Media Center

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

Proxy Adviser ISS Backs Call for FirstGroup Boardroom Shake-Up
Pernod Ricard Adds U.S. Premuim Brand Rabbit Hole Whiskey to Its Portfolio
Barnes & Noble Says It Did Not Get Any Other Bids Before Elliott's Deadline
Video: Barclays Isn't Europe's JPMorgan, but It's Not Deutsche Bank Either
Sony CEO's Choice: Stay Together or Bend to Loeb's Breakup Push
Red Robin Issues Statement in Response to Vintage Capital
HomeStreet Sends Letter to Shareholders
Daniel Loeb's Third Point Calls for Breakup of Sony—Again
Ferguson Surges as Hedge Fund Trian Takes 6% Stake
U.S. Proxy Firm ISS Backs Centene's Deal for WellCare
Jana Builds Stake in Callaway and Plans to Push for Sale
Renault Seeks Greater Role in Nissan Governance Reform
Investor Offers to Buy Red Robin
Blue Lion Capital Comments on the Decision by HomeStreet's Board to Reject Dwight Capital's Offer to Acquire Its Fannie Mae DUS Business
All Bow Street Nominees Elected to the Mack-Cali Board of Directors
Uniper, Fortum Should Explore Tie-Up to End Deadlock: Investors
Glass Lewis Joins ISS In Recommending J. Alexander's Shareholders Vote Ancora Advisors' GOLD Proxy Card
EQT Highlights Its Purpose-Built Board
Company Directors Will Have to Sit for Exams in India After Scandals
Four Mack-Cali Board Nominees Step Down
Investor Crystal Amber Seeks to Oust Allied Minds Board
Ackman, Loeb Oppose United Technologies' Merger With Raytheon
Campbell Soup Co. Names New Head of Meals and Beverages Division
Tesla Board Fails to Pass Supermajority Measure It Proposed Amid Call for More Oversight
Ackman Opposes United Technologies-Raytheon Deal
Regulus Announces New Additions to Board of Directors
Litt Threatens Third Proxy Fight at Mall Operator Taubman
Abe's Corporate Reform Plan Faces Acid Test at Government-Run Companies
Woodford and Investors: Great Minds Think Alike in Dash for Cash
Rice Team Sends Letter to Fellow EQT Shareholders Setting the Record Straight on EQT's Misleading Comments
Starwood Capital Group Supports Fir Tree Shareholder Proposals for JR Kyushu Upcoming Annual General Meeting; Intends to Vote in Favor
Proxy Advisers in Regulatory Glare
Allied Minds Names New Chief Executives and Scraps Bonus Scheme
Advisory Firm Hands J. Alexander's Investor a Big Win
Blue Lion Encourages Shareholders to Vote FOR Ronald K. Tanemura on the BLUE Proxy Card to Replace Incumbent Director Donald R. Voss
Hudson's Bay Chairman Offers Escape Path From Retail's Carnage
Proxy Advisory Firm Egan-Jones Recommends Mack-Cali Shareholders Vote Bow Street's GOLD Proxy Card FOR ALL of Bow Street's Nominees
Greece's OTE Faces Investor Push for Board Change
Proxy Advisers Fight Back Over Criticism of Their Work
Nissan Slams Renault's Decision to Abstain on Vote Over Corporate Governance
Renault to Block Nissan's Corporate Governance Overhaul
HomeStreet Sends Letter to Shareholders
Bow Street Urges Mack-Cali Shareholders to Vote the GOLD Proxy Card
'Responsible' Proxy Voting Is Going Mainstream
HomeStreet Gets Offer for Part of Its Multifamily Mortgage Lending
Investor That Pressured Apple Delays Launch of New Fund
Facebook's Shareholders Don't Count
HomeStreet Gets ISS Backing for Its Slate of Directors
Both Leading Proxy Advisory Firms Support Fir Tree's Case for Change at JR Kyushu
Neuberger Berman Calls Off Verint Proxy Challenge, Both Companies Say
Caesars Nears Deal to Combine With Eldorado Resorts
Nelson Peltz Likes the Look of American Plumbing
Breakingviews - Fiat's Renault Offer Was Fairer Than It Looked
Access Denied? Investors Lament Shift to Virtual Annual Meetings
Stakeholder Capitalism for Long-Term Value Creation
Corporate Governance by Index Exclusion
Bill Ackman Misses the Mark With His Raytheon Deal Critique
Board Diversity by Term Limits?
Meet the 'Activist' CEO Revamping the Conglomerate He Inherited
Funds Say Climate Change Is Now Part of Their Investing Equation
Once Shunned, Activist Investors Are Now Seeing a 'Wave of Change' in Japan
Activist Investors Dig Into Miners for the Long Haul
Board Development and Director Succession Planning in the Age of Shareholder Activism, Engagement and Stewardship
How Fiat Chrysler's Proposed Merger With Renault Crashed
The Business Case for ESG
Legal Tools for the Active or Activist Investor
Chinese Governance Raises Red Flags

