Media Center

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

Rolls-Royce Shareholder ValueAct Cuts Stake to 4.5%
Lone Star Succeeds in $1.9 Billion Buyout of Japanese Hotel Chain Unizo
GCP Applied Technologies Adds Two New Independent Directors in Fight With Starboard
Investor Boosts Stake in Broadcaster Tegna
Synalloy Commits to Review of Strategic Alternatives After Market and Global Health Pandemic Stabilization
Asset Value Investors Builds Stake in SoftBank
Tegna: Standard General’s Stock Sales Are ‘Troubling’
Bill Ackman Explains Himself as Pershing Square's Portfolio Soars
Ackman's Hedge Fund Posts 11% Gain in March After Recovery Bet
Starboard Moves Ahead With GCP Proxy Fight Despite Outbreak
MGM Resorts Sagging Stock Attracts Icahn Protege, Company Director Keith Meister
Synalloy Adopts Shareholder Rights Plan to Prevent Takeover of Company
Tegna Engaged in Board-Seat Battle With Shareholder
Former Hulu Boss Will Lead WarnerMedia, Home of HBO and CNN
A Top Occidental Petroleum Executive Is Out as Company Grapples With Oil Rout
WeWork Troubles Deepen as SoftBank Pulls $3 Billion Tender Offer
Xerox Is Ending Hostile Takeover Bid for HP
Ciam Says Increasingly Impatient to Hear More From Scor on Company Succession Plans
Red Robin Pushes Forward With 'Transformation Strategy' as It Ends Feud With Shareholder
Investor Steve Cohen: 'After an Earthquake There Are Tremors'
Standard General Calls on Tegna to Open Books to Remaining Bidders
Monex Activist Fund Starts Operations
Starboard Says It Has 9.3% Stake in Software Firm Commvault
Coronavirus Chaos Is Impacting Everything in the Property World: Pershing Square Buys Shares of Howard Hughes Corp.
Mack-Cali Board Forms Annual Meeting Committee
Hudson Executive Capital Urges USA Technologies Shareholders to Vote the GOLD Proxy Card 'FOR ALL' of its Independent Nominees
Governor Issues Executive Order Permitting Virtual Shareholder Meetings for Georgia Corporations
CIAM Keeps Pressure on Reinsurer SCOR—and Its CEO/Chairman Kessler
Investor ValueAct Takes 7% Stake in Japanese Chip Materials Maker JSR Corp.
Standard General Withdraws Nominee to Tegna Board
USA Technologies Issues Statement Regarding Shareholder Hudson Executive Capital's 'Emergency' Filing
Investor Makes New Push for HC2 Board to Remove Chief Falcone: Letter
SCOR Postpones AGM Following CIAM Criticism
Tegna Confirms Two Acquisition Offers Withdrawn Amid Coronavirus Upheaval
Bill Ackman to Trump: Launch 'The Biggest Infrastructure Program of All Time' Now
Ackman Says Pershing Square No Longer Has Hedges on Stocks
Investor Nominates Five Directors to Board of Synalloy
Korean Air Parent Shareholders Keep Chairman in Board After Intense Proxy Fight
Funds Defeated at Kirin, Toshiba Machine, but Advance in Japan
Amber Capital Does Not Rule Out Hiking Lagardere Stake
The Eldorado/Caesars Deal: Repricing in Light of the Virus Swoon
Stericycle Settles With Saddle Point for Two Board Seats: Sources
CIAM Blasts French Reinsurer SCOR Over 'Significant' Deficiencies
U.S. Cruise Line Company Lindblad Names Directors Backed by ValueAct to Its Board
Settlement Talks Between First United, Driver Management Break Down
Bill Ackman Says the Idea His CNBC Slot Pushed Market Down Is 'Absurd'
Process of Plotting Evergy's Future Gets a New Deadline
Amber Capital Makes Move to Oust Lagardère Board
Bill Ackman Puts Part of His Personal Fortune in Covid-19 Testing
Plunging Conditions Drag Down Hohn's TCI
Coronavirus-Stricken U.S. Companies Pop Poison Pills
Hanjin Chairman Has Upper Hand Over Sister
Cevian Lifts CRH Stake Again, Now Holds 3.5%
Occidental to Add Three of Icahn's Associates to Board
Beer Brawl Breaks Out Over Kirin's Move Into Cosmetics, Biotech
Green Dot Jumps 13% as Starboard Value Approves New CEO
SoftBank Says Ratings Firm Is 'Biased and Mistaken'
HP Urges Investors to Spurn Xerox Takeover
Occidental Petroleum Cuts Pay for Staff, Executives
Elliott Reduces Telecom Italia Stake
Ackman's Pershing Square Takes Off Coronavirus Hedges
SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected by Covid-19
Toshiba Machine Clash Redefines Japan's Foreign Investor Stance
SoftBank Held Talks on Going Private With Elliott
U.S. Investors Land & Buildings, Engaged Raise New Capital
Hudson Executive Capital Responds to USA Technologies' Proxy Materials
Prudential Considers Other Options Besides Minority IPO for U.S. Business
USA Technologies Sends Letter to Shareholders Regarding Proxy Fight With Hudson Executive Capital
Occidental Names Former CEO Stephen Chazen as Non-Executive Chair
New York and New Jersey Governors Allow Virtual-Only Annual Meetings Due to Pandemic
Land & Buildings Pulls Proxy Challenge to American Homes 4 Rent
SEC Plan Puts Institutions, Business on Opposite Sides of Fence Over Proxy Debate
SoftBank Plans $41 Billion of Asset Sales to Expand Buyback and Cut Debt
Box to Appoint Three New Directors Under Pressure From Starboard
Investor Group to Nominate Two Directors to GameStop Board: Sources
Twitter Issues Profit Warning as Coronavirus Spread Weighs on Ad Spending
Bill Ackman Makes $2.5 Billion 'Recovery Bet' Amid Coronavirus Tumble
Coronavirus Outbreak Gooses Icahn's $5 Billion Bet Against Malls
SoftBank Plans to Sell $14 Billion in Alibaba Shares
Daniel Loeb's Third Point Faces Worst Start to a Year
Delek Gulps Poison Pill After Icahn Buys 14.8% of Its Stake
Occidental Nears Settlement With Carl Icahn
D.E. Shaw Raises $2 Billion for Flagship Hedge Fund
WeWork's Board Prepares for a Fight as SoftBank Gets Cold Feet
Ackman, Cohodes Warn of Private Equity Pain in Shakeout
Colony Capital Makes Peace With Investor
Investor Battling Harley's Board Urges Focus on Core Riders
Executive Compensation Programs and Covid-19
To Postpone or Go Virtual? Companies Adapt Investor Day Plans Due to Covid-19 Lockdown
Rights Plans ('Poison Pills') in the Covid-19 Environment—'On the Shelf and Ready to Go'?
Annual Shareholders Meeting in the Time of Covid-19
SoftBank's Sprint Headache Gone but Coronavirus Adds to Migraine
Carl Icahn Benefits the Shareholders of Occidental Petroleum
U.S. Tech Giants Face Shareholders Over Gender Pay Disclosures
Activists Will Show Their True Colors in Covid-19 Pandemic
Glass Lewis' Approach to Governance in Times of the Coronavirus Pandemic
Acting on Activism and Emerging Governance Trends
Coronavirus Throws Deal Making Into Disarray
This Crisis Will Unleash an Activist War
'Stop, Look, and Listen'—Improving the SEC's Proposed Rules on Proxy Advisors
Covid-19 and Shareholder Activism—The Impact
Covid-19 and First Concerns for the Boardroom
Institutional Investors Must Look Ahead to Future ESG Issues
Q4 2019 Equilar Gender Diversity Index
Investors Lay Down Their Arms as Companies Cope With Coronavirus Spread
Big Hedge Funds Pivot in Market Turmoil
Regulation and Investor Expectations: The UK 2020 AGM Season
Annual Shareholder Meeting Season Upended by Coronavirus Outbreak
How Will Covid-19 Impact Shareholder Engagement?
The Impact of COVID-19 on Executive Compensation
Box CEO Aaron Levie on Managing Through Coronavirus and an Investor
Campaign Group Urges U.K. to Keep Virtual Annual Meetings Temporary
2020 U.S. Climate Proxy Voting Guidelines
Hedge Funds Do a Lucy on Charlie Brown Investors
Shareholder Activists, Watch That Credit Rating!
New CEO Pay Limits Loom as Investors Confront Coronavirus Crisis
Japan Finalizes Stewardship Code Revisions
Pandemics, Preparedness, and Corporate Governance: Boards Should Anticipate 'The Blame Game'
Coronavirus Pandemic Could Elevate ESG Factors
Shareholder Proposals 2019—ESG No-Action Letter Trends and Strategies
Institutional Investor Survey 2020
New ESG Disclosure Obligations
Businesses Can't Pay Rent. That's a Threat to the $3 Trillion Commercial Mortgage Market.
How Boards Can Approach the Covid-19 Pandemic
Video: Ackman Says He Is Betting on the U.S., Bought Shares in Starbucks
Video: Ackman Says 30-Day National Lockdown Necessary to Put U.S. Back in Business
Glass Lewis Guidelines Update on Virtual-Only Meetings Due to COVID-19
Canada 2020: Tackling Compensation Matters This Proxy Season
How Board Diversity Is Shifting in Canada
Coronavirus Creates a Whole Host of Unknowns
During Coronavirus Crisis, Big Companies Display Largess—but for How Long?
Corporate Governance Survey—2019 Proxy Season Results
Friend or Foe? The Convergence of Private Equity and Shareholder Engagement
Key Issues for Directors Relating to COVID-19
Virtual Annual Meetings and Coronavirus
Engagement Priorities for 2020
NACD Survey: Directors Recognize COVID-19 Disruption, Have Confidence in Management
Boards Are More Likely to Review Temporary Succession Plan Amid Pandemic
Corporate Boards Suffer From an 'Experience Gap' as the Coronavirus Upends Business
2020 Proxy Season Includes 400-Plus ESG Resolutions—Report

4/2/2020

Bill Ackman Explains Himself as Pershing Square's Portfolio Soars

Institutional Investor (04/02/20) Celarier, Michelle

Bill Ackman's Pershing Square Holdings is up 3.3% for the year after rising 11.1% in March. Ackman was quick to respond to the coronavirus crisis, hedging his portfolio and sending his employees home for the duration on Feb. 27. As a result, Ackman has made $2.6 billion off one $27 million investment that protected his portfolio of hotels and restaurants as the markets tumbled. He was in the process of closing out hedges when, on March 18, he tweeted to President Donald Trump to shut down the country for a month to stop the virus from spreading. Despite his dire warnings, Ackman said he was buying stocks that day and continued to buy until March 25, by which point Pershing Square had redeployed all of the net proceeds from its hedges by adding to investments in a number of companies. In a recent letter to investors, Ackman explained that his hedges were credit default swaps on various investment grade and high yield credit default swap indices. "At the time of purchase, the IG or investment grade indices were trading near all-time tight levels of about 50 basis points per annum. The high yield index, the CDX HY, was also trading near its lowest spread ever," he explained. The firm eventually sold the hedges because "the risk-reward ratio of holding the contracts at 140 basis points was not nearly as compelling as when spreads were at 50 basis points." Ackman denies the allegations that he intentionally scared people about Covid-19 to increase his profits, saying that his firm merely bought what are essentially insurance policies to mitigate the risk to investors' capital.

