Wall Street Journal entitled “The Proxy Advisers’ Veto” that questioned the power of proxy advisory firms. The article claimed that when Glass Lewis and Institutional Shareholder Services (ISS) recommended shareholders reject Albertsons’ acquisition of Rite Aid (RAD), it showed what an outsize role the two play in influencing shareholders. The editorial argued that the two firms control a combined 97% of the advisory market, “which encourages herd voting among investors.” The Council of Institutional Investors pushed back in a statement published on its website, declaring that herd voting is a “myth” and that proxy firms do not dictate voting outcomes. In the case of Albertsons and Rite Aid, whether or not the advisors’ recommendations were taken into account during the voting process is unclear. The nonprofit association said that institutional investors are willingly paying proxy advisory firms like Glass Lewis and ISS to do the work. “We are frustrated that we get the same false charges time and time again,” said CII deputy director Amy Borrus. “If investors didn't value proxy services, they wouldn't pay for them.” Both Glass Lewis and ISS are associate members of the Council of Institutional Investors, Borrus said. “Institutional investors are responsible for their voting,” a spokesperson for Glass Lewis said. “It is the job of proxy advisors to ensure that votes are cast in accordance with the specific instructions of their investor clients.”

A new survey published in the Financial Analysts Journal reveals that 75% of U.S. respondents have incorporated ESG information in their investment decisions, compared with 84% of European respondents. The survey also indicates that 63% of respondents say ESG information is material to investment performance. Of all respondents, 41% say they use ESG principles because it is the ethical thing to do; however, only 19% of U.S. managers said so. The most popular ESG investment style is engaging owners, cited by 37% of respondents, though engagement is more popular among European managers (48%) than U.S. managers (27%). U.S. managers were more likely to fully integrate ESG into the stock evaluation process. Among other things, the survey indicated that of the 18% of respondents that did not incorporate ESG, 20% cited the lack of access to material non-financial data as a reason for not doing so.

Diamondback Energy Inc. (FANG) will buy Energen Corp. (EGN) in an all-stock deal valued at $9.2 billion, amid pressure in the sector to control rising costs. In May, Corvex Management LP and Carl Icahn expressed interest in buying Energen themselves, though Icahn said at the time it would be more logical for a strategic buyer to acquire it at a good price. As of last week, Icahn and Corvex owned stakes in Energen, including derivatives, of 8.9% and 7.9%, respectively. Corvex and Elliott Management Corp. have both urged Energen to sell before, and Energen’s board includes Icahn Capital LP’s former senior managing director, Vincent Intrieri. The deal gives Diamondback 85% more acres in the Midland and Delaware basins, both of which are part of the Permian Basin, plus 57% more high-performing acres than it currently controls. Diamondback said it believes the deal would generate at least $3 billion in cost savings over time. The acquisition values Energen at $84.95 a share, a 19% premium to the stock’s closing price Monday. Energen shareholders will receive 0.6442 share of Diamondback stock for each Energen share they own. If the deal is completed, Diamondback shareholders would own roughly 62% of the combined company, with Energen stock owners controlling the rest.

Although Nielsen Holdings (NLSN) has struggled as a public company, a breakup may not be the best option. Elliott Management said Monday it has acquired an 8.4% stake in Nielsen and will push the company to consider strategic options, including a sale. Nielsen has two segments: a media and television rating business, which it calls its “watch” business, and a unit that tracks purchases of groceries and other consumer goods, called “buy.” This latter business has been the weak spot, and Nielsen has blamed disruption in the consumer-goods industry. However, Elliott reportedly believes Nielsen is also losing market share to smaller data provider IRI, due in part to underinvestment in data automation and analytics. The truth is likely somewhere in between. Companies are under pressure to cut costs, though at the same time they need market data more than ever to make accurate judgments about consumer trends. Nielsen's data is still the gold standard for the industry, and is more international than IRI's. The next question is if it makes sense to divest the “buy” business. One reason to keep them together is they have the same clients. To plan advertising campaigns, clients need to know not only what media is being watched, but also what products are selling and to whom. A breakup of the company would cause these natural synergies to be lost. In addition, the “buy” business may not fetch a great valuation on its own. A return to private-equity ownership would give Nielsen some breathing room, but any deal should keep watch and buy together.

