5/2/2042

ISS Says Unions and Pension Funds Should Back Ancora

CNBC (05/02/42) Goswami, Rohan

Norfolk Southern (NSC)-invested unions and pension funds should back Ancora’s full seven-director slate at the railroad’s shareholder meeting later this month, two different Institutional Shareholder Services proxy advisory services said. ISS’ Taft-Hartley Advisory Services and Social Advisory Services, which focus their recommendations on regulated unions and socially responsible investors, respectively said in their reports, that an Ancora majority would help address “negligence” by the current board and address its “serious concerns with accountability.” “The proxy contest is centered on a debate over which management team is best suited” to lead the company forward,” both reports said. “It is therefore important to provide the dissident with a voice that is loud enough to have its case for management change appropriately considered.” The recommendations also voiced their support for Ancora’s CEO pick Jim Barber as a “credible” director and chief executive, undercutting criticisms that his lack of railway experience was a liability. The former UPS executive appears “to be a capable candidate with experience and skills that should be transferable to the railroad industry,” the reports said. ISS’ main advisory arm and Glass Lewis, the two proxy giants, had already said that shareholders should support most of Ancora’s nominees at Norfolk Southern’s May 9 meeting. Glass Lewis endorsed six of Ancora’s director picks, including Barber. ISS earlier endorsed five of Ancora’s nominees, withholding support for Ancora’s proposed CEO Barber, but noting that he would likely be a capable executive as well. Thursday’s news “represents an important message to union retirement plans and firms prioritizing both socially responsible investments and enhanced value,” a statement from Ancora said. The statement added that Ancora’s three-year precision-scheduled railroading strategy “differs greatly from Norfolk Southern’s resilience railroading model and has worked well at the other four publicly traded Class I railroads." ISS’ two more tailored recommendations carry particular weight in light of the derailment in Ohio, which caused more than 100,000 gallons of toxic chemicals to be released into the environment. The recommendations also carry heft because of the outsize influence that unions have in the railroad industry. Union support has been divided between management and Ancora. Two different Teamsters unions are backing Ancora, around 42% of NSC’s unionized workforce. Another coalition of unions is backing management.

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6/18/2024

Toyota Shareholders Re-elect Chair Despite Governance Concerns

Reuters (06/18/24) Shiraki, Maki; Leussink, Daniel

Toyota (7203) Chairman Akio Toyoda and nine other members of the automaker's board were re-elected at an annual general meeting on Tuesday, with shareholders shrugging off concerns about governance and certification test scandals. Two leading proxy advisers had recommended against Toyoda's re-election. But his re-appointment was widely expected given shareholdings in the automaker owned by other Toyota group firms, record business results and his popularity among Japanese retail investors. That said, any big drop in shareholder support for Toyoda will not only be embarrassing but could spur further action on governance reforms. Analysts have cited an acceleration of efforts to unwind cross-shareholdings as one possible outcome. Toyoda's approval rating fell to 85% last year from 96% in 2022. Since then, the world's biggest automaker has been bedeviled by a spate of safety and other certification testing violations at group firms including small car maker Daihatsu as well as at its parent company. Proxy adviser Institutional Shareholder Services (ISS) had taken issue with the way the automaker has dealt with problems. New York City's public employee pension funds, for example, agreed with that stance and voted against Toyoda. "Setting a tone at the top is critical," Michael Garland, who oversees corporate governance for the funds, said in an emailed statement. Glass Lewis, which had recommended that Toyoda not be re-elected for a second year in a row, said that he was responsible for the board's lack of independence and also cited concerns about its strategic shareholdings and return on equity. But Toyoda, who is the grandson of the company's founder, remains deeply popular among retail investors, which account for 12.6% of the automaker's shareholders. Last business year's record profits and a strong stock performance have also worked in his favor. Shareholders on Tuesday also rejected an investor proposal urging greater disclosure of climate lobbying that had been opposed by Toyota.

