Call +1 (212) 223-2282
Featuring standstill agreement and nomination deadline windows, provisions and timelines
Featuring all breaking news and in depth articles and editorial press coverage pertaining to shareholder activism and corporate governance.
A new searchable database featuring the comprehensive voting records of all top institutional investors. This includes every proposal that was up for a vote and how the investor voted.
Elliott’s Stake In Softbank
Unilever Plc (UL) Chief Executive Alan Jope's efforts to acquire GlaxoSmithKline (GSK) and Pfizer’s (PFE) consumer health division have failed. Unilever management has expressed confusion, skepticism, and straight-out opposition to the attempts, according to several shareholders. Unilever’s share price fell as much as 11% before the company announced it would not be making a fresh offer. The reaction to the bid has plunged the FTSE 100 consumer goods group into its biggest crisis since it fought off a hostile approach by Kraft Heinz (KHC) five years ago, calling into question Jope’s management and blowing open a debate on how Unilever can boost its sluggish performance. “Unilever surely needs to address the fact that five years later the share price is only at the level of that (Kraft Heinz) bid,” said Terry Smith, a top-15 shareholder, in a letter to investors on Thursday. “Why then should we trust this management and board with preserving value for shareholders?” The GSK acquisition was intended to accelerate sales growth by applying Unilever’s marketing and distribution machine to health brands, but instead it prompted an outcry. Investors took fright at the scale of the potential deal, which could have pushed up Unilever’s debt to 4.5 or five times earnings. But not all were opposed to its general direction, said Bruno Monteyne, an analyst at Bernstein. Bert Flossbach, founder and chief investment officer at Flossbach von Storch, an €80 billion asset manager that is among Unilever’s top 10 shareholders, said: “Jope is in a tough position because Unilever has been a lame duck for a long time. But if there is nothing to buy at a reasonable price, then don’t buy anything.” The GSK bid has further shaken confidence in the ability of the chief executive and his chief financial officer, Graeme Pitkethly, to deliver change. “They’ve shown their hand: they clearly don’t have confidence in the existing business, otherwise they wouldn’t have been contemplating this,” said an investor who asked not to be named. Smith and others have also criticized Unilever’s focus on its sustainability credentials. Unilever indicated this week that it would be open to other large consumer health deals. But analysts and rating agencies played down the prospect of an acquisition or merger on the scale of the GSK division after poor outcomes from other recent large consumer deals.
Yatra's (YTRA) appointment of Sabre's (SABR) Chief Commercial Officer Roshan Mendis as an independent board member should satisfy Australian investment firm Maguire Investment Trust, which has been pushing to operationally revamp the Indian corporate travel agency. Yatra also entered into a cooperation pact with Maguire, which owns 7.4% of the company, where it will "abide by certain customary standstill and voting provisions for a period of 18 months from the date of signing of the agreement." In a July 21 open letter, Maguire said Yatra had "an extremely shareholder-unfriendly corporate governance profile and a lack of transparency in its executive compensation packages." The firm stated reservations about the company's corporate governance and executive compensation practices. "We have already suggested one extremely capable candidate who the board failed to even offer an interview, let alone legitimately consider appointing to the board," Timothy Maguire wrote. "We believe a change in tone at the top is essential and the board should immediately solicit shareholder recommendations for highly qualified director candidates to be named as nominees for election at an annual general meeting of shareholders scheduled for 2021." Maguire additionally said he wanted to drive Yatra's stock price on the Nasdaq exchange to at least $6 per share in 2022, and realize $100 million in sales. It is presently trading at $1.84. Mendis will replace Sean Aggarwal, who has left the board "due to other pressing commitments." Yatra further stated that "his retirement is not the result of any disagreement with the company or any of its affiliates on any matter relating to the company's operations, policies, or practices." ProKonsul Consulting President Gaurav Sundaram said Mendis' appointment signals a resolution of a potential clash with Maguire. "The failed Ebix [EBIX] acquisition has dented confidence, and for Yatra to succeed in the post-Covid world it will need additional management resources that can leverage the complexities and opportunities of the e-commerce and business travel domains," he said. "Such additions will allow Yatra to quickly increment growth and cross-selling synergies inherent in its business model." Yatra is also planning to take the company public in India in the first half of this year, and use the proceeds to buy up other local companies and fortify its balance sheet. Yatra racked up a $1.9 million loss for its 2022 second quarter, and is refocusing on the cargo sector, seeking to churn out $4 million to $5 million in freight-forwarding revenue this year. Taiwan's Fuh Hwa Securities Investment Trust Co., Ltd. has obtained a 4% interest in Yatra, according to a Jan. 14 SEC filing. "I look forward to working with Roshan and the other directors on our board, as we continue advancing our multi-channel strategy and deliver results for shareholders," said Yatra CEO Dhruv Shringi. "Amidst ongoing industry disruption and evolving consumer trends, we believe we are poised to capitalize on the accelerated shift by consumers to booking travel online and well positioned to deliver on growth and profitability post the pandemic."