6/13/2019

Red Robin Issues Statement in Response to Vintage Capital

Business Wire (06/13/19)

Restaurant chain Red Robin on June 13 issued a statement in response to a 13D filing by Vintage Capital Management LLC, saying "Red Robin welcomes open dialogue with its shareholders and appreciates input towards the goal of enhancing shareholder value. In multiple conversations with Vintage, we have expressed our openness to Vintage's participation in our ongoing search to identify a world-class CEO, and to maintaining a constructive dialogue. Given our dialogue to date, we were surprised by the content of the letter we received today, as Vintage has not been willing to propose any CEO candidates. As discussed with Vintage, we retained The Elliott Group in April 2019 to assist in our CEO search process, and the Search Committee is interviewing a number of highly qualified and interested candidates. We are pleased with our progress to date and confident we will identify an excellent leader for Red Robin. Concurrent with our CEO search process, Red Robin has a strategy in place to drive renewed growth and shareholder value, and we continue to execute on our 2019 strategic priorities, including stabilizing dine-in revenue by reinforcing Red Robin's compelling Value proposition; continuing building To-Go and Catering business; improving the Guest experience and recapturing Red Robin's known-for "Gift of Time" convenience; implementing digital platforms and restaurant technology solutions; and selectively refranchising and reassessing our real estate portfolio. Led by our Chair and independent directors, our Board is actively engaged in driving our strategic plan and remains open to all opportunities to create value. The Board comprises established industry leaders with diverse perspectives and operational expertise, including in the retail and restaurant industries. The Company's Board of Directors is focused on enhancing shareholder value and is mindful of its fiduciary duties to all shareholders. Consistent with its fiduciary duties, the Board would of course consider any bona fide offer made by Vintage."

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6/13/2019

Daniel Loeb's Third Point Calls for Breakup of Sony—Again

Wall Street Journal (06/13/19) Thomas, Patrick

Third Point LLC said in a June 13 letter to investors that Sony's (SNE) stock is undervalued and that the company's portfolio needs to be less complicated. Third Point said it has invested $1.5 billion in developing its stake in the company. Third Point called on Sony to spin off its semiconductor business and sell off stakes in Sony Financial and other units in order to position itself as a leading global entertainment company. This marks the second time in six years that one of the world's highest-profile investors has engaged the Japanese electronics giant. Last time, though, Loeb pushed for a very different kind of shake-up, advocating a spin-off of entertainment assets. According to Loeb, the semiconductor division is "often treated by investors as an afterthought" and should be spun off into a Japan-listed company known as Sony Technologies. The hedge fund has also called on Sony to consider selling its ownership interests in M3, Olympus, and Spotify Technology. By selling off these stakes, Third Point said Sony can "meaningfully reduce complexity" that has been a significant negative factor in the company's valuation. Sony said it will take the input of shareholders "seriously" and "engage in constructive dialogue" with shareholders. Meanwhile, Third Point has nothing but praise for Sony's Hollywood studio, noting that Sony Pictures is one of the few independent film studio franchises not owned by a major telecommunications or media conglomerate such as AT&T Inc. (T), Comcast Corp. (CMCSA), and Walt Disney Co. (DIS). And while Third Point is pushing for change, Sony executives announced in May they are looking at ways to create stronger links within its business, especially content, intellectual property, and direct-to-consumer services. The company also stated last month that it is considering joining with long-time game console system rival Microsoft Corp. (MSFT) on cloud and game-streaming technology.

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6/13/2019

Jana Builds Stake in Callaway and Plans to Push for Sale

Bloomberg (06/13/19) Deveau, Scott

Jana Partners has purchased a stake in Callaway Golf Co. (ELY) and is calling for the sporting goods company to conduct a strategic review, including weighing a possible sale. Jana said in a regulatory filing June 13 that it bought a 9.5% stake in Callaway Golf because it thinks the shares are undervalued. Jana intends to hold discussions with management about ways to boost the company's performance, including selling all or part of it. Callaway Golf, which has a market value of approximately $1.7 billion, was up about 16.4% on the news and traded up 14.1% at 11:53 a.m. in New York on June 13, its biggest gain since 2018. The shares had declined approximately 21% in the past year through the June 12 close. Although Callaway Golf doesn't comment on individual investors, its board and management are open to dialogue with all shareholders, according to spokesperson Scott Goryl. Jana is partnering with a number of consumer industry executives in the investment, including former Jarden Corp. (JAH) CEO James Lillie, former Nike Inc. (NKE) executive Cynthia Davis, and former vice chairman at Ralph Lauren Corp. (RL) Roger Farah. Callaway Golf in May said it was cutting its quidance for the Jack Wolfskin clothing line. Steven Zaccone, an analyst with JPMorgan Chase & Co. (JPM), said that move in the first full quarter of owning the brand will propel the "show me" narrative for investors debating the merits of the acquisition, according to a May 10 note to clients. After meeting with management, Zaccone said he was "incrementally more comfortable" with the guidance for the unit in light of the macro weather issues in Central Europe and China. The lower forecast was not a signal of underlying brand weakness, he noted.