Sources say Land & Buildings Investment Management's Jonathan Litt has increased his position in Mack-Cali Realty Corp. (CLI) and likely will push for changes at the real estate investment trust, including a possible sale of all or parts of the company. The firm disclosed in an Aug. 13 regulatory filing that it had acquired 1.26 million additional shares in Mack-Cali, quadrupling its stake to about 1.85%. Sources say it is uncertain whether Litt and Mack-Cali's management have met to discuss the changes he might seek at the company. Litt sat on Mack-Cali's board for more than two years, resigning in August 2016 after the company's shares rose more than 32%.

Carl Icahn no longer plans to solicit proxies to vote against the $52 billion Cigna-Express Scripts deal, after two proxy-advisory firms recommended shareholders support the transaction.  His decision marks a dramatic reversal of his position a week ago when he urged the health insurer's shareholders to vote against it.  Near the end of this year's first quarter, Cigna (CI) agreed to acquire Express Scripts (ESRX), one of the largest U.S. pharmacy benefits managers.  The health insurer, which now needs shareholder approval to close the deal, is holding a special meeting on Aug. 24 so investors can vote on it.  Icahn holds 0.56% of Cigna's shares.  One of the risks he pointed to is Amazon (AMZN), which recently purchased online prescription drug company PillPack.  Icahn believes Amazon could one day put Express Scripts out of business.  Another prominent hedge fund, Glenview Capital Management LLC, said last week it backed the deal.  The fund has a $1.3 billion stake split between the two companies.  Meanwhile, Institutional Shareholder Services and Glass Lewis' opinions hold significant sway with shareholders.  Such proxy advisory firms rarely recommend their clientele, which include big institutional investors, vote against proposed mergers.  In turn, major institutional shareholders often vote in line with the proxy-advisory firms' opinions.

In this video, CNBC commentators discuss Carl Icahn's move to drop his opposition to the proposed deal between Cigna (CI) and Express Scripts (ESRX).  He told CNBC "the crossover was too big...given what advisory firms said we realized there was no way we can win."

Paul Singer's Elliott Management Corp. acquired an 8.4% stake in Nielsen Holdings Plc (NLSN) and called for a sale of the consumer-data giant, sparking the biggest stock rally since it first went public. Elliott said it will "encourage the issuer to undertake a full strategic review of, and initiate a process to explore, the sale." Elliott built up its position on July 26, the day Nielsen reported bad news that plunged the company into upheaval and erased $2.7 billion of its market value. The company reduced its profit forecasts for the year and said its chief executive officer will retire. It also said it was considering options for its Buy segment, which tracks consumer purchases. "Elliott Management knows their way around the media business," said Douglas Arthur, a managing director at Huber Research Partners LLC. "What's important now is for them to figure out who'll be the buyer and what's going to happen to [its $8.5 billion of] debt." Nielsen shares rose 17% today to $25.67, the biggest intraday gain since the company's 2011 initial public offering. The stock had dropped 40% this year through Friday.

Elliott Management Corp. has acquired an 8.4% stake in Nielsen Holdings PLC (NLSN), according to a filing Monday, and plans to push the TV-ratings company to sell itself. Numerous private-equity firms have expressed interest in Nielsen and bidders could include Elliott, according to sources. The company has been struggling in a rapidly changing retail environment, and it recently announced CEO Mitch Barns would step down at the end of this year. It has begun a search for his successor.  Elliott believes the company's “buy” segment has failed to keep up with competitors such as IRI, which has invested in data-intensive offerings, while Nielsen has continued to depend on its employees to provide analysis to clients, sources said. The fund wants Nielsen to launch a strategic review of the entire business rather than just the “buy” segment. Meanwhile, a Nielsen spokeswoman said the firm's board of directors continues to evaluate how to best position the business and is open to the views of its owners, including Elliott.  