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6/18/2024

Starboard Sues Autodesk in Bid to Mount Proxy Fight

CNBC (06/18/24) Goswami, Rohan

Starboard Value sued software maker Autodesk (ADSK) on Monday to delay the company’s annual meeting and reopen the board nominating window and allow the activist to mount a proxy fight. Activists can typically only begin a proxy fight, involving the nomination of a slate of directors to replace the existing board, if they submit their proposals within a specific window. Starboard confirmed in a letter on Monday that it has a stake in Autodesk valued at more than $500 million. Autodesk shares rose 6.5% on the disclosure. Starboard said in its suit that Autodesk, in “an apparent effort to prevent a proxy challenge,” deliberately waited until that window had closed before disclosing to shareholders that it would delay its annual report and had launched an internal investigation into accounting irregularities and financial misreporting. “Manipulating corporate governance and disclosure obligations to give stockholders only one choice of directors effectively gives them no choice at all,” Starboard said in its complaint, which was filed in Delaware Chancery court. Autodesk began probing irregularities around how it reported operating margin and free cash flow in early March. By March 8, Autodesk had informed the U.S. Securities and Exchange Commission of the probe, regulatory filings show. The company waited until April 1 to tell shareholders about the investigation, filings show, which was more than a week after the nominating window had closed. The probe found that Autodesk executives made significant business decisions around how it billed customers and spent money to improve its free cash flow and operating margin. The findings were announced on May 31, alongside the replacement of CFO Deborah Clifford. “In a calculated scheme to ward off any potential challenges to their Board positions through a proxy contest, the incumbent directors failed to divulge these egregious issues regarding accounting misdirection and disclosure problems during the nomination window,” Starboard said in its suit. Starboard began speaking with Autodesk’s board about those issues and the broader underperformance of the business shortly after the findings were publicized. An Autodesk representative referred CNBC to its prior statements on the matter, where it said it would refuse Starboard’s requests to reopen the nominating window and delay the annual meeting. “Starboard is seeking to leverage a now-completed internal investigation that resulted in no financial restatement as a pretext for re-opening the advance notice period,” the company said in the statement.

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6/18/2024

AmeriServ Negotiates Settlement with Activist Investor Group

The Tribune-Democrat (PA) (06/18/24) O'Reilly, Russ

AmeriServ Financial Inc. (ASRV) has negotiated a settlement with an activist investor to end a yearlong campaign by the group to gain seats on AmeriServ’s board of directors and oust the bank’s executive management. Last May in federal court, U.S. District Judge Stephanie L. Haines, of the Western District of Pennsylvania, denied the investor group, Driver Opportunity Partners, an injunction that would have allowed its members to run for election to AmeriServ Financial Inc.’s board of directors during its annual meeting of shareholders. The group subsequently appealed that decision and litigation has been ongoing. In addition, the group has proposed another slate of candidates for the 2024 annual meeting of shareholders scheduled for August. However, AmeriServ Financial Inc. announced a cooperation agreement and $1.76 million settlement agreement Friday with Driver Opportunity Partners that ends the proxy war. The agreement includes the investor group’s withdrawal of its recent notice of nomination of director candidates and the group’s voluntary dismissal of all outstanding litigation against AmeriServ. AmeriServ said that approximately 68% of the $1.76 million settlement to Driver Opportunity Partners will be covered by directors’ and officers’ liability insurance policies held by the company. Driver Opportunity Partners has agreed to a perpetual standstill, according to a press release from AmeriServ, which provides that Driver Opportunity Partners will not attempt to nominate director candidates at AmeriServ or bring litigation against the company at any time after the effective date of the agreement. AmeriServ and Driver Opportunity Partners have also executed a stock purchase agreement under which AmeriServ will acquire the approximately 628,000 AmeriServ shares held by Driver Opportunity Partners for a price equal to the five-day trailing average stock price prior to the effective date of the Stock Purchase Agreement. That stock purchase agreement benefits Ameri- Serv shareholders as Driver’s shares will be acquired at a price below tangible book value, AmeriServ said in its press release. AmeriServ Chairman of the Board J. Michael Adams Jr. said AmeriServ is pleased to move forward from its dealings with the activist investors. “We are pleased to have achieved closure in these matters and look forward to continuing to focus on executing our strategic business plan for the benefit of our shareholders, customers, employees and the communities we serve,” Adams said. “Our strong, well-rounded Board includes individuals with a diverse array of professional experience that are highly relevant to AmeriServ’s business and strategy, and we remain committed to enhancing value for our shareholders and all our stakeholders.”