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6/13/2019

Blue Lion Capital Comments on the Decision by HomeStreet's Board to Reject Dwight Capital's Offer to Acquire Its Fannie Mae DUS Business

PRNewswire (06/13/19)

Blue Lion Capital, which beneficially owns approximately 6.5% of the stock of HomeStreet Inc. (HMST), on June 13 released a statement expressing its ongoing concern with the company's failure to fully engage with Dwight Capital about its offer to acquire HomeStreet's Fannie Mae DUS license and related mortgage servicing rights. On June 12 HomeStreet issued a press release concluding that Dwight Capital's offer was not in the company's or shareholders' best interests because it did not represent a compelling premium. Blue Lion estimates that HomeStreet generated approximately $3 million of net income from the FNMA DUS business in 2018. Based on this calculation, Dwight Capital's preliminary $60 million offer represented a 20x multiple on the earnings generated from the FNMA DUS business last year. Stated differently, it would take HomeStreet twenty years to produce the $60 million that Dwight Capital offered. In Blue Lion's opinion, "HomeStreet's Board has refused to fully evaluate Dwight Capital's offer consistent with its fiduciary duties under applicable law, as it promised it would do in the Company's June 6, 2019, press release. ... In our view, there are likely to be several financial and strategic buyers interested in bidding for this scarce asset. At a minimum, we believe the Board should engage a better financial advisor to examine the full market value of the FNMA DUS business. ... For reasons such as this, Blue Lion has nominated a very experienced financial professional, Ronald K. Tanemura, for election to the Board of Directors at this year's annual meeting. Blue Lion recommends shareholders vote the BLUE proxy card FOR Ronald Tanemura and FOR Blue Lion's proposal to separate the roles of Chairman and CEO."

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6/12/2019

Glass Lewis Joins ISS In Recommending J. Alexander's Shareholders Vote Ancora Advisors' GOLD Proxy Card

PRNewswire (06/12/19)

Ancora Advisors, which has an 8.67% stake in J. Alexander's (JAX), has announced that Glass, Lewis & Co. has endorsed its case for change at the company. The report concurs with Ancora's perspective regarding J. Alexander's dismal share price and financial performance, as well as the board's deficient strategic review process. The Glass Lewis report recommends that shareholders support Ancora's gold proxy card, withholding votes from two incumbent board members, Timothy Janszen and Ronald Maggard. Institutional Shareholder Services (ISS) has also endorsed Ancora's campaign given the company's relative underperformance and corporate governance shortcomings. Glass Lewis also faults the board, and Maggard in particular, for its lack of diversity, saying, "Director Maggard serves as chair of the nominating and corporate governance committee. There are currently no women serving on the Company's board ... . When a board consists solely of male directors, we believe that it is the responsibility of the nominating and corporate governance committee to disclose a sufficient rationale for the board's lack of female members, or a timeline for addressing the issue. In this case, no timetable has been provided for addressing the lack of gender diversity on the board. We believe that the chair of the nominating and corporate governance committee bears responsibility for not sufficiently addressing this issue."

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6/12/2019

EQT Highlights Its Purpose-Built Board

Business Wire (06/12/19)

EQT Corp. (EQT) on June 12 mailed a letter to shareholders highlighting the complementary skills and experience of the company's 12 director nominees. The letter also highlights EQT's issues with the Toby Rice Group's nominees, "whom we believe lack the independence, skills and experience to oversee EQT, and have clear conflicts and personal connections to the Rice family in addition to a history of poor corporate governance." EQT alleges that "The Toby Rice Group wants to replace EQT's recently refreshed and independent Board with less qualified individuals who will support the Rice family's interests ahead of yours. ... Give up control of EQT to the Toby Rice Group, which is deeply conflicted and promising unrealistic free cash flow growth despite NEVER having generated positive annual free cash flow at Rice Energy. ... We do not believe that the skillset of the Toby Rice Group nominees is comparable to the depth, breadth, and experience of the director candidates nominated by EQT. ... Further, the fact that two of the Toby Rice Group's nominees dropped out following the announcement of EQT's slate of nominees demonstrates, in our view, that the Toby Rice Group's slate of nominees was developed through a rushed and deeply flawed selection process. ... Many of the nominees on the Toby Rice Group slate have clear conflicts and personal connections to the Rice family and a history of poor corporate governance. Four of the Toby Rice Group nominees—Kathryn Jackson, John McCartney, Daniel Rice, and Toby Rice—were previously chosen by the Rice family to serve on the Rice Energy board of directors. Rice Energy adopted—and maintained in the face of investor criticism—a number of shareholder-unfriendly governance practices and provisions, including, among other things, having a board of directors that included multiple Rice family members and was only approximately 60% independent, as well as a classified board structure. The Rice family and many of the Toby Rice Group's nominees have significant investments in the E&P industry that are opaque, undisclosed, and may result in related party transactions or other potential conflicts with EQT's interests. Toby Rice has already demonstrated an inappropriate willingness to call EQT personnel to try to promote his business. Toby Rice is inherently conflicted through operating Rice Investment Group. We believe that having a CEO with a murky portfolio of active multi-million-dollar investments in the same industry presents the potential for numerous conflicts and is not in the best interests of shareholders.