Glass Lewis & Co. has advised Cigna Corp. (CI) shareholders to vote for the company’s $54 billion deal for Express Scripts Holding Co. (ESRX) at an Aug. 24 shareholder meeting. The proxy advisor's recommendation—which echoes that of Institutional Shareholder Services Inc.—marks a setback for Carl Icahn's efforts to block the deal. “We find the proposed merger both strategically and financially compelling, structured in a reasonable manner from a valuation standpoint for Cigna shareholders,” Glass Lewis said in its report Friday. Icahn, who owns a 0.56% stake in Cigna, has argued the insurer is “dramatically overpaying” for Express Scripts. While he has admitted he faces an uphill battle to upend the deal, the billionaire investor has urged Cigna investors to vote against it, based in part on the threat from Amazon.com Inc. (AMZN) to Express Scripts's future. Icahn said he believed Cigna should pursue a multiyear partnership rather than a takeover, and use its cash to buy back shares. He said he believes Cigna could be worth $250 a share on a standalone basis and that Express Scripts, which he holds a short position in, would be worth less than $60 a share. Cigna closed Friday at $183.28 while shares in Express Scripts ended the trading day at $83.64. Glass Lewis said it believed the merger was set at a reasonable price, and would create a more diverse and integrated business model in the changing healthcare industry.

A Thyssenkrupp shareholder is unsatisfied with mid-term targets announced last week and is calling for a strategy overhaul led by a new CEO. Union Investment owns just a 0.2% stake in the German conglomerate, but has been one of its most vocal shareholders and repeatedly pressed management to seek a deeper restructuring. “Thyssenkrupp needs a strategy shift. This is easier to achieve when someone new comes in from the outside,” said fund manager Ingo Speich said. Thyssenkrupp has been in crisis after both its CEO and chairman stepped down in July following shareholder pressure to boost the share price, which has dropped one-third since 2011. A recent profit warning has escalated matters for interim CEO Guido Kerkhoff, who served as CFO but has taken the helm until a long-term successor is found. “(Kerkhoff) stands for the old strategy. It would send a stronger signal to capital markets if the new CEO came from the outside,” Speich said. “A good combination could be a new external CEO who will be supported by Kerkhoff.” Speich, along with bigger shareholders Cevian and Elliott, does not support an outright breakup of the company but said there should be a more active management of its portfolio. “This includes replacing some areas or strengthening them via acquisitions. This could also result in the addition of jobs,” he said.

In the United States, 8% of CEO successions face assignment of an interim CEO. According to George Mussalli, chief investment officer and head of research, equity, and Sevinc Cukurova, analyst, equity, at PanAgora Asset Management Inc., "In today's world where investors increasingly are paying attention to environmental, social, and governance (ESG) factors and how ESG impacts their investments, CEO succession is one area of governance worth paying closer attention to. The reality is that interim CEO successions lead to worse financial performance than permanent CEO successions. This is explained by the limited managerial discretion interim CEOs possess, and the fact that disruptive events can lead to politicization of the management process." Their research reveals that, in many cases, there were signs of poor corporate governance before interim CEO appointments were made. "Specifically, such boards have shorter tenure, lower connectedness to outside networks, and chairs who do not hold the CEO title. We associate this evidence with low management quality, fewer permanent CEO candidates, and possibly turmoil. We believe these observable characteristics are related to the lack of succession planning, which in turn results in the appointment of an interim CEO," they write. Their research indicates that a CEO who also holds the chairman title is more likely to be succeeded by a permanent candidate, and that "departing CEO duality is arguably the best proxy for whether the firm has a CEO succession plan." They add, "We find that searches take significantly less time at more connected boards given they know more CEO candidates through their collective network, resulting in shorter search time frames."