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6/18/2024

HKEX Announces Consultation on Proposed Changes to Corporate Governance Code

Morgan Lewis (06/18/24)

The Hong Kong Stock Exchange (HKEX) recently published a consultation paper proposing changes to the Corporate Governance Code and related amendments to the Listing Rules. The proposed changes represent the continuous effort by the HKEX to upgrade its corporate governance framework. The HKEX’s proposals apply equally to both issuers listed on the Main Board and GEM, the secondary board of the HKEX. The HKEX’s key proposals include board effectiveness improvement. The exchange's focus is on the board composition of a listed issuer and ensuring a suitable balance of skills, experience, and diversity of perspective. The HKEX proposes issuers without an independent board chair be required to designate one independent non-executive director (INED) as a Lead INED. Mandatory continuous professional development will be introduced, requiring all directors to receive training on a wide range of specified topics each year. Board performance review must be conducted at least once every two years, on a “comply or explain” basis, with specific disclosure in the Corporate Governance Report on the scope of performance review conducted as well as the process and findings of the review, including any areas of improvement identified and measures taken or planned to address the findings. Issuers are required to maintain and disclose a board skills matrix in the Corporate Governance Report with enhanced disclosure, covering the current mix and further skills that the board is looking to acquire, if any. This new requirement seeks to ensure that the qualifications and skills of the directors are aligned with and support the long-term strategic goals of the issuer. A hard cap will be introduced on overboarding, with a three-year transition period. The new rule is proposed to apply beginning in 2028. The consultation paper also focuses on board independence. The HKEX proposed to introduce a hard cap on the tenure of long-serving INEDs, with a three-year transition period similar to the proposal on overboarding. Further, the HKEX proposed to introduce a two-year cooling-off period, after which the long-serving INED will be allowed to serve as an INED on the board of the same issuer. During the cooling-off period, the INED must also not serve as a director of the issuer’s holding company or any of their respective subsidiaries or any core connected persons of the issuer. The HKEX also proposed to extend the disclosure requirement on the length of tenure to every director, not just the long-serving INEDs, and their current period of appointment in the Corporate Governance Report of the listed issuer. While the HKEX seeks to introduce many significant changes to the Corporate Governance Code, it is expected that the exchange will continue to periodically enhance the corporate governance framework for Hong Kong listed companies in the coming years.

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6/18/2024

U.K. Fund to Keep Keisei Stake Even if Tokyo Disney Sale Rejected

Nikkei Asia (06/18/24) Yamashita, Akira

U.K. hedge fund Palliser Capital will remain invested in Japan's Keisei Electric Railway (KELRF) even if shareholders vote down its proposal for the train company to pare its stake in Tokyo Disney Resort operator Oriental Land (OLCLY), according to the fund's founder. Palliser, which owns less than 2% of Keisei, is calling for the company to reduce its interest in Oriental Land to less than 15% by the end of March 2026. It has argued that cashing in some of the shares would free up funds for growth in the tens of billions of yen (1 billion yen equals $6.3 million). "We've been invested for nearly three years," during which time the fund has been asking Keisei to cut the stake, said Palliser founder James Smith. But the fund "will still be committed to the long-term success of this company" even if the proposal is voted down at the June 27 meeting, Smith said. The fund is not asking for a change in directors as part of its proposal, which has been "very respectfully and politely put forward after years of engagement," said Smith. Palliser is proposing amending the articles of incorporation, which would require a two-thirds majority vote at the shareholders meeting. While acknowledging that this is "a high threshold, no question," Smith said that "even if we get a 50% or 40%, this is a lot." "That will perhaps provide the impetus for something more in the next [annual general meeting] ... for further change," Smith added. U.S. proxy advisory firms Institutional Shareholder Services and Glass Lewis have announced their support for Palliser's proposal. "This is almost like a test case, to see if the domestic institutions are ready to put the final piece of the jigsaw in the puzzle," Smith said. Keisei has made clear its opposition to the proposal, saying its Oriental Land shares are "valuable assets that can serve as a source of financing for the large-scale investments necessary to enhance the Company's corporate value over the medium to long term."