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6/11/2019

Abe's Corporate Reform Plan Faces Acid Test at Government-Run Companies

Nikkei Asian Review (06/11/19) Givens, Stephen

Japanese officials are crafting rules for publicly-traded companies controlled by a dominant shareholder, including the government. The new rules, which are part of Prime Minister Shinzo Abe's corporate reform plan, will be introduced later this summer. Parent entities can abuse their position to turn their "listed subsidiaries" into subordinate entities, writes Stephen Givens, a corporate lawyer based in Tokyo. The government directly controls Japan Post Holdings (JPHLF), Japan Tobacco (JAPAF), Nippon Telegraph and Telephone (NPPXF), Inpex (IPXHF), and Japan Petroleum Exploration, and indirectly controls Japan Post Bank (JPSTF), Japan Post Insurance, and NTT Docomo (NTDMF). The biggest concern for general shareholders is that the government will use its control to subordinate the listed company's profitability and corporate value to the government's public policy objectives. The new rules will increase the number of independent directors who sit on the boards of listed subsidiaries. The reform would expose conflicts of interest, including the use of government-controlled companies as post-retirement landing spots for senior bureaucrats. "If the promised rules lead to a majority of independent directors at NTT and the rest, and an elimination of sinecures for former bureaucrats, the government will have set an admirable example and Japan will have taken a difficult step in the right direction," Givens concludes.

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6/10/2019

Rice Team Sends Letter to Fellow EQT Shareholders Setting the Record Straight on EQT's Misleading Comments

Business Wire (06/10/19)

The Rice Team, comprising Toby Z. Rice, Derek A. Rice, J. Kyle Derham, and William E. Jordan, shareholders of EQT Corp. (EQT), on June 10 sent a letter to EQT shareholders seeking to correct a number of claims that EQT has made. The letter also addresses a number of personal attacks that EQT has made against the Rice Team. The letter states that: "As large shareholders, we want what is best for EQT and for generating long term shareholder value. ... Unfortunately for our fellow shareholders, it's not just EQT's share price that has sunk to new lows: EQT's CEO and directors have resorted to making false, misleading, and inaccurate claims about the health of EQT's business, among other things. We believe the use of these deceptive, low-road tactics is another reason why current EQT leadership cannot and should not be trusted. The Rice Team believes that EQT shareholders deserve to have the facts and urges them to vote the WHITE universal proxy card for the Rice Team's slate of director nominees. ... Contrary to EQT's claim that it is among the lowest cost producers in the Appalachian Basin, EQT is actually the highest cost operator in the Basin, according to financial analysts and EQT's own investment banker. EQT's claim that it has generated $300 million of free cash flow (FCF) over the last two quarters is disingenuous, because 40% of the FCF is from temporary midstream dividends from its stake in ETRN, which EQT has announced it will sell, and the rest is from EQT being forced to drastically reduce its growth capex. EQT's assertion that Rice Energy never generated free cash flow ignores the fact that EQT's own estimates at the time of the merger indicated that Rice Energy was on a path to generate approximately $2.3 billion more upstream free cash flow on a standalone basis than EQT through 2021 because of Rice's operating efficiency. ... EQT's claim that its Board and management team are 'new' is undermined by the fact that EQT's 'new' executive team has an average tenure of approximately nine years.

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6/10/2019

Starwood Capital Group Supports Fir Tree Shareholder Proposals for JR Kyushu Upcoming Annual General Meeting; Intends to Vote in Favor

PRNewswire (06/10/19)

Starwood Capital Group, a global private investment firm focused on real estate and energy investments, has issued a statement through a controlled affiliate as a significant shareholder of Kyushu Railway Co. regarding certain shareholder proposals made by Fir Tree Partners for the company's upcoming annual general meeting. Starwood Capital says it has "great respect" for JR Kyushu's executive management team and "has engaged in a constructive dialogue with the Company." Further, Starwood Capital "believes that the Company can implement a number of modest strategic initiatives in order to unlock the substantial long term value for shareholders. ... The Company operates numerous capital intensive businesses but has yet to leverage its balance sheet to fund these operations and currently holds cash well in excess of only limited levels of indebtedness. Management has the opportunity to improve shareholder return on equity with a share buyback while still maintaining conservative leverage levels well below peers and preserving sufficient capital for important investments in the maintenance of railway operations and growth in the real estate portfolio. With interest rates in Japan among the lowest in the world, it is prudent for the Company to utilize low cost borrowings to enhance return on equity for shareholders. Starwood believes after a buyback the company would easily maintain its credit rating in its opinion. Fir Tree, another major shareholder of the Company, has made certain proposals that will be voted on at the upcoming annual meeting, including implementing a 10% share buyback, making improvements to board governance, introducing a stock compensation plan, and nominating three new independent directors with strong industry expertise in real estate and corporate finance. The Fir Tree proposals align with the objectives of Japan's Corporate Governance Code for improved corporate oversight and greater alignment of interests. Starwood Capital intends to vote in favor of the Fir Tree proposals which it believes are in the best interest of shareholders, customers, and employees."