This article argues that proxy advisors in India have become too powerful and that their analyses may be at odds with shareholders. The issue was pushed toward the forefront by a recent recommendation by ISS to vote against a resolution that sought the reappointment of Deepak Parekh as the non-executive chairman of HDFC (HDB) due to concerns that he is overextending himself with board seats at eight other companies. Ultimately, Parekh received 77.36% of votes in his favor. According to JN Gupta of SES Advisory, "The issue got attention because it involved a high-profile company and high-profile personalities. It is not the only case where shareholders have expressed dissatisfaction. Rather than describing as activism, I would say that shareholders are becoming enlightened, realizing their responsibility and are becoming conscious of the price that they pay because of their passivity." TT Ram Mohan, a professor at IIM Ahmedabad, adds, "Shareholder activism in India is still in a nascent stage. Fund managers cannot disregard the views of advisory firms; if they do, the onus will be on them to explain why they disregarded the advice. The concern the firms had, namely, that it is difficult to do justice to board membership if one is on too many boards, is well founded. The advisory firms are only enforcing norms they have applied globally. Board members will now come to realize that they must meet the expectations of advisory firms."

The lawyer who represented Paul Singer’s Elliott Management in a proxy battle against Samsung Group is seeing a surge of interest from activist investors in South Korea’s businesses. Inquiries to his law firm about shareholder activism have tripled, said Choi Young-ik, founding manager at Nexus Law Group. The trend comes as President Moon Jae-in seeks to push the country’s powerful family-owned conglomerates, known as chaebol, to improve corporate governance and boost investor returns. Hedge funds, mostly from the U.S. or U.K., aim to boost their returns from shareholder activism by 15% to 40% in South Korea, Choi said. Activists have had little success in the country in the past, but that began to change after the Samsung merger, observers say. After engaging Samsung Electronics Co. for more than a decade, Singer’s campaign in 2016 succeeded in pushing the tech giant to increase stock buybacks and dividends. Most recently, Hyundai Motor Group terminated a $8.8 billion deal under pressure from Elliott, marking an unprecedented victory for shareholder activists in South Korea. Choi, who has advised Elliott Management since 2001, said the number of foreign hedge funds who eventually launch a proxy fight against Korean companies is still small because of a lack of local protections of minority shareholders. Choi is now leading the country’s first activist campaign by a local hedge fund against a foreign fund in Korea. Seoul-based Platform Partners Asset Management is mimicking Elliott’s campaign strategy to get Macquarie Korea Infrastructure Fund to lower management fees and boost returns to shareholders.

Today's business environment is placing more demands on corporate board members than ever. Recent research by the National Association of Corporate Directors (NACD) found that directors now spend an average of 245 hours a year on board business. The increased time commitment is one of the reasons director pay is on the rise. The NACD study determined that the median salary for a board member was nearly $200,000 in 2017.

In the early 1980s, large American companies steered less than half their earnings to shareholders, spending the rest on their employees and other priorities. But between 2007 and 2016, they dedicated 93% of their earnings to shareholders. For much of U.S. history, corporations sought to succeed in the marketplace while recognizing their obligations to employees, customers, and the community, writes Sen. Elizabeth Warren (D-Mass.). These days, wages are no longer rising along with corporate profits partly because of a new theory that emerged in the late 20th century—that corporate directors had only one obligation: to maximize shareholder returns. The Accountable Capitalism Act would look out for American interests by requiring large companies to obtain a federal corporate charter mandating that corporate directors consider the interests of all major corporate stakeholders—not only shareholders—in company decisions. Employees would elect at least 40% of directors. Shareholders could sue if they believed directors weren't fulfilling those obligations. This approach is similar to the "benefit corporation" model, which gives businesses fiduciary responsibilities beyond their shareholders, according to Warren.

Elizabeth Proust, chairman of the Australian Institute of Company Directors, says in this opinion piece that the role of non-executive directors increasingly is misunderstood. "Recent discussions among policymakers and commentators reveal an emerging view that non-executive directors should be so intimately involved in day-to-day operations that they are able to ensure that nothing ever goes wrong. Such a view is not only unrealistic given the size and complexity of many modern companies, but also fundamentally misunderstands the role of non-executive directors, the duties they have under law, and their place in our corporate governance framework," she writes. "While it would be nice to think that we could regulate our way to a world where no employee of any company ever acted unethically, the truth is corporate governance is too complex a matter for all factors and eventualities to be foreseen and proscribed by regulation...Non-executive directors in businesses of all types should reflect on the learnings from and recommendations that will emerge from the current royal commission. Directors and management need to take accountability for misconduct in their organizations and be transparent about their actions in response. Importantly, however, regulators must enforce the laws already available to them. And before legislators rush to legislate, they need to understand the underlying strengths of the corporate governance system we already have."