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4/2/2020

Starboard Moves Ahead With GCP Proxy Fight Despite Outbreak

Bloomberg (04/02/20) Deveau, Scott

In its second proxy fight since the outbreak of the coronavirus, Jeff Smith's Starboard Value argues that its board nominees for GCP Applied Technologies Inc. (GCP) would be better able to navigate the chemical maker through the crisis. The hedge fund, which owns 9% of GCP, has nominated eight directors to take control of the board. In a letter to shareholders, Starboard managing member Peter Feld said, "We recognize the Covid-19 crisis has created a difficult environment for many companies. GCP is no different and needs strong leadership and oversight during these challenging times. We believe the nominees we have put forth are uniquely capable to help govern the company through and after this crisis." Last March, Starboard won two board seats at GCP after threatening a proxy fight. The company said it had attempted to work constructively with Starboard to avoid a proxy fight, which it called "self-serving" and "out of touch with the realities of the current operating environment and global crisis." In a statement, GCP said, "It is designed to undermine a board and management team—that have been delivering positive financial and operating results and prudently managing the balance sheet—with directors who have limited experience in the sector and have yet to provide any plan." Starboard last month nominated four directors to eBay Inc.'s (EBAY) board—a move that was criticized by the company for its timing during the pandemic. Last year, Starboard was granted a seat on eBay's board alongside Elliott Management Corp.

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4/1/2020

Tegna Engaged in Board-Seat Battle With Shareholder

Washington Business Journal (04/01/20) Hansen, Drew

Standard General LP is pushing to replace four board members at Tegna Inc. (TGNA). The hedge fund, which owns nearly 10% of the outstanding shares of Tegna, sent a letter to the company's shareholders and launched a website on March 31 calling for change and criticizing Tegna's approach to recent acquisition overtures and management's failure to increase shareholder value. "We believe one of the key reasons for Tegna's underperformance is the lack of relevant industry expertise on its board," wrote Standard General founding partner Soo Kim, a nominee to Tegna's board. "None of Tegna's 11 independent directors has operating experience in local affiliate television broadcasting. That is why we nominated candidates with decades of C-suite and directorship experience in publicly traded local affiliate television broadcasting companies, and backgrounds spanning strategic planning, finance, M&A and technology." In response, Tegna Board Chairman Howard Elias and President and CEO Dave Lougee issued their own letter to shareholders and launched a website emphasizing the company's accomplishments, including a series of acquisitions, and urging shareholders to vote all 12 of the company's current directors back into their board seats. They also wrote, "Tegna's board has serious concerns about Mr. Kim's significant investments in and influence over Standard Media Group and Mediaco Holding, two emerging competitors in the broadcasting industry. Furthermore, we believe that it is highly inappropriate for another industry operator to have access as a Tegna board member to Tegna proprietary information, including our M&A pipeline, product development plans, R&D efforts, and partnership and affiliation strategies."

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4/1/2020

Former Hulu Boss Will Lead WarnerMedia, Home of HBO and CNN

New York Times (04/01/20) Lee, Emmett; Koblin, Josh

AT&T (T) will bring in Jason Kilar, founding CEO of streaming platform Hulu, to take over for John Stankey as the head of WarnerMedia. Kilar will report to Stankey, who will remain as AT&T's president and COO. The change comes a month before the scheduled introduction of streaming service HBO Max, the company's $15-a-month streaming service. As head of WarnerMedia since June 2018, Stankey has been controversial as he invested heavily in HBO Max and worked to dissolve the borders between WarnerMedia's separate units. Stankey has been controversial with major figures such as Richard Plepler, who had led HBO to 160 Emmys and maintained its independence was the key to its success. Elliott Management has a $3.2 billion stake in AT&T, and it has criticized the company's attempts to leave its telecommunications comfort zone to become a major player in the news and entertainment industries. In September, days after Stankey was made AT&T president, Elliott Management went public with a letter questioning AT&T's handling of WarnerMedia, expressing concern about whether Stankey had been right to allow the departure of Plepler. It also questioned whether he could simultaneously play a leadership role at the overall company while having oversight of CNN, Warner Bros., Turner, and HBO Max. Stephenson did not push back publicly against Elliott's criticism, and the two sides eventually agreed on a forward-looking plan that included streamlining operations and potentially selling off some of its units.

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4/1/2020

Red Robin Pushes Forward With 'Transformation Strategy' as It Ends Feud With Shareholder

Denver Business Journal (04/01/20) Sealover, Ed

Red Robin Gourmet Burgers (RRGB) has agreed to put a representative of Vintage Capital Management's choice on its board in exchange for the firm directing its participants at the company's annual meeting to vote for the restaurant chain's board nominees and platforms. Vintage Capital is Red Robin's third-biggest shareholder, with an 11.6% stake. The agreement, which was signed on March 26 and detailed in a March 31 Securities and Exchange Commission filing, also permits Vintage to purchase up to 20% of the company without triggering a poison-pill provision the Red Robin board adopted in 2019. It is good for five years or until Vintage and managing partner Brian Kahn have holdings of less than 11.6% of common stock. The agreement comes nearly 10 months after the Red Robin board backed a plan offering every shareholder the chance to purchase more shares of common stock having a value of twice the exercise price of the right if another person or group acquired beneficial ownership of 10% or more of the company's common stock. A week later, Kahn and Vintage Capital offered to buy Red Robin outright for $40 a share—about a 60% premium over where it had been trading the day before—if the company declined to review strategic alternatives including a sale. In September, the board rejected that $519 million offer. Less than a week after that, Vintage said it intended to pursue its examination into Red Robin's finances and seek to bring about major changes to what it felt was an underperforming company. In February, it stated in a letter that it was planning to nominate four directors to Red Robin's 10-person board at the company's upcoming annual meeting. Under the new agreement, Red Robin agreed to appoint Anthony Ackil, co-founder of health-focused comfort-food chain B. Good, to its board while Vintage Capital will withdraw the nominations of three other candidates. "We appreciate Red Robin's constructive approach, and we are pleased to reach this agreement," Kahn said in a press release. "We have great confidence in the company's newly appointed CEO, Paul Murphy, and its recently refreshed board, and we look forward to working with the company towards our mutual goal of positioning Red Robin for success and value creation."

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3/31/2020

Monex Activist Fund Starts Operations

Finance Magnates (03/31/20) Bahr, Julia

Monex announced that the Monex Activist Fund has commenced operations. The fund is part of an initiative by the Japanese online brokerage to activate Japan's capital markets and provide better investment products to individual investors. "This team is comprised of members with extensive expertise managing bottom-up research-based funds, hedge funds, activist funds, and fund engagement as well as experience in management consulting, M&A banking, and a diverse range of other fields," the company said. Monex added that Monex-Saison-Vanguard Investment Partners is in the process of becoming a 100% wholly owned subsidiary as of April 1. "It will be renamed Monex Asset Management Inc. Monex AM will take on a central role in the Group's asset management businesses and with advice from Japan Catalyst, begin managing Monex Activist Fund in April," explained Monex. "The company will provide the seed investment and is fully committed to Monex Activist Fund, as well as its efforts to transition from a broker model to an asset management model." The company added, "With the rapidly changing market and economic environment, we believe now more than ever is an opportune time for Monex Activist Fund to help raise corporate value of Japanese companies. And precisely given these current times, we as a Group will continue to pursue our mission to provide individual investors high-value-added products and services."

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3/30/2020

Starboard Says It Has 9.3% Stake in Software Firm Commvault

Reuters (03/30/20) Herbst-Bayliss, Svea

Starboard Value disclosed in a Securities and Exchange Commission regulatory filing that it has acquired a 9.3% stake in U.S. data protection and data management software company Commvault (CVLT), stating that it felt the shares were undervalued when it bought them. The filing said Starboard owns 4.3 million shares, and Commvault shares increased 7.3% in after hours trading, after having closed the session at $39.13. The Commvault filing did not offer any clues about Starboard's plans, saying only that the shares, when purchased, "were undervalued and represented an attractive investment opportunity." The filing indicated that the hedge fund started acquiring forward contracts in February and purchased common stock this month. "Commvault's top priorities, at this time, are the health and safety of our employees, taking care of customers, and operating our business," said a company spokeswoman. "As always, Commvault embraces open dialogue with our shareholder community and will continue to act in their best interest." Two years ago, Elliott Management and Commvault reached an agreement to add two independent directors suggested by the investor. In 2019, Commvault CEO Robert Hammer stepped down and was replaced by Sanjay Mirchandani. Commvault's stock has fallen 14% since January, showing more resilience than many other firms whose shares have been hit by panic selling triggered by fears over the coronavirus pandemic. Commvault's stock price jumped nearly 25% in the last five days. Last week, Starboard and cloud content management and file sharing service Box Inc. (BOX) reached an agreement to place three independent directors on the board of Box, in which Starboard owns a 7.5% stake. Two weeks ago, Starboard nominated four directors to eBay's (EBAY) board, pressuring the e-commerce company for the second straight year after having helped fill one board seat in 2019.