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6/10/2019

Blue Lion Encourages Shareholders to Vote FOR Ronald K. Tanemura on the BLUE Proxy Card to Replace Incumbent Director Donald R. Voss

PRNewswire (06/10/19)

Blue Lion Capital, which beneficially owns approximately 6.5% of common stock of HomeStreet Inc. (HMST), has amended its proxy statement and blue proxy card. Blue Lion is now asking HomeStreet shareholders to vote on the blue proxy card to elect Ronald K. Tanemura to replace incumbent director Donald R. Voss. Charles W. Griege Jr., managing partner of Blue Lion, said, "During the past thirteen months, Blue Lion has spoken with all of HomeStreet's top shareholders. It is clear from these conversations that change is not only warranted but necessary for the Company to become a top-performing bank. Following recent discussions with several large shareholders who expressed their support for ongoing change, but also indicated a desire to minimize the potential disruption of removing HomeStreet's CEO from the Board, Blue Lion has decided to remove Mr. Griege from its proxy card." He continued, "By making this change, Blue Lion has narrowed its campaign to elect one independent director, Ron Tanemura, to replace Donald Voss on the HomeStreet Board of Directors. This change would promote the desired stability shareholders want on the Board as well as ensure the necessary accountability that only a true independent director can affect." Blue Lion's decision to remove Griege from consideration will effectively enable shareholders to elect Ronald Tanemura, Sandra Cavanaugh, and Mark Mason. In its recent research report, Institutional Shareholder Services (ISS) agreed that Blue Lion has been successful in effecting HomeStreet's recent changes, but also recognized the need for additional change. In its report, ISS stated the following: "In just over 18 months—since the dissident initially went public with its criticisms—HMST has implemented, either in whole or in part, many of the key initiatives promoted by the dissident. These include exiting the core of the mortgage banking segment, refocusing on the commercial and consumer banking business, and making several corporate governance enhancements and appropriate board additions in the process. Ultimately, the dissident deserves credit for harnessing the sentiment of shareholders ... and catalyzing this energy into positive change. ... These positive changes are just first steps, and more improvement will be needed ... HMST continues to face operational challenges in its commercial and consumer banking business, including expenses that are too high, a loan portfolio that is too concentrated, a loan yield that must be improved, and prioritizing profitability over growth."

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6/10/2019

Proxy Advisory Firm Egan-Jones Recommends Mack-Cali Shareholders Vote Bow Street's GOLD Proxy Card FOR ALL of Bow Street's Nominees

Business Wire (06/10/19)

Bow Street LLC, which beneficially owns approximately 4.5% of the outstanding shares of common stock of Mack-Cali Realty Corp. (CLI), today announced that a third leading independent proxy advisory firm, Egan-Jones Proxy Services, has recommended that Mack-Cali shareholders vote on the gold proxy card. Egan-Jones recommends shareholders vote the gold proxy card for all of Bow Street's independent director nominees—Alan Batkin, Frederic Cumenal, MaryAnne Gilmartin, and Nori Gerardo Lietz—at Mack-Cali's annual meeting of shareholders to be held June 12, 2019. Two other proxy advisory firms, Institutional Shareholder Services Inc. and Glass, Lewis & Co., have also recommended that Mack-Cali shareholders vote on Bow Street's gold proxy card. Egan-Jones said, "We believe that a new set of qualified directors are needed to be elected in the Board, in order to conduct an evaluation of strategic alternatives that will lead to long-term value creation. In our view, the over-tenured members of the incumbent Board are long overdue for replacement due to their slack performance and poor oversight. ... In our view, the status quo of underperformance should be broken by electing new directors whose interests are aligned with the shareholders. We believe that an entrenched board contributed to the Company's rising debt, wide NAV discount, and below average stock performance. ... The Company's corporate governance structure should be fixed in order to restore credibility and integrity that will help Mack-Cali rebuild its reputation. If elected to the Board, we support the creation of a Strategic Review Committee composed of independent directors that will work on unlocking shareholder value."