Although Carl Icahn dropped his opposition to Cigna Corp.’s (CI) proposed $54 takeover of Express Scripts Holding Co. (ESRX) on Monday, his criticisms of the deal were valid.  In fact, the health insurer's takeover of the pharmacy benefit manager (PBM) is only getting riskier amid the Trump administration's push to lower drug prices.  The White House has indicated it will be targeting PBMs and specifically drug rebates—the payments pharma companies give PBMs to ensure their drugs are covered by insurers. The rebate system allegedly plays a role in escalating prices, and the administration is weighing rules that may seek to shift the industry to a more transparent and likely less profitable model. This regulatory threat is a major risk factor for the deal, even if Cigna argues that rebates make up just a fraction of its earnings. The notion that the PBM business would be as effective or profitable in a post-rebate world is unlikely. It is possible the rebate threat will never materialize, and Cigna's drug-cost savings may be such that any changes will not matter. But if the deal succeeds, Cigna shareholders will be on the hook for a $54 billion bet on that outcome. Depending on the Trump administration's future actions, they may wish they took Icahn's out.

ISS data reveals that the percentage of shareholder proposals pertaining to more traditional governance matters was nearly equal to the percentage of shareholder proposals pertaining to environmental or social matters over the last two years, but there was a significant decrease in governance proposals and a corresponding increase in environmental and shareholder proposals between 2016 and 2017 meetings. For 2018, about 40% of shareholder proposals reported to ISS related to governance matters, down from 42% in 2017, while 41% pertained to social or environmental matters, up from 40%. In 2016 meetings, about 50% of shareholder proposals related to governance matters, and 30% related to environmental or social matters. Shareholder proposals receiving majority support during the last three years include 10 proposals requesting a report on governance proposals implemented to monitor and manage financial and reputational risks related to the U.S. opioid crisis, seven proposals related to drug prices, six proposals requesting a report on "truthful" news operations, three proposals related to cybersecurity and cybersecurity risk matters, and two proposals requesting reports on gun violence or safety.

Companies with more women on their boards attract fewer activist investors, according to a study by global consultancy firm Alvarez and Marsal (A&M). In addition, companies not engaged by activists had on average 13.4% more women on their boards. The study shows that the push for diverse governance only seems to be getting stronger globally. In Canada, all CBCA companies with publicly traded securities must now disclose how many women and visible minorities are on their boards. In addition, proxy advisors Institutional Shareholders Services and Glass Lewis have pledged to withhold vote recommendations if a company does not have female board members or if it has not adopted a formal written gender diversity policy. The study highlights an important correlation between women and shareholder activism, and the relationship appears to lie in company performance. Harlan Zimmerman, a senior partner at Cevian Capital, explained that "boards with a greater percentage of women are not only likely to be more diverse in their thinking, but, by definition, they are less likely to function like an old boys' club" and that "both of these should contribute to, on average, better performance." Furthermore, diversity of experience and thought also leads to better risk management and more innovation. With all of these benefits becoming increasingly apparent, if a board has no women on it, it is easier for activists to depict a company as out of touch and use that as an opportunity to advance their platforms.

Activist investors have started presenting themselves as “change agents” that help companies unlock value and drive growth, especially in Asia. They have also become more sophisticated communicators, using traditional and digital media to launch campaigns, lobby shareholders, and address journalists directly. This shift in positioning as a “force for good” has been assisted by policy changes in some of Asia's key markets. Most notable is Japan, where Prime Minister Shinzo Abe is driving corporate governance reforms and strengthening the protection of minority shareholders. Other markets—including Hong Kong, South Korea, Singapore, and China—are following suit, and opportunities for shareholder activists are expected to multiply across Asia. According to JP Morgan, there were 106 activist campaigns in Asia last year, up from just 10 in 2011. In this new environment, many management teams in Asia are now more willing to engage with activists. And while it does not mean that companies will immediately agree to activists' requests, it does mean that companies are having to be much clearer about explaining their strategies to all stakeholders. It is important for companies to prepare for any issues early, know their audience, and clearly communicate the company's long-term vision.  An activist investor's biggest weapon is being a “champion of change,” and many dissatisfied investors will often choose “change for the sake of change.” Companies must actively define their strategic and financial goals and provide a clear path to realizing them—otherwise, activist investors will be only too happy to point the management in the right direction.