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3/30/2020

Governor Issues Executive Order Permitting Virtual Shareholder Meetings for Georgia Corporations

JDSupra (03/30/20) Hanson, Mark; May, Joel; Thomas, Lizanne

Georgia Gov. Brian Kemp issued an executive order on March 20, 2020, allowing Georgia corporations to hold virtual shareholder meetings, so long as a company's board implements procedures to allow shareholders and proxyholders to participate and vote at the meeting via remote communications. The order is applicable to shareholder meetings scheduled between March 20, 2020, and the conclusion of the Public Health State of Emergency, including any extensions. Georgia corporations should carefully weigh whether their shareholder meetings should be changed to "virtual-only" or to a hybrid meeting that supports remote communication in order to comply with federal, state, and local directives on groups of people. Corporations should examine their organizational documents and the requirements of the order to confirm the board and the company can implement the appropriate procedures to make use of the order if needed. If the board finds that a virtual shareholder meeting is in the company's best interests, the decision should be memorialized by a formal resolution that lays out any needed guidelines and procedures for hosting and holding the meeting by remote communications. There are a variety of service providers that offer the technology required to host virtual or hybrid meetings of shareholders and maintain compliance. The company should apply reasonable verification measures to ensure that people accessing the virtual meeting are indeed shareholders or proxyholders. Companies should contact their inspector of elections, proxy solicitor, and attorney to talk about verification measures and any additional information that should be added to the company's proxy materials. If the company has already mailed proxy materials, such verification measures may require a further mailing or communication. Companies must also make sure the shareholder list is made available in accordance with O.C.G.A. Section 14-2-720(b), as updated by the order. Companies should make sure that virtual meeting participants can participate and vote "substantially concurrently" with the meeting's proceedings and that a record of any vote is kept by the company. Companies should also confirm that their intended virtual shareholder meeting conforms to the guidance from the Securities and Exchange Commission on shareholder meetings in light of the Covid-19 pandemic.

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3/30/2020

CIAM Keeps Pressure on Reinsurer SCOR—and Its CEO/Chairman Kessler

Insurance Journal (03/30/20) Howard, L.S.

The French investment fund CIAM is again pushing for SCOR (SCRYY) to separate the chairman and CEO roles, both held by Denis Kessler. CIAM, which holds about 1% of the reinsurer's share capital, began its campaign against SCOR in early 2019 after SCOR rejected a €8.5 billion (US$ 9.5 billion) takeover bid in 2018 from French mutual insurer Covéa, its largest shareholder with a 10% stake at the time. CIAM had said SCOR's hostile reaction toward Covéa was not appropriate and underscored problems with its oversight practices. CIAM continues to believe that separating the chairman and CEO roles would help improve governance. The fund also has taken aim at "a poorly drafted pay policy that continues to lavishly reward" Kessler. In a March 24 letter to shareholders, CIAM said Kessler's "generous pension benefits has led SCOR to provision €24.7 million [US$27.5 million], based on his reference compensation." CIAM added that SCOR has only made "cosmetic changes...to the executive pay policy despite nearly half of the shareholders opposing SCOR's policy last year." CIAM has called for a shareholders' vote against the approval of Kessler's renumeration. Further, the fund is calling on shareholders to vote against the renewal of Augustin de Romanet as a director who chairs SCOR's Compensation and Nomination Committee, citing his long friendship with Kessler. In response, SCOR said, "CIAM puts forward once again seriously unfounded, inaccurate, and misleading statements with the purpose of destabilizing SCOR." The company said its board of directors has unanimously decided to reiterate its full support for Kessler and de Romanet. "The board has also acknowledged that the dismissal of Denis Kessler as director would also entail the termination of his office as chief executive officer, with all the foreseeable consequences on the stability and management of the group," SCOR added.

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3/30/2020

Standard General Withdraws Nominee to Tegna Board

Reuters (03/30/20) Herbst-Bayliss, Svea

On March 30, Standard General said it withdrew one of its five director nominees for a board seat at Tegna Inc. (TGNA) after discovering a "contractual restriction" on him serving on the board. The hedge fund—which owns 9.7% of Tegna—said in a regulatory filing that former Tribune Media Co. (TPCO) executive Lawrence Wert withdrew as a Standard General nominee on March 27. Sources say the restriction relates to non-compete clauses in his employment contract that still apply after ending his employment with Tribune last year. Standard General said it became aware of the situation on March 26. Tegna and Standard General have been embroiled in a proxy battle since January, when the hedge fund nominated four candidates to the board. It added Wert as a fifth nominee in late February, after the company named a new director. Standard General is moving forward with four nominees, including its founder, Soohyung Kim. However, Tegna has said it would be inappropriate for Kim to have access to the company's proprietary information, including its acquisition pipeline and product development plans, given his involvement with two other broadcasting companies, Standard Media Group LLC and Mediaco Holding Inc. (MDIA). Standard General holds a note that is convertible into 99% of the limited liability interests in Standard Media and some of its assets, as well as an option to acquire from McDermott Communications LLC, an entity owned by board nominee Deborah McDermott, all of its equity interests in Standard Media. Tegna shareholders will vote on the nominees at its April 30 annual meeting.

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3/30/2020

Investor Makes New Push for HC2 Board to Remove Chief Falcone: Letter

Reuters (03/30/20) Herbst-Bayliss, Svea

MG Capital has for the second time in two months called for the ouster of HC2 Holdings Inc. (HCHC) Chairman and CEO Philip Falcone. Michael Gorzynski, the former Third Point executive who runs MG Capital—which owns 5% of HC2 along with its partners—asked lead independent director Wayne Barr in a letter "to facilitate the removal of Mr. Falcone." In February, MG Capital criticized the company's financial performance and said it wanted to replace the entire board, including Falcone, with six directors of its own. In the recent letter, the fund wrote, "Based on Mr. Falcone's well-documented financial, legal, and regulatory issues, MG Capital—and presumably other stockholders—remains perplexed by the incumbent board's focus on preserving HC2's status quo." In recent weeks, Falcone has been sued for more than $65.8 million for allegedly defaulting on loans and had his assets frozen for failing to pay lawyers. HC2 was ordered by a court last year to withhold some of Falcone's wages to satisfy unpaid obligations after he was ordered to pay $2.69 million in unpaid taxes to New York City. MG Capital said, "We remain deeply troubled by the impact that Mr. Falcone's apparent financial distress and legal issues may have on HC2." Further, Gorzynski wrote that MG Capital would "engage in a constructive one-to-one dialogue with [Barr] and the other directors once Mr. Falcone has been removed."

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3/27/2020

Funds Defeated at Kirin, Toshiba Machine, but Advance in Japan

Reuters (03/27/20) Ando, Ritsuko; Yamazaki, Makiko

Shareholders of Kirin Holdings (KNBWY) on March 27 rejected investor Independent Franchise Partners' (IFP) proposal for the company to exit businesses outside of beer and buy back shares worth $5.54 billion. A majority of shareholders also approved board members proposed by management, rejecting nominees recommended by IFP. The proposals by IFP, which owns a 2% stake in Kirin, highlight weaknesses at Kirin, where moves toward diversification have produced mixed results. Analysts say that despite the vote, Kirin is now under strong pressure to prioritize investor returns, and may be forced to agree to less radical demands ahead. In another shareholder vote on March 27, Toshiba Machine (TSHMY) pushed through controversial anti-takeover measures to thwart a hostile bid by a fund backed by investor Yoshiaki Murakami. However, the proposal passed with the approval of just 62% of shareholders—close enough to keep the pressure on the former subsidiary of Toshiba Corp. (TOSYY) Murakami has said that while he will end his hostile bid if a poison pill goes through, he will keep urging more dividends and share buybacks. Analysts say that although people like Murakami are unpopular in consensus-driven Japan, institutional investors are no longer as passive as they once were. "Shareholder activism is not easy in Japan's complacent corporate culture, but will continue to increase as that's the global trend," noted Masayuki Otani, chief market analyst at Securities Japan. The number of activist funds operating in Japan rose to 36 in 2019 from only seven five years ago, according to data from IR Japan Holdings. Shareholders in SoftBank Group Corp. (SFTBY) may already be benefiting. Elliott Management had been urging SoftBank to complete $20 billion in stock buybacks by selling down its stake in Chinese e-commerce giant Alibaba (BABA). Although SoftBank initially spurned that call, it has subsequently announced it intends to raise as much as $41 billion to buy back shares and reduce debt.

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3/27/2020

CIAM Blasts French Reinsurer SCOR Over 'Significant' Deficiencies

Hedgeweek (03/27/20) Leask, Hugh

CIAM has written to shareholders of French reinsurer SCOR to caution about major corporate governance shortcomings at the company, and has called on it to postpone its annual general meeting (AGM), currently scheduled for April 17. CIAM has a greater than 1% stake in SCOR. CIAM said areas of "significant concern" at SCOR have been "largely unaddressed by an unresponsive board." Catherine Berjal, CIAM's chief executive, said only "cosmetic changes" have been made to SCOR's executive pay policy, even though almost 50% of shareholders opposed it in 2019. Pointing to a "poorly drafted pay policy that continues to lavishly reward the chairman/CEO"—without a sufficient tie to performance—Berjal said that last year's AGM sent a "very clear signal" that the executive remuneration policy was inadequate. Berjal also criticized the lack of an independent chairman at SCOR, and asked that the company delineate a clear succession plan for when Denis Kessler, the current chief executive and chairman, exits in 2021. Further, Berjal discussed the firm's environmental, social, and governance (ESG) policy. "For a company operating in the financial services sector, the level of sophistication on the environmental, social, and governance criteria incorporated within the bonus plan is worrying," she wrote. "There is no clear forward-looking quantitative ESG priorities set for 2020, including on the topics ranging from climate change to gender equality." She suggested that a postponement of SCOR's AGM would be more shareholder-friendly, and would allow SCOR to focus on managing the effect of the ongoing Covid-19 crisis.