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6/17/2024

Starboard Value Has Stake in Autodesk

Wall Street Journal (06/17/24) Thomas, Lauren

Starboard Value has a roughly $500 million stake in Autodesk (ADSK) and is pushing for changes at the design-software maker, according to people familiar with the matter. Starboard met with Autodesk executives in recent weeks to discuss concerns related to the company’s operations, corporate governance and the handling of a recent accounting probe that tanked the stock. The activist thinks the company should improve its margins and make changes to its board, the people said. Autodesk has a market capitalization of nearly $50 billion. Shares of the San Francisco-based company are down 7% so far this year. Autodesk shares have fallen steeply since touching a record high in August 2021. Shares took a tumble in April when the company delayed its annual financial report and disclosed it had opened an investigation into its accounting practices around free cash flow and operating margins. Starboard in private conversations with Autodesk criticized the company for not disclosing the investigation and other material updates until after the company’s window for shareholders to nominate director candidates closed in late March, the people familiar with the matter said. A securities filing shows Autodesk’s board and the Securities and Exchange Commission were aware of the probe in early March, weeks before Autodesk alerted shareholders. Starboard is considering taking legal action to ask for Autodesk’s director-nomination window to be reopened and for the company’s annual shareholder meeting, currently set for July 16, to be delayed, the people added. Later in May, Autodesk said the monthslong investigation stemmed from how the company was accounting for billings from multiyear software contracts. The delay in Autodesk’s annual filing stoked investors’ anxiety, but the company said the probe didn’t result in any adjustments to its financials. Its investigation did find that decisions about spending, collections and accounts payable were informed by how they were going to affect certain financial metrics. Late last month, Autodesk named its previous audit committee chair, Betsy Rafael, as interim chief financial officer. She succeeded Deborah Clifford, who moved to the role of chief strategy officer. The software maker said in a filing earlier this month it is cooperating with separate investigations by the SEC and the Justice Department following its internal probe. The company’s current chief executive, Andrew Anagnost, took over the role in June 2017 after a stint as interim co-CEO. Anagnost succeeded Carl Bass, who resigned in February 2017 after Autodesk faced a pair of activists that secured board seats.

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6/17/2024

Masimo Board of Directors Files Definitive Proxy and Issues Letter to Stockholders

Business Wire (06/17/24)

Members of the Masimo Corporation (MASI) Board of Directors issued a letter to stockholders in connection with its definitive proxy materials filed on June 17, and the company’s Annual Meeting of Stockholders to be held on July 25, 2024. The letter highlights what in our view are the significant risks to the value of Masimo if control of the Board is ceded to Politan Capital Management, which we believe wants to eliminate some of the key people and practices that have fueled Masimo’s long-term innovation and growth and supported its premium valuation multiple. The letter also details the company’s excellent positioning to continue to drive above-market organic growth and meaningful margin expansion, while highlighting the expertise and experience of Masimo’s highly qualified director nominees. To protect stockholders’ investment and the Company’s future, the Board strongly encourages stockholders to vote FOR Masimo’s exceptional director nominees, Joe Kiani and Christopher Chavez. The letter states, "At the upcoming Annual Meeting of Stockholders, you face a choice: electing your Board’s nominees – Joe Kiani, the founder, Chairman and CEO of Masimo, and Christopher Chavez, a highly experienced and independent former CEO and director of public medical device companies – or adding two more nominees hand-picked and paid by Politan, thereby ceding control of Masimo to Politan. This election is critical to the future of Masimo and the value of your investment in our stock. As independent directors who have served on Masimo’s Board alongside Politan directors Quentin Koffey and Michelle Brennan, it’s clear to us that they have no understanding of Masimo’s business. Innovation and revenue growth have supported Masimo’s longstanding valuation premium to medical technology peers, but we believe Politan wants to eliminate some of the key people and practices that drive Masimo’s innovation and growth. The risk of their agenda is immense. Masimo has earned its valuation through innovation that has driven consistent organic growth, consistently taking share in existing markets with clinically superior products and creating new markets with new technologies and applications. Mr. Kiani leads this process with a team that drives and is driven by him. We are concerned that replacing this approach and team with Politan’s inexperience and what we believe is a misguided agenda will destroy Masimo’s innovation engine, slow organic growth, and dramatically depress Masimo’s valuation multiple. A year ago, Politan rebuffed Masimo’s assertion that Politan was seeking control of the Company as 'absurd.' Now, Politan is doing exactly that—refusing to settle its second consecutive proxy contest for anything less than a majority of Politan-nominated directors on the Company’s Board. Your vote on the GOLD card FOR Masimo director nominees Joe Kiani and Christopher Chavez will help ensure that Masimo continues delivering on its business plan to create value for stockholders and improve the lives of patients and customers. With your support at the upcoming Annual Meeting, we are confident that we can complete the separation of Masimo’s consumer business, continue to advance our strong innovation pipeline to support our valuation premium, consistently meet or exceed revenue and earnings expectations, and continue to seat highly qualified and independent directors to expand the Board. Since last year’s Annual Meeting, Masimo has weathered the post-Covid market environment and returned to growth in its healthcare business, gained significant market share, and successfully enforced our intellectual property against Apple at the U.S. International Trade Commission. Our Board and management team also undertook a thorough engagement program with our stockholders – we listened and we acted. As a result, we have undertaken a process to separate our consumer business in a manner that we believe will maximize value for our stockholders. We accomplished all of this despite what we view as obstructive behavior by the Politan directors."

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