Voss Capital LLC, a significant shareholder of Griffon Corp. (GFF), has announced that it has issued a presentation outlining Voss’s history of engagement with the company, the ongoing issues with Griffon’s conglomerate structure and corporate governance, and opportunities to create value through the addition of Voss's highly experienced candidate to Griffon Corp.'s Board of Directors.
India's biggest companies must split the position of chairman and managing director by March 31. The chairman and the managing director, or chief executive officer, can't be related to each other, and the position of chairman must be held by a non-executive member. The new mandate from India's securities regulator SEBI takes effect April 1 and applies to the top 500 listed companies by market capitalization. The regulator issued a notification of a requirement to separate the roles in 2018, but delayed the rule after receiving feedback from India's private sector. SEBI says splitting the chairman and managing director position will help improve corporate governance in India. The regulator says the new provision is not intended to weaken the position of promoters. Market observers say the new mandate is most likely to impact family-owned businesses.
Netflix (NFLX) said in its fourth-quarter earnings report that it will propose the removal of a supermajority provision that has required 66% of the votes for board member changes. "While our current governance structure has served our shareholders extraordinarily well with a sustained period of substantial growth, we've clearly proven our business model," the company said. "So the Netflix Board has decided to evolve to a more standard large-cap governance structure and will recommend several changes at our next annual meeting." Netflix added that it will permit shareholders to call special meetings and amend the voting standard for its directors in uncontested elections. Stockholders have been demanding the change to a simple majority for years. Five times since 2013, they have backed a proposal at the annual meeting to eliminate the supermajority requirement. In its proxy filing ahead of the last shareholder meeting in June, Netflix stated: "We believe that in the current dynamic business environment, the supermajority we have in place is appropriate to increase stability in our operations, while still being set low enough for stockholders to have a voice on issues where there is strong consensus. We will continue to monitor and evaluate this issue." The new notice was posted on the same day Netflix reported fourth-quarter earnings and revenue that topped estimates, although shares plummeted almost 20% in after-hours trading on decelerating subscriber growth.
DIRTT Environmental Solutions Ltd. (DRTT) provided an update on the path forward in responding to the Nov. 17, 2021, requisition issued by 22NW Fund, LP. The company announced that while it remains focused on realizing its potential as its top priority, it believes it has no choice but to file an application with the Alberta Securities Commission against the investor and another shareholder for breaching take-over bid and early warning reporting provisions under applicable Canadian securities laws, in order to protect minority shareholders and ensure that all shareholders are provided with full and accurate information. 22NW’s refusal to meet with the company regarding its requisition raises fundamental concerns, including its credibility. In a recent press release, 22NW claimed it had delivered executed documents from the beneficial owners of a majority of DIRTT’s outstanding shares in support of the election of 22NW’s six candidates nominated for election pursuant to the requisition. DIRTT is committed to ensuring that all shareholders have the benefit of full and accurate information before votes are counted at the annual and special meeting of shareholders.