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3/26/2020

Settlement Talks Between First United, Driver Management Break Down

Reuters (03/26/20) Herbst-Bayliss, Svea

Discussions between First United Corp. (FUNC) and Driver Management to settle a battle for board seats at the bank holding company broke down when the investor spurned the offer, according to two sources. Driver Management has approximately a 5% stake in the company. "Your 'best and final' offer failed to meet what I clearly described as the minimum acceptable conditions for any cooperation agreement," Driver founder Abbott Cooper wrote in a letter to the board's lead director. "I think it is appropriate to suspend those discussions." The two sides now seem poised for a showdown at a time when several companies have moved to settle with investors amid the panic selling spurred by the coronavirus pandemic. First United, the holding company for Maryland community bank First United Bank & Trust, said it was offering Driver a say in choosing more than a quarter of its 11-member board, including two independent directors who would be selected prior to the 2020 annual meeting. Driver would select one director from the company's nominees and the company would choose one of Driver's proposed candidates, according to First United's proposal. A third independent director would be chosen prior to the 2021 meeting. Driver has for months been calling for the company to sell itself, arguing it has fallen behind competitors in making new loans. In September, Driver anticipated the company could be sold for between $26 and $33 a share. It traded at $12.88 on March 26. This week, Driver criticized the company for mistakes during the 2008 financial crisis and said it was poorly positioned for the current downturn.

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3/26/2020

Process of Plotting Evergy's Future Gets a New Deadline

Kansas City Business Journal (03/26/20)

Evergy (EVRG) has postponed by two months the deadline for a special board committee to provide options for the company's restructuring or possible sale, as part of an agreement with Elliott Management Corp. The committee, comprised of current Evergy directors and new directors added at Elliott's urging, will present a formal recommendation to Evergy's full board on July 30 instead of May 30. The deadline for a board vote on the recommendations also has been pushed back two months to Aug. 17. Evergy said in a filing with the Securities and Exchange Commission that the extensions are required due to restrictions on travel and in-person meetings related to the Covid-19 outbreak. Elliott approached Evergy in October, and went public in January with its demand that Evergy either reorganize or pursue a merger. Evergy and Elliott announced an agreement on Feb. 28 calling for the appointment of new members to the utility's board, while having four existing board members retire in May. The two new members—onetime Energy Future Holdings CEO Paul Keglevic and NRG Energy (NRG) CFO Kirk Andrews—were to serve on a new committee established to review the company's options for improving shareholder value "including through a potential strategic combination or a modified long-term standalone operating plan and strategy." Other committee members include Evergy CEO Terry Bassham and existing board member Art Stall. Elliott agreed not to raise the amount of stock it owns or controls in Evergy to more than 9.9%, nor to solicit any other voting arrangements or disparage the utility.

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3/25/2020

Bill Ackman Puts Part of His Personal Fortune in Covid-19 Testing

Bloomberg (03/25/20) Deveau, Scott

Bill Ackman has invested some of his personal wealth to help manufacture antibody testing kits produced by Covaxx, a newly formed subsidiary of United Biomedical Inc. "The key to a successful reopening beyond the maintenance of social distancing, hand washing, mask use, and other related practices is a broad-based testing regime and tracing program," Ackman said in a Wednesday letter to investors in Pershing Square Capital Management. "This will enable the inevitable viral breakouts to be identified early and minimized with localized quarantines, reducing the impact on the overall U.S. economy and the need for future shutdowns." The letter says that Ackman made a roughly 100 times return on hedges he had put in place to protect Pershing Square's $6.6 billion portfolio against the impact of the virus. His firm paid roughly $27 million for the hedges, which were made in the form of purchases of credit protection on investment-grade and high-yield credit indices. He said he has since redeployed the capital by investing further in his portfolio companies, including Lowe's Cos. (LOW), Agilent Technologies Inc. (A), Hilton Worldwide Holdings Inc. (HLT), and others. Covaxx has already deployed over 100,000 Covid-19 tests in China, and Ackman says its tests offer a broader antibody-based screen that could allow for more accurate data on the virus. United Biomedical mainly produces vaccines for animals, and it has developed blood-screening kits and a test for SARS, or Severe Acute Respiratory Syndrome.

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3/25/2020

Coronavirus-Stricken U.S. Companies Pop Poison Pills

Reuters (03/25/20) Herbst-Bayliss, Svea

Looking to ward off hostile bidders and shareholders seeking to exploit the coronavirus-induced market sell-off, more U.S. companies are adopting so-called poison pills. These tools prevent other companies and investors from amassing ownership stakes above a certain threshold by authorizing the company to sell new stock to its shareholders at a discount. The S&P 500 Index has lost about a quarter of its value in the last month due to the coronavirus outbreak, making the shares of many companies cheaper and more vulnerable to approaches by corporate rivals and hedge funds. A record 10 companies announced poison pills in March, according to FactSet Research Systems Inc. (FDS) and Deal Point Data LLC. FactSet adds that 44 poison pills were adopted in the year ending March 25, double the number during the previous 12-month period. "Companies have been adopting poison pills at a faster pace than we have ever seen in recent years. We expect more will be coming, many more," said Lawrence Elbaum, co-head of law firm Vinson & Elkins LLP's shareholder activism practice. Companies announcing poison pills in the last 10 days include Occidental Petroleum (OXY), Dave & Buster's Entertainment Inc. (PLAY), Delek US Holdings Inc. (DK), Williams Cos. (WMB), Global Eagle Entertainment (ENT), and Chefs' Warehouse (CHEF). Occidental and Delek adopted poison pills to defend against investor Carl Icahn. The others did so after their stock price plummeted, without disclosing a specific threat. Meanwhile, hedge funds with stakes in companies that suffered losses in the stock market recently have raised their stakes. For instance, Jana Partners boosted its stake in Bloomin' Brands (BLMN) to 9.2% from 7.4%, ValueAct Capital raised its stake in Lindblad Expeditions Holdings (LIND) to 9.8% from 7.4%, and Pershing Square Capital Holdings snapped up shares of Starbucks Corp. (SBUX) after having sold a previous stake earlier this year.

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3/25/2020

Occidental Petroleum Cuts Pay for Staff, Executives

Wall Street Journal (03/25/20) Dezember, Ryan; Elliott, Rebecca

Occidental Petroleum Corp. (OXY) is reducing salaries for its U.S. employees by up to 30% in an effort to reduce expenses, according to an internal e-mail made available to The Wall Street Journal. The Houston-based oil-and-chemical company is dealing with high debt from an ill-timed acquisition, plummeting oil prices, and falling demand due to a halt in economic activity because of the coronavirus pandemic. Occidental CEO Vicki Hollub's salary will be slashed by 81%, while the company's top executives' compensation will be reduced by an average of 68%, the e-mail states. Employee bonuses and perks, including commuter subsidies and gym memberships, are scheduled to end next month. Meanwhile, Occidental is close to reaching a truce with Carl Icahn that would bring the investor into the oil company’s boardroom, The Wall Street Journal reported March 22. A deal would mark the end of a protracted battle with Icahn, who took aim at Occidental after the company outbid Chevron (CVX) for Anadarko. Occidental's market capitalization has since plummeted below $10 billion, from more than $46 billion at the time of the offer. The company had held off Icahn for months, but had to give up significant ground as oil prices dropped below $25 a barrel because of a price war between Saudi Arabia and Russia and weakened demand due to the coronavirus pandemic.

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3/25/2020

SEC Extends Conditional Exemptions From Reporting and Proxy Delivery Requirements for Public Companies, Funds, and Investment Advisers Affected by Covid-19

Securities and Exchange Commission (03/25/2020)

The Securities and Exchange Commission (SEC) on March 25 announced that it is extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19.  In addition, the SEC's Division of Corporation Finance has issued its current views regarding disclosure considerations and other securities law matters related to COVID-19.  To address potential compliance issues, the SEC issued an order that, subject to certain conditions, provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020.  The March 25, 2020, order supersedes and extends the commission's orignal March 4, 2020, order.  Among other conditions, companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed.  The commission also issued orders that would provide certain investment funds and investment advisers with additional time with respect to holding in-person board meetings and meeting certain filing and delivery requirements, as applicable.  The March 25, 2020, orders supersede and extend the filing periods covered by the commission's original March 13, 2020, orders.  Among other conditions, entities must notify the division staff and/or investors, as applicable, of the intent to rely on the relief, but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur.  The Division of Corporation Finance on March 25 issued Disclosure Guidance Topic No. 9, providing the staff's current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions.  The guidance encourages timely reporting while recognizing that it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies.

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3/24/2020

SoftBank Held Talks on Going Private With Elliott

Financial Times (03/24/20) Massoudi, Arash; Raval, Anjili

SoftBank Group (SFTBY) had discussions with investors including Elliott Management and the Abu Dhabi sovereign investment vehicle Mubadala about possibly taking the company private. The talks came as SoftBank founder Masayoshi Son moved to revive shares in the group, which has $55 million in debt, after a stock market rout last week. Eventually SoftBank decided instead to move ahead with a plan to sell down about $41 billion in assets to pay down debt and boost its share buyback to $23 billion, sending the company's shares up 41% last week. At the end of last week, SoftBank's shares had an equity value of around $50 billion before any potential premium would have been applied. Son began considering a leveraged buyout after Elliott's Gordon Singer expressed interest in buying more SoftBank shares last week as their price fell. During those discussions, Son and some of his key lieutenants began to study the formation of an investor consortium to take SoftBank private. The plan was eventually abandoned for a number of reasons, including the complications around getting an investor consortium together quickly for such a large deal, Tokyo-listing rules, and other tax considerations. Son has often vented his frustration with the public markets, arguing that SoftBank's equity value is at a steep discount to the value of its holdings. By the end of last week, SoftBank said that the discount had stretched to 73%, the widest in the company's history.