Engine Capital, a small New York-based hedge fund, recently forced changes at Navigant Consulting (NCI) and InnerWorkings (INWK) by threatening public proxy fights. On July 29, InnerWorkings agreed to add two independent board members and hire a consulting firm to identify cost-cutting strategies. In May, Navigant said it would increase its share-buyback program by $175 million and allow the hedge fund to address the board about executive compensation and performance goals. "We are at record levels of activism," says Kai Liekefett, a New York-based partner at Sidley Austin and chairman of the law firm's shareholder activism practice who has represented both Navigant and InnerWorkings. Liekefett says there have been more than 90 proxy fights already this year, up from 79 in all of 2017. Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, says, "Small companies flew under the radar before." Engine Capital was founded five years ago by Arnaud Ajdler and first emerged in late 2013 when it threatened a proxy fight at LSB Industries (LXU). It has about 50 investments, valued at about $190 million, according to Nasdaq, with stakes in Navigant and InnerWorkings of 4.4% and less than 2%, respectively. "Proxy fights are the new normal," says Liekefett. "In the good old days, if a company's board didn't do what you wanted, you voted with your feet by selling your shares. Now you launch a proxy fight."

Research firms that focus on environmental, social, and governance (ESG) matters provide helpful information to investment firms. However, investors should not rely solely on the ratings developed from their research to make investment decisions, according to Karina Funk, portfolio manager and head of sustainable investing at Brown Advisory, and Emily Dwyer, research analyst at Brown Advisory. Investors need to engage in diligent, primary research in order to uncover key information on ESG matters. One problem facing ESG ratings is the different factors that the various ratings systems prioritize when defining a "good" company, which means that the offerings can deliver wildly different results. A Brown Advisory analysis last year comparing six leading ESG ratings systems revealed that a typical company might receive a top-quartile rating from one ratings system, and a bottom-quartile rating from another. Investors should ask what they can learn from each ratings system. Rather than view ESG grades as an endpoint, investors should approach ratings as a resource that can help spark questions and lead to further digging for information, according to Funk and Dwyer.

So far this year, acquisitions worth more than $540 billion have been derailed in part due to increased government scrutiny. Increasingly, companies are using foreign investment laws to block deals in the technology and utilities industries, among others, and antitrust regulators have put the brakes on several multibillion-dollar transactions. These deals include Broadcom's (AVGO) $142 billion hostile bid for rival Qualcomm (QCOM), which was blocked by U.S. President Donald Trump on national security grounds, and Qualcomm's $44 billion pursuit of Netherlands-based NXP Semiconductors (NXPI), which China refused to approve amid an escalating trade dispute with Trump. Other deals that were unsuccessful include the $3.9 billion merger of local broadcast operators Tribune (TRCO) and Sinclair (SBGI) and U.S. grocer Albertsons' (ABS) $5.6 billion takeover of drugstore chain Rite Aid (RAD). In addition to regulatory scrutiny, advisers say shareholder activism has added a significant amount of uncertainty to pending transactions. "You used to sign up a deal and, absent a topping bid, shareholder approval was largely on autopilot," said Daniel Wolf, M&A partner at Kirkland & Ellis. "Now, the possibility of deal-related activism, on the buyer or the target, has become part of the discussion."