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6/10/2019

Greece's OTE Faces Investor Push for Board Change

Financial Times (06/10/19)

Amber Capital intends to propose Alberto Horcajo, a former CEO of Telefonica Brasil, for an independent non-executive deputy chairman and board member at the Greek telecoms operator OTE (HLTOY) at the company's June 12 annual shareholders' meeting. Amber Capital has a 2% stake in OTE. Institutional Shareholder Services backs Horcajo's candidacy. Corporate governance in Greece is weak, despite the conditions set for the nation's second international bailout in 2013. Greece's creditors, the European Union and International Monetary Fund, instituted corporate governance reforms at the nation's largest banks, but the Greek capital markets commission was given the responsibility of making sure that other companies listed on the Athens stock exchange boosted the number of independent members on their boards and selected qualified board members to their audit committees. OTE's 10-member board should have four independent directors, but has only two. Deutsche Telekom, which has a 45% stake in OTE, wants Eelco Blok, a former CEO of Dutch telecoms operator KPN to serve as deputy chairman. Amber Capital managing director Giuseppe di Mino lauded OTE's Athens-based management team for the way they dealt with "very difficult market conditions" during the nation's eight-year recession, but said that corporate governance urgently needed a revamp. "We see inadequate board independence and insufficient knowledge among audit committee members ... Minority shareholders would be better represented by a deputy chairman that has not been sponsored by the controlling shareholder," Amber Capital said. Amber Capital is urging Deutsche Telekom to support Horcajo for deputy chairman.

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6/10/2019

Proxy Advisers Fight Back Over Criticism of Their Work

IR Magazine (06/10/19) Holt, Andrew

Proxy advisers, which have come under attack from think tanks, the Securities and Exchange Commission (SEC), and others over their influence on the behavior of issuers and investors, are setting the record straight with the development of a new web page. "There are calls—largely from corporate interests—for the SEC and Congress to impose new regulations on proxy advisers," says Steven Friedman, ISS general counsel. "As part of these efforts, there has been a distinct lack of facts and accurate information around the important role proxy advisers play in making sure investors have the critical information and data they need to support their proxy voting and governance activities. ... To help set the record straight, ISS established this web page to ensure that interested parties who want to learn about the true value of proxy advisers have a place to turn for factual, non-biased information. As the page demonstrates, the corporate interests pushing these new regulations on proxy advisers lack the broad support they claim to have. ... We welcome a robust and meaningful debate on proxy advisers and the valuable role they play in supporting the critical governance and stewardship needs of the institutional investors that are entrusted with helping hard-working Americans achieve their financial goals." The story may already be starting to change, with the SEC's investor advocate, Rick Fleming, lending a dissenting voice to the regulator's approach. "Some have criticized proxy advisers and allege that they have conflicts of interest in their business models, factual errors in their analytical processes, and a political agenda that supports social policies at the expense of investment return," Fleming says. "All of these things would cause me great concern, except for one thing: the investors who are paying for this service are not the ones who are expressing those concerns. ... I sincerely hope the commission will not prioritize a rulemaking that could impair the independence of proxy advice or lead to even greater inefficiencies in proxy voting."

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6/7/2019

'Responsible' Proxy Voting Is Going Mainstream

Barron's (06/07/19) Norton, Leslie P.

New voting rules from Parametric Portfolio Associates, an investment adviser owned by Eaton Vance (EV), mean Pimco and other well-known asset managers are opposing company management at annual shareholder meetings. Parametric—which votes the shares in companies owned by Pimco RAE funds and for institutions such as Prudential Financial (PRU) and Wilmington Trust—was long reluctant to support proposals that were not strictly about corporate governance, and it had two proxy voting policies, one for so-called responsible investors and another for all others. With more clients interested in responsible investing, which includes ESG (environmental, social, and governance), socially responsible, and impact investing, the firm adopted a one-size-fits-all approach to voting in 2018. The firm has not commented on specific votes in the 2019 proxy season. According to Parametric's guidelines, "Our guiding principles are that businesses must adhere to internationally recognized labor and human rights standards; be transparent around corporate practices involving weapons, repressive governments, public health and product safety; maintain accountability for lobbying and political contributions; and set and report on environmental performance goals related to the firm's long-term strategy. We will not support resolutions on matters best left to the board's discretion or addressed via legislation or regulation, or that would be unduly burdensome."

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6/6/2019

Both Leading Proxy Advisory Firms Support Fir Tree's Case for Change at JR Kyushu

Business Wire (06/06/19)

Fir Tree Partners, manager of certain funds that reported collective beneficial ownership of approximately 6.1% of the outstanding shares of Kyushu Railway Co., says that both Institutional Shareholder Services Inc. and Glass, Lewis & Co. support Fir Tree's case for change at JR Kyushu. ISS and Glass Lewis affirmed Fir Tree's case for change at the board level, citing several challenges the company faces related to capital allocation and the company's underperformance, as well as the need for relevant, independent fresh perspectives on the board. ISS recommended shareholders vote for Fir Tree's proposals regarding share buybacks, creating a three-committee structure, and aggregate director compensation, as well as for the election of Fir Tree's independent nominees—Toshiya Kuroda and Keigo Kuroda—to the JR Kyushu board at the company's annual meeting of shareholders to be held on June 21. Glass Lewis recommended voting for the election of Toshiya Kuroda, Keigo Kuroda, and J. Michael Owen, as well as for its aggregate director compensation proposal. Aaron Stern, managing director and partner at Fir Tree, stated: "ISS and Glass Lewis have clearly and rightfully recognized that change is needed at JR Kyushu. ... While ISS did not recommend shareholders vote for our nominee J. Michael Owen, we strongly believe that Mr. Owen brings important communications and investor relations expertise focused squarely on the real estate industry to the Board."