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3/23/2020

SEC Plan Puts Institutions, Business on Opposite Sides of Fence Over Proxy Debate

Pensions & Investments (03/23/20) Croce, Brian

In November, the Securities and Exchange Commission (SEC) proposed rules that would require proxy advisory firms to disclose more about their process and give companies the opportunity to make revisions before submitting final recommendations to clients. Institutional investors such as New York City Comptroller Scott Stringer have had a negative reaction to these recommendations, which they say will further insulate corporations. Patti Brammer of the Ohio Public Employees Retirement System is concerned that the proposals would negatively impact the independence of proxy recommendations, adding that if costs rise as a result of the new regulations, issuers should bear some of the burden. A recent study from MSCI Inc. looked at more than 2,300 shareholder proposals and found that 30.9% of them were submitted by individual investors, and that 55.3% of those proposals obtained more than 30% of total votes cast. MSCI's Ric Marshall says these findings undermine the notion that shareholder proposals are simply filed by gadfly investors. SEC Commissioner Elad Roisman voted for the proposals, but said in a March 10 speech at the Council of Institutional Investors that, based on feedback from stakeholders that use proxy advisory firm services, he understands "that there is concern that these days devoted to issuer pre-review could disrupt current voting practices." Proxy advisory firm Glass Lewis & Co. says it continues to engage with SEC on the proposals.

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3/23/2020

Coronavirus Outbreak Gooses Icahn's $5 Billion Bet Against Malls

New York Post (03/23/20) Kosman, Josh

Since last summer, investor Carl Icahn has been betting $5 billion against shopping malls in the CMBX 6 index, which tracks $25 billion in commercial mortgage-backed securities. Icahn's mall short has grown from $400 million in November to $5 billion today, representing 25% of his total assets of $20 billion. His position puts him against mutual fund giants like Putnam Investments and AllianceBernstein, who are betting that the diversified securities will come out fine even if malls default. Mutual funds had been winning the battle until now, as the coronavirus pandemic pushes shoppers inside and pushes stores to close. On Monday, the value of the BBB negative-rated swaps represented by CMBX 6 fell to 68 cents on the dollar, down from 95 cents before the coronavirus forced retailers to close en masse. The A-rated swaps, which face less chance of default, dropped in value to 81 cents from $1.06. And last week, one of the 39 malls covered by the CMBX 6 index, the Newgate Mall in Ogden, Utah, started the process of filing for bankruptcy, sources said. Icahn's gains are currently helping him offset losses from other investments tanked by coronavirus fears, including Occidental Petroleum (OXY), down 75% this year, and hotel and gaming chain Caesars Entertainment (CZR), down 50%. Still, without someone to buy his swaps, Icahn might have to wait until the securities mature in 2022 to cash in on the CMBX 6 gains.

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3/23/2020

SoftBank Plans to Sell $14 Billion in Alibaba Shares

Bloomberg (03/23/20) Chen, Lulu Yilun; Turner, Giles

SoftBank Group Corp. (SFTBY) will sell about $14 billion of shares in Chinese e-commerce company Alibaba Group Holding Ltd. (BABA) in an effort to raise $41 billion to support businesses battered by the coronavirus pandemic. The Japanese conglomerate may raise the rest of the money by selling a stake in domestic telecommunications arm SoftBank Corp. (SFTBY), as well as part of Sprint Corp. (S) after its merger with T-Mobile US Inc. (TMUS). On Monday Son revealed he would unload $41 billion of stock and alleviate investor concerns that at one point shaved more than 40% off SoftBank's value from a February peak. Investors were surprised by the scale of the plan and sent the stock soaring 21% on Tuesday in their biggest intraday gain since listing, a few days after dropping about the same amount. Even so, Softbank's shares are still down about 33% from their 2020 peak, underscoring persistent concerns that plummeting technology sector valuations will damage the heavily-indebted company, which has ties to many unprofitable startups. The reversal sees Masayoshi Son finally using part of his $120 billion stake in Alibaba to repurchase shares and pay down debt, which investors have pushed for him to do for years. "This buyback is music to our ears," said Atul Goyal, senior analyst at Jefferies Group. "But the timing of this announcement is not ideal. We would have ideally preferred such an announcement from a position of strength and not because the stock came under tremendous pressure."

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3/23/2020

Daniel Loeb's Third Point Faces Worst Start to a Year

Financial Times (03/23/20) Aliaj, Ortenca; Fletcher, Laurence

The flagship fund of Daniel Loeb's Third Point declined by nearly 8% in the first two weeks of March, bringing its year-to-date losses to about 13% and putting the firm on track for its worst ever first quarter. The $13.4 billion investor returned 17% net of fees to investors last year. Meanwhile, Scott Ferguson's $3.2 billion fund Sachem Head Capital Management has suffered losses this month in the upper range of 10% to 20%, leaving the fund down a similar amount. Last year Sachem Head started campaigns against five companies and gained 24%. The losses come as the hedge fund industry's most prominent managers are hit by the equity markets' rapid descent into a bear market and a plunge in other risky assets. Third Point has suffered big paper losses on some of its largest bets, including a $2 billion stake in Prudential (PRU), whose shares have dropped over 50% since Third Point last month unveiled a set of demands for it to separate its U.S. and Asian businesses and exit the United Kingdom. Third Point's $700 million stake in EssilorLuxottica, which is among the group's largest holdings, has also taken a hit with shares down more than 30% since the end of February. Loeb is also engaged with Sony (SNE), which has rejected his demands to spin off its semiconductor unit and sell a stake in insurer Sony Financial. Sony's shares have declined about 20% in the past month but are still trading higher than they were when news of Third Point's position emerged.

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3/20/2020

Ackman, Cohodes Warn of Private Equity Pain in Shakeout

Bloomberg (03/20/20) Porzecanski, Katia

As the coronavirus wreaks havoc on equity markets, bonds, and energy prices, short-seller Marc Cohodes is warning that the resulting near-freeze in leveraged lending will punish private equity funds that own highly indebted companies. Cohodes is betting against the hedge fund industry, which he says is headed for losses as firms mark down holdings. However, Cohodes believes the fallout could be a boon for long-short hedge funds once clients start moving their cash out of private equity and start looking for skilled stock-pickers. Investor Bill Ackman also warned of risks to private equity if the crisis persists, though he is still buying shares of Blackstone Group Inc. (BX) amid the sell-off. The market for leveraged loans has ballooned in the past decade amid record-low interest rates, but the COVID-19 pandemic has triggered fears of a global recession and nearly shut markets for such loans and high-yield bonds. Worries are growing because of the quality of some borrowers, as a Morgan Stanley (MS) report in November found that almost 60% of the companies acquired in leveraged buyouts had debt loads above six times earnings, compared with 51% in 2007. In the short run, banks may ensure that indebted companies have access to revolving credit lines and increase them or allow some borrowers to switch to payment-in-kind to preserve cash. Last year, Omega Advisors founder Leon Cooperman cautioned that private equity returns can't last with higher borrowing costs, as falling rates were the main reason leveraged buyouts generated high exit multiples.

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3/19/2020

Investor Battling Harley's Board Urges Focus on Core Riders

Bloomberg (03/19/20) Welch, David; Deveau, Scott; Coppola, Gabrielle

Impala Asset Management LLC has filed documents nominating two directors to the board of Harley Davidson (HOG). If it succeeds, Impala has CEO candidates in mind who could take Harley back to its roots and focus on its core market, the 35- to 60-year-old Americans who buy expensive motorcylces. That would take the company away from its current strategy, which has seen it enter new market segments such as electric motorcycles in the United States and low-priced bikes overseas. In its filing, Impala criticized Harley's board and former CEO Matt Levatich's "More Roads" strategy, saying that it hasn't stopped the company's sales slide. The fund wants Harley to spend its resources on marketing and sprucing up its core line-up of chrome cruisers. The investment firm also believes the American brand has been tarnished by a series of moves that have alienated its core customer base, including closing its Kansas City plant and moving that work to Thailand. Harley has two new middleweight bikes due out in late 2020, and its plan also calls for investment in classic heavyweight bikes. Harley's first electric bike received rave reviews from critics, but its rollout to dealers was delayed in October because of last-minute quality issues. Harley's share of the heavy motorcycle market in the United States has slipped from 50.7% to 49.1%; sales in the United States dropped for a fifth year in 2019.

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4/3/2020

Executive Compensation Programs and Covid-19

Harvard Law School Forum on Corporate Governance (04/03/20) Resch, Ryan; Huddleston, Becky; Goldstein, Andy

Willis Towers Watson is suggesting that boards and companies consider a few guiding principles when assessing the effectiveness of their executive compensation programs and whether to make any changes due to the upheaval created by the outbreak of the coronavirus.  Boards and companies should take a long-term view, balance alignment between shareholders and executives, and understand the impact of long-term pay programs on executives.  They should also consider the symmetry of business impacts, maintain their underlying compensation philosophy, and focus on a holistic approach and materiality.  The suggestions are based on Willis Towers Watson's consulting experience and lessons learned from the 2008 financial crisis.  Due to the challenging situations they are likely to face through 2020, boards and companies should address in-year performance cycles, set performance targets, customize performance plans, and consider selective retention awards for key executives. Boards and companies may need to monitor share granting practices and underwater stock options, and consider alternative approaches for measuring compliance with share ownership guidelines.  Also, the board and management should have ongoing discussions about the impact of the market turmoil and disruption to business to make sure that executives and employees are fairly treated given the circumstances.

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4/3/2020

To Postpone or Go Virtual? Companies Adapt Investor Day Plans Due to Covid-19 Lockdown

IR Magazine (04/03/20) Human, Tim

The Covid-19 outbreak is forcing companies to adapt their investor day plans. GoDaddy (GDDY), for instance, hosted a day of virtual presentations, product demonstrations, and Q&A, while Moody's Corp. (MCO) held an online fireside chat and Fiserv (FISV) postponed until the fall but did release new cost-saving targets. Investment conferences, non-deal roadshows, and annual general meetings are among the other events that have been affected by the pandemic. Of the 26 respondents to a survey by CIRI, the Canadian IR association, 18% said they have postponed an investor day and 12% have changed their event to a virtual format. Meanwhile, an analysis of filing data by Intelligize reveals that more than 150 U.S. companies have withdrawn annual guidance since March 16. "Capital markets days are typically seen as an opportunity to present a new medium-term strategy, showcase the depth and breadth of operational management, and demonstrate how different parts of the business generate value," says Kate Bundy, head of events and roadshows at financial communications firm Citigate Dewe Rogerson. "In the current environment, meeting any of these objectives is likely to be challenging. Many of our clients are withholding guidance for 2020 due to a lack of visibility, as they remain unable to quantify the impact of the Covid-19 crisis on this year's results."