Rite Aid (RAD) and Albertsons’ termination of their seven-month engagement last week highlights the outsize role that proxy advisory firms increasingly play in dictating shareholder interests, writes the Wall Street Journal Editorial Board. After the two companies proposed a merger earlier this year, Glass Lewis and Institutional Shareholder Services (ISS) protested that the deal undervalued Rite Aid shares. ISS said that the deal “would introduce a new set of risks associated with the grocery business, and the combined company’s leverage could limit investment in two evolving business environments.” The firm also cited a conflict of interest because Albertsons CEO Bob Miller had served on Rite Aid’s board. The proxy firms may be right that the combined company would have had too much debt to invest in new technology, and the market is changing so fast that shareholders might be better off waiting. Expanding Rite Aid’s retail clinics and small pharmacy benefit management operation could add more value than combining with Albertsons. Yet pharmacy benefit managers are facing increased regulatory scrutiny, and it is uncertain whether Rite Aid can survive as a standalone company. The objections by Glass Lewis and ISS carry weight since the Securities and Exchange Commission allows institutional shareholders to fulfill their fiduciary obligations by relying on the advice of third-party proxy advisers. Proxy firms also don’t have to demonstrate that their recommendations are in the best interest of shareholders, which can cause conflicts of interest. For example, Glass Lewis is partly owned by Alberta Investment Management Corporation, which is one of Rite Aid’s 10 largest shareholders. Corporate management is accountable to shareholders, but who will hold proxy firms responsible if they low-balled the value of the Albertsons-Rite Aid deal?

The debate over regulating proxy advisory firms is once again gathering steam. According to "The Big Thumb on the Scale: An Overview of the Proxy Advisory Industry" from Stanford's Rock Center for Corporate Governance, although proxy advisory firms influence institutional voting decisions and corporate governance choices to a significant extent, it “is not clear that the recommendations of these firms are correct and generally lead to better outcomes for companies and their shareholders.” The paper thus suggests that some type of regulation of proxy advisory firms might be necessary to increase their transparency and improve the reliability of their recommendations. Specifically, it recommends regulation that could include the following requirements: maintain adequate resources, improve the reliability of recommendations, require reliability testing, provide past recommendation data for third-party evaluation, increase transparency about model and guideline development, develop reliable mechanisms for incorporating market feedback on models and guidelines, disclose commercial relationships with issuers, and impose an explicit fiduciary-duty standard. In addition, the paper suggests eliminating the requirement that institutional holders vote on all proxy items, which, the authors suggest, would enable investors to decide whether or not to buy recommendations from proxy advisors.

The independence and competence of the board of Tesla (TSLA) will be tested like never before following Chairman Elon Musk's recent tweet that he might take the electric-car maker private. The board has faced pressure this year as Tesla burned through billions in cash and struggled to meet certain production goals. A shareholder pushed for the election of an independent chairman, and CtW Investment Group waged a battle against the reelection of three directors who were up for vote. Several of Tesla's directors have close business or personal ties to the chairman and CEO. Antonio Gracias, founder of Valor Equity Partners, serves as lead independent director, and Brad Buss, former SolarCity chief financial officer, is another director that the electric-car maker deems to be independent, but they are not classified as independent by proxy advisory firms Institutional Shareholder Services and Glass Lewis. Kimbal Musk, a food entrepreneur and Elon's brother, is another director. "Having a strong independent board is extremely important for us and the funds we work with to ensure that this has been looked at through independent eyes," said Dieter Waizenegger, the executive director of CtW.

Procter & Gamble's (PG) acquisition of Gillette in 2005, the largest transaction in history at that time, has not always panned out as P&G hoped. Warren Buffett, Gillette's largest shareholder then, called the $57 billion purchase a "dream deal." Although the market has rebounded, Gillette continues to struggle due to a slowdown in shaving. American men are not shaving with old-fashioned razors like they used to. Investor Nelson Peltz, who won a seat on P&G's board after a lengthy proxy fight, criticized executives for not mounting a more effective response to cheaper, direct-to-consumer online subscription shaving clubs. The company decided to cut prices by an average of 12% on its shaving products last year, and also expanded cheaper choices. The moves helped Gillette regain share and reverse sales declines. In addition, the relaunch of Gillette on Demand, a digital subscription platform that includes text-to-order and free shipping, has given the company a new tool to acquire customers online and fight off the direct-to-consumer online subscription shaving clubs.