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6/13/2019

Stakeholder Capitalism for Long-Term Value Creation

Harvard Law School Forum on Corporate Governance and Financial Regulation (06/13/19) Klemash, Steve; Smith, Jamie C.; Doyle, Rani

A growing group of market participants is increasingly calling for companies to focus more on creating long-term value for multiple stakeholders. They believe that corporations are better able to deliver long-term value to shareholders when they understand and address the needs of their customers, employees, investors, regulators, and other key stakeholders. This marks a change from the view that the primary purpose of companies is to enhance and protect value for shareholders. Several market-driven and regulatory initiatives on long-term value illustrate this shift to the longer-term, broader perspective of value suggested in stakeholder capitalism. FCLTGlobal encourages a longer-term focus in business and investment decision-making, the Embankment Project for Inclusive Capital says financial expansion involves more than financial drivers, the Sustainability Accounting Standards Board has identified sustainability issues with long-term impact, the Securities and Exchange Commission has called human capital a mission-critical asset, and the International Organization of Securities Commissions believes ESG factors can be relevant to financial performance and corporate value. As boards examine these changing dynamics and expectations, they should consider these initiatives. Boards have an opportunity to strengthen their role by guiding management to focus on the long term, understand stakeholder objectives, and communicate how their companies create value.

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6/12/2019

Bill Ackman Misses the Mark With His Raytheon Deal Critique

Bloomberg (06/12/19) Sutherland, Brooke

Bloomberg Intelligence takes issue with Bill Ackman's critique of United Technologies' (UTX) planned merger with Raytheon (RTN). According to Bloomberg Intelligence, such a deal would create a $120 billion aerospace and defense giant. But Ackman, who has less than a 1% stake in the company, according to Bloomberg, is not impressed. Although Ackman's assessment that United Technologies' stock looks a little cheap right now is largely accurate, the discount is partially a reflection of the fact the Carrier building-controls and Otis elevator units are being divested. But the breakup won't happen until next year, leaving many investors disinclined to purchase a stock whose chief catalysts are up to a year away. That said, United Technologies is hardly paying a premium for Raytheon. The deal suggests an Ebitda multiple of 11.3 times for Raytheon, according to Wolfe Reserach analyst Nigel Coe, which is in line with where it was trading prior to the deal and matches its five-year average. The combined company will be robust enough to compete with Boeing (BA), but more diversification across commercial aircraft products and defense contracts will give it added resilience if either segment falters. Further, Raytheon's fairly untapped balance sheet and sound cash flow would help the United Technologies aerospace assets cut their debt load faster, positioning the merged company to invest aggressively in new technologies. Ackman's perspective that Raytheon is the inferior partner is at odds with what some experts say. Approximately 40% of the company's backlog comprises foreign purchasers, insulating it better than some of its rivals from the mercurial political positions taken at the federal level.

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6/9/2019

Once Shunned, Activist Investors Are Now Seeing a 'Wave of Change' in Japan

CNBC News (06/09/19) Franck, Thomas

Activist investing in Japan is on the rise, a gradual but marked change for the country. ValueAct will soon have a representative, Robert Hale, on the board of camera company Olympus (OCPNY) and Third Point has reportedly reinvested at entertainment giant Sony (SNE). "There is a wave of change in Japan," Fir Tree partner Aaron Stern told CNBC. "I see it just in the level of engagement: I used to be meeting with investor relations. Now I'm meeting with CEOs." Fir Tree has for years lobbied some of Japan's biggest conglomerates to reconsider how they spend their money. While the firm usually keeps its investments private, it has taken its campaign at one of Japan's biggest operators, JR Kyushu, public. Though the bid for a board shake-up may seem unremarkable to an average American investor familiar with personalities such as Starboard Value's Jeff Smith and Pershing Square's Bill Ackman, even incremental progress in Japan represents a big shift there. However, while some data suggest progress, Japan is still in the very early stages of a pivot toward more diverse boardrooms. According to Jefferies, more than 92% of directors at Japan's TOPIX 500 companies are Japanese males. The brokerage further determined that of inside director seats, 98% are Japanese men, only 0.5% are female, and 1.7% are foreigners. Last year, there were only 323 women in total on the boards of TOPIX 500 companies, which represents 0.6 women on an average 11-member board, Jefferies analysts concluded.

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6/7/2019

Board Development and Director Succession Planning in the Age of Shareholder Activism, Engagement and Stewardship

Harvard Law School Forum on Corporate Governance and Financial Regulation (06/07/19) Niles, Sabastian V.