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4/2/2020

SoftBank's Sprint Headache Gone but Coronavirus Adds to Migraine

Nikkei Asian Review (04/02/20) Hotta, Takafumi; Igawa, Ryo

T-Mobile (TMUS) and Sprint (S) have completed their merger, allowing Japan's SoftBank Group (SFTBY) to dispose of its struggling U.S. telecommunications business. SoftBank had an 84% stake in Sprint, acquired in 2013, and the deal leaves it with only a 24% stake in post-merger T-Mobile US, which will be a SoftBank Group equity method affiliate rather than a subsidiary. Although the deal lifts a significant burden from SoftBank's balance sheet, the investment company faces a number of other challenges. On Thursday, a tender offer for existing shareholders of The We Co., owner of office-sharing service WeWork, expired. SoftBank says initial conditions for the tender offer were not met, but some shareholders are threatening legal action, and the matter could draw further lawsuits later on. On March 23, SoftBank announced it would sell 4.5 trillion yen in assets over the next 12 months to prop up its lagging share price, probably at the request of shareholder Elliott Management, which could prove challenging in the current environment. Moreover, Moody's Japan downgraded SoftBank's issuer rating by two notches on March 25. SoftBank Group said the decision was based on a "misunderstanding" and requested that Moody's withdraw its rating. On Friday, one of SoftBank's investee companies, a British satellite communications startup that is an equity method affiliate, filed for bankruptcy. SoftBank Group booked 225.1 billion yen in operating losses in the three months through December.

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4/1/2020

Glass Lewis' Approach to Governance in Times of the Coronavirus Pandemic

Harvard Law School Forum on Corporate Governance (04/01/20) Bertinetti, Aaron

Glass Lewis expects all governance issues and most proposal types to be impacted by the coronavirus pandemic.  Among the key governance areas Glass Lewis is paying particular attention to are shareholder activism and mergers and acquisitions, which surged during the global financial crisis.  Glass Lewis expects to see a similar wave of shareholder activism, mergers and acquisitions, lawsuits, and consolidation as macro conditions improve, and where boards prefer to focus on day-to-day business health and stability, the ongoing trend for settlements with investors is likely to continue. While the content of most shareholder proposals will likely not include any consideration of the pandemic or related crisis, the context for assessing environmental or social shareholder proposals on the basis of materiality to the returns or risk of a business has changed significantly.  Glass Lewis also will be monitoring governance issues involving compensation and balance sheets, board composition and effectiveness, and oil and gas companies.  The proxy advisory firm will exercise appropriate discretion and pragmatism to prioritize timing, certainty, disclosure, and voting on such proposals.  Glass Lewis also has updated its virtual meetings policy to give the market certainty about its support for such meetings to preserve company and shareholder interests.

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3/31/2020

Coronavirus Throws Deal Making Into Disarray

Wall Street Journal (03/31/20) Lombardo, Cara

Corporate deal-making has been upended by the coronavirus pandemic as companies postpone initial public offerings (IPOs) and abandon takeover deals. The value of announced mergers in the first quarter through Monday is down 33% from a year ago to $572 billion, a seven-year low, and the decline is even more acute in the United States at over 50%. Xerox Holdings Corp. (XRX) said Tuesday it is ending its more than $30 billion hostile pursuit of printer maker HP Inc., citing market turmoil. Marathon Petroleum Corp. (MPC) was close to selling its sprawling Speedway gas-station unit for more than $20 billion before a dip in oil and stock prices deterred its suitor, though the company will likely revisit a sale or spinoff of the unit after things stabilize. Paint maker Axalta Coating Systems Ltd. (AXTA) said Tuesday that it has ended talks about a sale to PPG Industries Inc. and buyout firm Clayton Dublier & Rice. The financial and economic swoon has created opportunity for cash-rich investors, including private equity firms and hedge funds, which stand by ready to offer financial lifelines to the hardest-hit companies. Hostile mergers and acquisitions could also generate merger activity as companies that weather the crisis well move on those that struggle to recover. There are a few companies forging ahead, such as eBay Inc. (EBAY), which is pushing forward with a sale of its classified-ads unit.

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3/31/2020

This Crisis Will Unleash an Activist War

Institutional Investor (03/31/20) Segal, Julie

A recent survey by Boston Consulting Group (BCG) found that 59% of the portfolio managers and senior analysts it polled think shareholder activism will spike amid the devastation caused by the spread of Covid-19. "A lot of people expect activism to both resume and to be much more active once the crisis stabilizes," said Hady Farag, partner and associate director at BCG. "Activists sit on tons of cash, and on average stocks are 20% cheaper over the last month, so it's a buying opportunity." BCG found that 58% of survey respondents also indicated that they think companies should seek out acquisitions that will help strengthen their businesses. Seventy-three percent of investors say companies should focus on preserving liquidity, even if that means not investing in areas that would give them a competitive advantage. Sixty-one percent think companies should avoid aggressively repurchasing shares despite low stock valuations, and 59% say they would support dividend cuts in the near term. Moreover, 79% of investors surveyed want companies to provide revised earnings guidance for the current fiscal year within the next three months. Eighty-nine percent want management to start preparing for the eventual turnaround in the economy, even if that means the companies will miss earnings estimates. Fifty-five percent of respondents were either "bullish" or "extremely bullish" about the market in 2021, but 85% were either bearish or neutral on the remainder of the year.

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3/31/2020

Covid-19 and Shareholder Activism—The Impact

Harvard Law School Forum on Corporate Governance (03/31/20) Klein, Ele; Crawford, Aneliya S.

The Covid-19 crisis presents both obstacles and opportunities for shareholders considering or conducting an activist campaign at a company. Many shareholders are facing practical impediments, partly in the form of share ownership issues from brokers and banks operating at reduced capacity and partly in the form of delays in documentation from director nominees. Shareholders contemplating nominations should start early and initiate the process to preserve their rights and flexibility if a campaign proves desirable. Even after nominations, the strain on resources at the Securities and Exchange Commission may affect the speed and ease of the proxy filing process. It may also be more difficult for active solicitations to get attention, because the Covid-19 pandemic has spurred historic levels of market volatility, prompting many investors to focus on current portfolio valuations. Despite these challenges, the market volatility also creates opportunities for shareholder campaigns as many companies face depressed valuations and significant business disruption. A straightforward platform may resonate best with nervous investors, and settlements may become more likely as sides find added incentive to come to terms rather than risk going to a vote. The market slump also offers an opportunity to economically increase holdings in companies where activists have a high-conviction thesis.

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3/27/2020

Box CEO Aaron Levie on Managing Through Coronavirus and an Investor

Silicon Valley Business Journal (03/27/20) Levitsky, Allison

In a recent interview with the Silicon Valley Business Journal, Box Inc. (BOX) CEO Aaron Levie discussed his company's new agreement with Starboard Value LP to replace three board members. The hedge fund holds a 7.7% stake in the cloud content management company. "We worked with Starboard very collaboratively to agree on: how do we bring in individuals with additional experience, people that have built massive companies and can help see around the next set of corners that we're going to face as a business as we continue to grow and drive more profitability? It made a lot of sense that we would bring very experienced operators around the table. And then it really becomes a math exercise of how to make the seats available and make sure that we can build, again, a board of very experienced, strong operators," he said. "It's a pretty natural evolution when you look at kind of going from a startup to a public company where you do have a much more independent board of experienced operators. So we saw this as a pretty natural evolution of the board of directors. And, you know, Starboard certainly was an additional catalyst to that. But our agreement with them, I think, was structured around the fact that we want to drive shareholder value." He added, "I think from the very beginning, we decided that our interests were extremely, extremely aligned—I mean, we felt the company was undervalued. We felt like we could be growing faster. We felt we could drive greater profitability. I think that that was very aligned with what Starboard felt about the business as well. So, I think when you have that type of alignment with an...investor, it's a lot easier to collaborate and find a mutually agreeable solution to the problem."

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3/26/2020

Campaign Group Urges U.K. to Keep Virtual Annual Meetings Temporary

Reuters (03/26/20) Jessop, Simon; Jones, Huw

ShareAction said on March 26 that the use of virtual annual general meetings (AGMs) by companies during the coronavirus outbreak should be temporary. In a letter to the head of Britain's business ministry, Alok Sharma, the responsible investment campaign group said making virtual AGMs the norm could prevent investors from attending and holding companies to account. "A significant proportion of retail shareholders are older people who tend to be less comfortable with using the kind of technology required to host a digital AGM. In addition, physical AGMs allow retail shareholders and the board a unique and unscripted opportunity to meet and have conversations in person," wrote policy manager Rachel Haworth. "If attendees can only submit questions in advance and cannot 'raise their hand' and ask them in real time, this could allow companies to cherry-pick which questions they answer." The letter comes after the London Stock Exchange said it would support temporarily allowing companies to hold their AGMs electronically this year because of the pandemic. Meanwhile, the Chartered Governance Institute published guidance on annual meetings during the epidemic, which was developed in conjunction with the Financial Reporting Council and law firm Slaughter & May. According to the guidance, virtual-only meetings are not viable given they may not constitute valid meetings, but the articles of some companies allow them to hold hybrid meetings, or a combination of physical and electronic meetings. However, companies have the option of changing their articles to allow online meetings.