Speaking on "Bloomberg Daybreak: Europe," ThyssenKrupp CEO Guido Kerkhoff discusses the current state of the business, the breaking up of the company, and activist investors.

In opposing Cigna's (CI) proposed acquisition of Express Scripts (ESRX), investor Carl Icahn cites the threat of competition from Amazon (AMZN). In a public letter to shareholders of Cigna, in which Icahn owns a stake of undisclosed size, he said, "Purchasing Express Scripts may well become one of the worst blunders in corporate history, ranking up there with the Time Warner/AOL fiasco and General Electric's (GE) long-running string of value destruction." In addition to criticizing the price Cigna is paying and questioning whether the White House's desire to lower drug prices could put a damper on Express Scripts' profitability, he argued that Amazon's acquisition of online pharmacy PillPack puts the company in competition with Express Scripts' own mail-order pharmacy business. Icahn wrote, "With their 100 million prime members, Amazon has become one of the toughest competitors in history (feel free to ask the retail industry). While their ultimate health care plans are not revealed yet, it is almost certain the first step of a much larger play in the pharma distribution space. Make no mistake, Express Scripts is no Apple (AAPL) and breaking into the PBM ecosystem is not that difficult for a company that already has the systems, the network, and the scale that Amazon does. Knowing this, it is absurd for Cigna to now walk into the minefield that Express Scripts might well become."

Shareholder advocates in Asia have lost out in the race for technology listings. Hong Kong and Singapore’s stock exchanges this year permitted companies to list shares with different voting rights, despite concerns that dual-class shares would harm the long-term integrity of markets by elevating corporate founders’ rights over other investors. Corporate governance watchers warn that outsize voting rights make it impossible to oust senior management or enforce discipline. Meanwhile, the growing value of tech companies highlights why there is no turning back for Asian exchanges. For example, Chinese smartphone maker Xiaomi Corp. raised $5.4 billion in an initial public offering in Hong Kong in July, shortly after the new rules took effect. It is now one of the most actively traded stocks on the exchange and its second-largest tech company by market value. "It looks like dual-class shares are here for now," said David Smith, Asia head of corporate governance at Aberdeen Standard Investments. "We need to be careful, though, that investor protection is balanced with this commercial desire to attract listings."

The globe's biggest mining companies are spending big on shareholders via dividends and share buybacks, following through on a pledge to increase payouts as they come out of a market slump. Executives have been forced to defend the payouts though, amid worries that they are sacrificing opportunities for growth, like making deals or building mines. Iron-ore giant Vale SA (VALE) reported a jump in first-half underlying earnings and said it would give shareholders $2.1 billion in dividends and buy back shares worth $1 billion. Vale, which recorded second-quarter capital expenditures at the lowest level in 13 years, said buying shares "is one of the best investments for its excess cash." In 2017, BHP (BBL), Rio Tinto, Glencore, Vale, and Anglo American PLC gave investors dividends worth over 50% more than the prior year, according to S&P Global Ratings.

Investors who recently submitted proposals at Japanese companies for anything from adding outside director to reducing cross-shareholdings found themselves fighting off accusations of being "bad" shareholders. Companies accused them of being motivated solely by greed and short-term profit. Orix Senior Chairman Yoshihiko Miyauchi, among others, dismissed shareholder activism as a "shortsighted money game." Reporters joined company management in cross-examining shareholders about their "long-term intentions," writes Stephen Givens, a professor in the Law Faculty of Sophia University. In the mid-2000s, the government, courts, and corporate establishment similarly bandied about the idea of "good" and "bad" shareholders when the first wave of shareholder activism reached Japanese shores. The "good" shareholder, or the investor who resists the temptation to sell their shares when a company is in trouble, is self-serving propaganda designed to justify the web of cross-shareholdings. Investors who sell their shares are said to be "bad" because they strip a company of capital, which is not true. The fable of "good" and "bad" shareholders should be put to bed, and the merits and disadvantages of cross-shareholdings deserves a rigorous debate, according to Givens.