Sabastian V. Niles, a partner at Wachtell, Lipton, Rosen & Katz, says company practices are evolving to meet the expectations of more vocal and engaged investors and ensure that the board continues to be a strategic asset to the company and the management team. In this new environment, he says boards should consider explicitly acknowledging in governance guidelines, board policies, and public disclosures "the importance of board development and succession planning as part of the company's commitment to strong governance and affirm its belief that such planning will strengthen the board's ability to further the best long-term interests of the company and its shareholders and other stakeholders and achieve the company's purpose." Niles adds, "Especially if the company has been the subject of public controversies, activist attacks or heightened scrutiny, [they should] consider potentially favorable 'signaling' aspects of changes in board composition and ensure that actions regarding board composition align with the broader narrative and messaging that the company seeks to convey." Among other things, the board should periodically review board composition to ensure it "reflects the knowledge, experience, skills and diversity that will best enable the board to fulfill its duties"; maintain a strong pipeline of candidates to consider for membership on the board; advance board diversity in the self-assessment, recruitment, and nomination process; and consider increasing the size of the board to accommodate new talent in advance of an incumbent director's departure.

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6/4/2019

The Business Case for ESG

Harvard Law School Forum on Corporate Governance and Financial Regulation (06/04/19) Boze, Brandon; Larcker, David F.; Zlotnicka, Eva

A new paper, The Business Case for ESG, examines how companies can incorporate environmental, social, and governance (ESG) factors into their decision-making processes, in part by considering how long-term investors do so. The paper takes as its basis the idea that many companies and investors have become too focused on near-term reported profits at the cost of the long-term sustainability of those profits. The paper presents a framework informed by the experience of long-term investor ValueAct Capital, which has worked to incorporate ESG-related factors in its decision-making process and its engagement with portfolio companies. The paper lays out how ValueAct incorporates ESG factors into its process by identifying relevant stakeholders and factors, isolating and evaluating potential risks, and supporting companies as they invest in their businesses to increase returns. ValueAct has set up this process because it finds that focusing on downside risk and earnings durability often inherently incorporates many ESG concepts. It finds that analyzing ESG factors can provide an effective risk management framework; offer a new lens for strategy development and growth opportunities; and address the demands of stakeholders such as customers, employees, and investors. The approach described suggests that opportunities exist for investors to earn competitive risk-adjusted returns with a favorable ESG focus.

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6/1/2019

Legal Tools for the Active or Activist Investor

Harvard Law School Forum on Corporate Governance and Financial Regulation (06/01/19) Phillips, Christine

Investor campaigns are becoming a prominent factor for the boards of listed companies, as environmental, social, and governance (ESG) issues and the discharge of stewardship responsibilities lead passive and institutional investors to become active and engaged. In the United Kingdom, draft regulations have been published to build on past amendments accordingly. The draft regulations work to implement the provisions of the European Union's Second Shareholder Rights Directive (SRDII) and to expand or improve policies defined in past regulations. Further, the draft regulations require additional ESG annual reporting obligations. The company must report on how it has engaged with suppliers and customers and on how it has complied with its duty to promote the success of the company for the benefit of members as a whole. Investors holding at least 5% of the company's paid up voting shares can requisition a general meeting and propose resolutions to be considered at the meeting, often for the removal of certain directors and the proposed appointment of new directors. These investors may also require the company to circulate a brief statement to shareholders relating to any matter proposed for consideration at a requisitioned meeting. According to the Disclosure and Transparency Rules, an investor must notify a listed company within two trading days if their interests in the company's shares reach, exceed, or fall below certain thresholds. The draft will also adjust the 2019 U.K. Stewardship Code such that asset owners and managers will have increased reporting requirements, which in turn are likely to result in increased engagement with the companies in which they have invested.

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6/1/2019

Chinese Governance Raises Red Flags

Financial Times (06/01/19) Riding, Siobhan; Thompson, Jennifer

Fund managers have long been concerned about environmental, social, and governance (ESG) standards in regard to Chinese companies. However, due diligence of Chinese assets will gain in importance as further capital is allocated to Asia's biggest economy and ESG investing moves into the mainstream—especially as MSCI lifts the waiting of A-shares, or Chinese domestic stocks, from 0.71% to 3.3% of its flagship emerging markets index by November. In April, Japan Exchange Group and the Shanghai stock exchange announced plans for closer links between the exchange traded funds listed in their respective markets, which also should increase international funding for Chinese companies. However, the liberalization of the Chinese market poses a challenge for international investors, with Lisa Beauvilain, head of sustainability at asset manager Impax, noting that "investing in China is different from investing in many other markets. As an investor, one needs to be very aware of that." A 2018 study by the Asian Corporate Governance Association reveals that 59% of foreign investors do not understand how corporate governance functions in China, and 68% say engaging with A-share companies is "very difficult." Beauvilain stresses that Chinese companies still have a "very different type of corporate culture than European or U.S. companies." One reason Chinese companies have not prioritized governance is the lack of an investor stewardship code. The country does have a corporate governance code, and while technically mandatory, it is not enforced. Other challenges are posed by the large number of state-owned enterprises and the lack of transparency in the way many Chinese companies operate.

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