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3/26/2020

2020 U.S. Climate Proxy Voting Guidelines

Harvard Law School Forum on Corporate Governance (03/26/20) Mishra, Subodh

In its climate proxy voting guidelines for 2020, Institutional Shareholder Services (ISS) says that factors used to evaluate a company's environmental performance fall under five primary categories: climate norms violations; disclosure indicators; current performance indicators including greenhouse gas emissions data; future performance indicators drawing from the ISS Carbon Risk Classification (CRR); and Carbon Risk Classification. The factors are used to assess a company's risks associated with the impacts of climate change, along with its preparedness to face and mitigate those risks in an increasingly carbon-restricted economy. ISS says it will generally recommend voting against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal. It will also recommend voting against proposals to reduce quorum requirements for shareholder meetings, and will generally recommend voting to ratify auditors unless the auditor's independence or competence is in serious question. ISS will generally support management proposals to move the scheduling or location of a shareholder meeting if the request is reasonable, but vote against shareholder proposals to do so unless the current scheduling or location is unreasonable. ISS will vote case-by-case on the issue of auditor indemnification and limitation of liability, as well as on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services. It will also vote case-by-case on shareholder proposals asking for audit firm rotation.

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3/25/2020

Hedge Funds Do a Lucy on Charlie Brown Investors

Bloomberg (03/25/20) Gilbert, Mark

Several hedge funds that have suffered losses due to the impact of the Covid-19 pandemic on the markets are seeking to raise fresh money, including LMR Partners, Baupost Group, Citadel, and Capital Four Management. These hedge funds have to stem losses on their existing cash piles before they can earn performance fees for improving performance. "Fresh money would reset the bar, allowing them to share in more of the upside they expect—or claim—to be able to generate," says Bloomberg Opinion columnist Mark Gilbert. "And there are undoubtedly opportunities in the market carnage." He cites Bill Ackman, who said this week that his Pershing Square Capital Management firm has done "about the most bullish thing we've done" in investing $2.5 billion in equities in a "recovery bet" in recent weeks. In a Bloomberg Television interview, Ackman said, "We are all long. No shorts." Gilbert notes that "the current market dislocations may, if anything, make it harder [for hedge funds] to get in and out of trades quickly and profitably." He adds, "Investing in a hedge fund is bound to have good times and bad times; clients have to be willing to accept there will be periods of losses, provided the performance over time is good enough to justify the fees. But it takes a certain amount of chutzpah to ask investors to increase their allocations to a losing strategy, even in normal financial times. As things stand, it's outrageous...It would take a special kind of optimism—the blind kind, perhaps—to throw good money after bad by investing in a hedge fund that has failed to distinguish itself so far in the prevailing maelstrom."

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3/25/2020

Coronavirus Pandemic Could Elevate ESG Factors

Wall Street Journal (03/25/20) Broughton, Kristin; Sardon, Maitane

The recent swings in the financial markets because of the coronavirus pandemic could provide investors with more of a reason to question companies about nonfinancial risks. Environmental, social, and governance (ESG) investing was accelerating in popularity prior to the virus beginning to circulate, as investors sought out companies that have taken steps to manage nonfinancial risks related to climate change, board diversity, or human rights matters in the supply chain. However, the pandemic has demonstrated more broadly the importance of other factors that are significant to ESG investors. These include disaster preparedness, continuity planning, and employee treatment via benefits like paid sick leave. Companies should expect more investors to ask questions about resilience and contingency planning, seeing the issues in light of the pandemic as relevant to a company's long-term performance, according to Jeff Meli, global head of research at Barclays PLC. Eventually, those discussions could evolve to broader ESG considerations, including topics such as whether telecommuting could curb a company's carbon footprint, he said. "There is obviously a lot of volatility and a lot of big open questions just in the very near term that need to get answered," Meli said. "...Over the long term, I think if anything this would likely accelerate the focus on ESG from an investor standpoint." Barclays plans to provide ESG assessments for each of the companies it covers, and Citigroup Inc. (C) in a note to clients said investors are asking more questions about issues like employee benefits and mortgage relief, with the goal of identifying corporate strategies to limit the economic fallout from the pandemic. The bank said the pandemic likely will impact priorities in ESG, as well as discussions on the pros and cons of having temporary workers and stock buybacks becoming the new concern of corporate governance.

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3/24/2020

New ESG Disclosure Obligations

Harvard Law School Forum on Corporate Governance (03/24/20) Maleva-Otto, Anna; Wright, Joshua

New European Union (EU) regulations requiring investment managers to disclose sustainability risks and sustainability factors relevant to their investment activities are set to take effect on March 10, 2021.  The regulation on Sustainability-Related Disclosures will apply to alternative investment fund managers (AIFMs), UCITS management companies, and portfolio managers and investment advisers authorized under MiFID.  The aim is to enhance transparency regarding integration of environmental, social, and governance matters (ESG) into investment decisions and recommendations.  The United Kingdom will implement the regulation, which will apply to U.K. AIFMs, UCITS management companies, and portfolio managers authorized under MiFID.  AIFMD rules apply to EU/U.K. managers of EU AIFs (e.g., Irish or Luxembourg structures), as well as managers of non-EU AIFs under the national private placement regimes through cross-references in Articles 36 and 42 of AIFMD (that establish such regimes). This could mean that the pre-investment disclosure obligations will apply not only to if they market their funds in the EU/United Kingdom who market their EU or non-EU funds, but also to non-EU AIFMs (e.g., U.S. or Swiss investment managers) who market their Cayman and other non-EU funds under Article 42 private placement regimes in the United Kingdom or any EU jurisdictions. Asset managers and investment advisers will need to develop policies and procedures, website disclosures, and pre-contractual disclosures—as well as disclose sustainable investments—to comply with the new regulations.

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3/24/2020

How Boards Can Approach the Covid-19 Pandemic

Corporate Secretary (03/24/20) Gregory, Holly; Kelsh, John; Kim, Thomas

There are several key areas that corporate boards may want to consider amid the Covid-19 pandemic. Regarding issues of health and safety, boards must set a tone at the top through communications and policies that protect employee well-being and act responsibly to slow the spread of Covid-19. Boards should also monitor efforts to identify, manage, and prioritize potentially significant risks to business operations, including any outbreak-related vulnerabilities that may increase the risk of a cybersecurity breach. Moreover, boards need to consider and continually reassess their business continuity plans in light of developments. Key issues to consider include employee/talent disruption, supply chain and production disruption, financial impact and liquidity, internal controls and audit function, key person risks and emergency succession plans, incentives, and board/governance continuity. Companies must further consider whether they are making sufficient public disclosures about the impacts of Covid-19 on their business and financial condition. Given the Securities and Exchange Commission's (SEC's) emphasis on discussing how boards oversee the management of material risks, companies may want to expand proxy statement disclosure of board oversight of Covid-19-related risks. Further, companies may want to consider buying back stock to take advantage of significantly depressed stock prices. Boards must continue to communicate with significant shareholders while monitoring for changes in stock ownership.

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3/23/2020

Glass Lewis Guidelines Update on Virtual-Only Meetings Due to COVID-19

Harvard Law School Forum on Corporate Governance (03/23/20) Bertinetti, Aaron

Proxy advisory firm Glass Lewis will not recommend against the use of virtual-only shareholder meetings in response to the COVID-19 pandemic. For companies opting to hold a virtual-only shareholder meeting due to COVID-19 during the 2020 proxy season, Glass Lewis will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses its rationale for doing so, including citation of COVID-19. Additionally, should these companies opt to continue holding virtual-only shareholder meetings in subsequent years, future proxy statements should include robust disclosure concerning shareholder participation. Glass Lewis' standard policy on virtual shareholder meetings will apply after June 30, 2020, and it expects robust disclosure in the proxy statement concerning shareholder participation. Shareholders have previously expressed concerns regarding companies' use of this meeting format, which has the potential to silence dissenting shareholders and could insulate management and the board from criticism and controversy. However, given the ramifications of the ongoing pandemic, even groups and shareholders that have argued ardently against the practice of holding virtual-only meetings are considering whether the current circumstances warrant an exception. Glass Lewis is generally neutral on the use of virtual-only meetings, so long as they are structured to ensure meaningful shareholder participation and companies disclose the shareholder protections they are providing.

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3/23/2020

Canada 2020: Tackling Compensation Matters This Proxy Season

IR Magazine (03/23/20) Culbert, Lisa; Grewal, Ramandeep

The Laurel Hill Advisory Group reports that average support for say-on-pay votes at Canadian companies in 2019 was 90.9%, down from 91.9% average support in 2018. This aligns with the 2019 amendments to the Canada Business Corporations Act that will make it mandatory for "prescribed corporations" to hold a say-on-pay vote, though this will not take effect until after the 2020 proxy season. Investment managers have noted that institutional investors seem to be increasingly exercising independent judgement related to say on pay. Laurel Hill notes that this might happen because CEO and executive pay has increased faster than total shareholder return, or because CEO and executive pay is considered to be misaligned with the size and stage of the business. Generally, the tipping point for when management is expected to engage with shareholders opposing a say-on-pay vote is 80% for Glass Lewis and 70% for Institutional Shareholder Services (ISS). The Canadian Coalition for Good Governance recommends that boards enhance disclosure of any adjustments made to financial performance measures within the issuer's executive compensation structures. For director pay, ISS will now recommend a "withhold" vote in the event of two consecutive years of high director pay unless the company provides satisfactory reasons for this in its disclosure. It may be useful for directors to monitor director pay among peer company boards and consider where their pay levels fall. Beginning in 2019, ISS' research reports for Canada began including additional information on company performance using economic value-added (Eva) metrics, which apply uniform adjustments to financial statement accounting data. Therefore, ISS will incorporate Eva metrics into its quantitative pay-for-performance models.

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3/23/2020

How Board Diversity Is Shifting in Canada

Corporate Secretary (03/23/20) Culbert, Lisa; Grewal, Ramandeep

Lisa Culbert, counsel for legal design and operations, and Ramandeep Grewal, partner, with Stikeman Elliott in Toronto, say recent amendments to the Canada Business Corporations Act (CBCA) require diversity disclosures of "designated groups" beyond gender, and unlike the Canadian Securities Administrators' (CSA) National Instrument 58-101 Disclosure of Corporate Governance Practices, venture issuers are not exempt from the CBCA diversity disclosure requirements. The four designated groups covered by the CBCA requirements are, as defined under the Employment Equity Act, women, indigenous people (First Nations, Inuit, and Metis), persons with disabilities, and members of visible minorities. The requirements apply to proxy circular disclosure regarding the board and senior management. Further, NI 58-101 and the new CBCA diversity disclosure provisions require disclosure of director tenure limits. Culbert and Grewal note that "there is growing guidance on what some consider to be lengthy tenure," pointing to the expanded version of the ISS Governance QualityScore, which identified lengthy director tenure as nine years. Under the QualityScore, a five-board maximum emerged as the new standard in 2019 for non-executive directors and a two-board maximum for the CEO, in addition to sitting on the board of the company where they are CEO. Culbert and Grewal's 2019 analysis of the annual proxy circular disclosure of the S&P/TSX 60 found that 40% of issuers have between 21% and 30% representation by women on their board. Regarding gender diversity targets, 47% of issuers have no reported target, while 36% have a target of 30% women board members. Most issuers do not impose term limits, but 14% have set term limits of 15 years.

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3/23/2020

Coronavirus Creates a Whole Host of Unknowns

Pensions & Investments (03/23/20) Croce, Brian

Proposed rules from the Securities and Exchange Commission (SEC) would transform how proxy advisory firms make recommendations and raise the thresholds for submitting shareholder proposals, while the economic impacts of the coronavirus pandemic could affect proxy vote outcomes for certain public companies, according to Courteney Keatinge at proxy-voting advisory firm Glass, Lewis & Co. "Particularly when it comes to compensation, when companies are not doing very well financially, [shareholders] don't want to see executives doing very well either," she said. The SEC on March 4 released "conditional" regulatory relief, providing companies impacted by COVID-19 up to 45 extra days to file disclosures due between March 1 and April 30. Issuers who delay disclosures must provide "a summary of why the relief is needed in their particular circumstances," the SEC mandated. SEC Chairman Jay Clayton admitted that the virus turmoil may prevent certain issuers from compiling these reports within required time frames. "We also remind all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments," he said. The SEC on March 13 issued guidance on the process companies should follow if they opt to change the date, time, or location of an annual meeting. That includes publishing a news release, filing the announcement on EDGAR, and taking "all reasonable steps necessary" to notify other intermediaries in the proxy process and other relevant market participants of the changes. Keatinge said more companies may follow Starbucks' (SBUX) lead and host virtual-only shareholder meetings this proxy season. SEC guidance on virtual meetings directed issuers planning to conduct such meetings to alert all market participants of such plans in a timely manner and disclose clear directions on the logistical details of the meeting, including how stockholders can remotely access, participate in, and vote.

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3/22/2020

During Coronavirus Crisis, Big Companies Display Largess—but for How Long?

Wall Street Journal (03/22/20) Weber, Lauren

Amid the ongoing pandemic, dozens of large companies are extending pay and benefits to employees whose livelihoods are affected by the coronavirus. AT&T Inc. (T), for example, is offering up to 160 hours of paid time off to workers whose children are at home and need supervision. For its part, JPMorgan Chase & Co. (JPM) is giving $1,000 bonuses to some branch and operations workers who can't work from home, to help defray costs such as child care and transportation. Facebook Inc. (FB) said it would give full-time workers an additional $1,000 in their next paycheck and would continue to pay contractors. But there have been exceptions. Airlines and hotels have instituted unpaid leaves and furloughs. Large companies typically have more resources to weather disruption than do small companies. They are also acting with consideration of the court of public opinion. Some 54% of companies say they will continue for some period of time to pay hourly staff whose workplaces shut down due to the virus, and 51% will pay people who stay home because of cold and flu symptoms, according to a survey of 805 big companies by consulting firm Willis Towers Watson. The pandemic in certain respects is turning out to be a natural experiment in stakeholder capitalism, the vision laid out last August by the Business Roundtable. The group adopted a definition of corporate purpose that promotes "an economy that serves all Americans," scuttling its previous focus on shareholders above all others. The group's statement of purpose, signed by more than 180 chief executives, specifically referred to employees as stakeholders. Joshua Bolten, the president and CEO of the Business Roundtable, recently pointed out that stakeholders' interests are aligned. If employees, customers, suppliers, and communities aren't supported, "there will be no business for shareholders to own when we come out of this crisis," he said. Still, there are limits to what even large companies can do. And once the first big company starts to lay off workers, others may quickly follow suit.

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3/22/2020

Corporate Governance Survey—2019 Proxy Season Results

Harvard Law School Forum on Corporate Governance (03/22/20) Bell, David A.

Adoption of dual-class voting stock structures among Fenwick – Bloomberg Law Silicon Valley 150 firms (10.9% in 2017, 13% in 2018, and 12.7% in 2019) has surpassed the companies included in the Standard & Poor's 100 Index (9.0% in 2016 to 2019) in recent years, according to Fenwick's annual survey of corporate governance practices. Classified boards increased from 50.7% in 2018 to 52.7% in the 2019 proxy season for the SV 150, while the S&P 100 increased to 5.0% in the 2019 proxy season from 3.0% in the prior year.  Among S&P 100 companies, majority voting rose from 10% to 96% between the 2004 and 2019 proxy seasons, and among the SV 150 the rate has risen from zero in the 2005 proxy season to 57.3% in the 2019 proxy season.  Stock ownership guidelines have generally increased over time in both groups, but the SV 150 only recently surpassed the level of the S&P 100.  The SV 150 continues to add female directors at a higher rate than S&P 100 companies; the share of SV 150 companies with at least one woman director increased from 82% to 91.3% over the past year.  Most SV 150 companies would meet California's new standard mandating inclusion of women on boards of directors in 2019.  SV 150 companies tend to have fewer executive officers than S&P 100 companies, and the average number per company in both groups continues to decline.  Companies in the SV 150 paid on average $4.3 million on audit fees compared to $22.9 million paid by S&P 100 companies, with an average increase of 3.7% from the prior year.

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3/21/2020

Key Issues for Directors Relating to COVID-19

Harvard Law School Forum on Corporate Governance (03/21/20) Lipton, Martin; Katz, David; Shapiro, David

Martin Lipton, founding partner, and David A. Katz and David E. Shapiro, partners, Wachtell, Lipton, Rosen & Katz, stress the important role that directors on corporate boards play in navigating the path forward amid the COVID-19 pandemic. There are several issues that directors face, including maintaining close contact with the CEO and working with management to ensure the safety and well-being of the company's employees, other stakeholders, and the public at large. Directors also must understand the risks to the company and its stakeholders from the COVID-19 pandemic, and discuss, as a board, management's strategies for minimizing and mitigating these risks. They should review the viability of the enterprise from a short-term and long-term perspective and make changes accordingly; receive a board-level briefing on company indebtedness, understand the company's near-term liquidity needs, and work with management to secure liquidity needs; and provide the CEO and management with assistance in handling communication with internal and external constituents. Among other things, directors should frequently communicate with, and seek guidance from, applicable regulators and other government agencies with oversight; respond to activist engagement; work with management in engaging shareholders and other stakeholders on corporate operations, impact to strategy, and other important concerns, including environmental, social, and governance issues; review compensation plans and consider whether changes are necessary; evaluate the company's current and future dividend and buyback policy as well as capital allocation and liquidity generally; and maintain respect among board members and promote effective decision-making through stressed and stressful conditions.

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3/20/2020

Virtual Annual Meetings and Coronavirus

Harvard Law School Forum on Corporate Governance (03/20/20) Albano, Michael; Flow, Sandra; Odell, Francesca

Michael Albano, Sandra Flow, and Francesca Odell, partners at Cleary Gottlieb Steen & Hamilton LLP, said companies considering whether to move to a virtual or hybrid annual shareholder meeting in response to the COVID-19 outbreak must determine whether they are permitted to under the company's state law of incorporation and its bylaws and take steps to properly notify shareholders of any change. If virtual meetings are permitted under state law, companies should then examine their bylaws to determine whether they would permit holding a virtual or hybrid meeting. Management and/or the board of directors generally will have discretion in determining the proper venue and format for the annual meeting. Next, companies must take steps to comply with filing requirements and other obligations set forth by the Securities and Exchange Commission (SEC) and state law. The SEC's Coronavirus Guidance indicates that if a company has already filed its proxy statement and has notified shareholders of the location and timing for its annual meeting, any change needs to be communicated. The company should issue a press release disclosing the change in format, file the release with the SEC as supplemental proxy materials, and add it to posted proxy materials. If a company has yet to file its proxy statement and is considering the possibility of moving to a virtual or hybrid meeting, disclosure indicating the possibility of a change and the reason for such a change should be included in the proxy statement, both in the meeting notice and in the meeting logistical information. Further, companies should consider the overall benefits and costs of moving to a virtual or hybrid meeting. They should recognize that certain meeting elements, such as the presentation of shareholder proposals, may be more cumbersome, and virtual meetings can create more uncertainty in shareholder vote counts because shareholders can more easily attend and change their vote at the last minute. Among other things, companies should consider whether they have the necessary infrastructure, procedures, and conduct rules in place to host a virtual annual meeting.

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3/20/2020

Engagement Priorities for 2020

Harvard Law School Forum on Corporate Governance (03/20/20) Novick, Barbara; Edkins, Michelle

BlackRock (BLK) is increasing its focus on sustainability-related issues and relevant disclosures in 2020, due to the growing impact of these issues on long-term value creation. The investment manager is also mapping its engagement priorities to specific U.N. Sustainable Development Goals, such as gender equality and clean and affordable energy, and providing a high level, globally relevant key performance indicator (KPI) for each priority so companies are aware of its expectations.  Board composition, effectiveness, and accountability remain a top priority for BlackRock, which expects to have access to a non-executive, and preferably independent, director.  For environmental risks and opportunities KPI, BlackRock plans to hold relevant committee members, or the most senior non-executive director, accountable for inadequate disclosures and the business practices underlying them.  For matters of corporate strategy and capital allocation, BlackRock plans to engage with companies to review its reporting expectations and encourage them to make the connection between long-term planning and business-relevant sustainability risks and opportunities.  BlackRock expects pay outcomes to be correlated with a business relevant long-term performance metric, and will hold compensation committee members accountable for pay outcomes.  Human capital management also will be a priority this year for BlackRock, which expect boards to oversee strategies in this area.

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