Terry Smith, a top Unilever (UL) shareholder, has launched a new attack against the company's management. Smith described Unilever's rejected bids for GlaxoSmithKline's (GSK) consumer health division as a "near-death experience" and urged management to focus on improving the existing business rather than targeting big acquisitions. Smith set out his view in a wide-ranging letter to Unilever's investors on Thursday. The Financial Times has viewed a copy of the letter. In it, Smith and his head of research, Julian Robins, criticized the company's management, strategy, communication with shareholders, and "penchant for corporate gobbledegook." Unilever's share price has underperformed compared to its rivals in recent years.
Unilever (UL) has come under fire from a group of investors for its unhealthy food products, following a week of intense criticism that has seen the FTSE-100 firm’s share price slide as much as 10%. Eleven asset managers representing $215bn (£158 million) in assets have attacked the firm for a health “blind spot” as they filed a resolution calling on the company to set more ambitious health targets. Ignacio Vazquez, senior manager at shareholder group Share Action, which is backing the asset managers, said: “Unilever has long been a sustainability leader. Some even criticize it for being too focused on ESG.” Yet the health and profile of the food and drink products remain a blind spot. The resolution filed by the investors has urged the firm to disclose the current proportion of sales linked to healthier products, set targets to “significantly increase” this share by 2030 and called for an annual review of its progress.
Icahn Enterprises Chairman Carl Icahn appeared on CNBC’s “Fast Money” on Thursday in honor of the 15th anniversary of the program. Icahn expects inflation to cause problems for the U.S. economy, "but I certainly don’t let it, you know, bother my investment philosophies and activism and I just keep going but I think it’s and we keep a pretty big hedge on." He says Securities and Exchange Commission (SEC) Chair Gary Gensler's effort to shorten the 13D filing window "could be one of the last nails in the coffin. I think the SEC is doing a lot of good things and I think Gary Gensler is doing good things. I think there’s a lot of things at Wall Street, that should be cleaned up. ... But I think activism is a very important break on corporate America." He notes that with Icahn Enterprises, "we have permanent capital, but what you are killing is the smaller activists who, you know, if you don’t give him time to accumulate a stock position, you know, up to 10%, up to 15% even up to 5%, ... there’s no incentive to spend the great deal of money that you have to spend to do a proxy fight to try to get these guys through."
On Jan. 20, shares of PTC India Financial Services Ltd. fell more than 18% after three of its independent directors—Kamlesh Shivji Vikamsey, Thomas Mathew, and Santosh Nayar—resigned, citing lapses in corporate governance. In his resignation letter, Mathew said independent directors had repeatedly notified the company about serious lapses in corporate governance. "I have placed on record many times—specially over the last few months—my deep displeasure about the lack of appropriate information being made available to the board," he said. The letter highlighted such issues as the appointment of a full-time director, non-disclosure of a forensic audit report regarding a loan account, and unilateral changes in loan conditions without board approvals. Mathew added that the company did not address corporate governance issues reported by the previous chairman, Deepak Amitabh. The company said it rejects the allegations from the directors.
Sources told CNBC's David Faber that Carl Icahn owns a 4% stake in International Flavors & Fragrances (IFF), whose shares rose 2% after the news broke. Icahn also recently acquired an interest in Southwest Gas (SWX) as he presses the utility to dump its acquisition of Questar Pipeline. Meanwhile, IFF named Frank Clyburn the company's CEO starting Feb. 14, succeeding Andreas Fibig. IFF's 2019 merger with DuPont's (DD) nutrition and biosciences unit established a $45 billion consumer behemoth. The company's shares have declined about 6% in the year to date after rising 38% in 2021.
RWE (RWE) investor ENKRAFT criticized the German utility for not pushing aggressively enough to sell its brown coal mining and power division after CEO Markus Krebber emphatically supported such a move. ENKRAFT claims a sale of that business could double the company's value. "RWE's management is failing to take important initial steps to pave the way for a separation of RWE's non-core lignite business," lamented ENKRAFT Managing Director Benedikt Kormaier. He further elaborated, "The lacking sense of urgency of management around the most important strategic and financial topic of RWE is frightening." Krebber said an early phase-out of lignite demanded a vast expansion of renewables and solutions to guarantee the security of energy supplies, and to support affected workers. "That is our path. And that's also how the valuation uplift will come about, just perhaps a little later," he remarked when queried about ENKRAFT's view that a sale could raise RWE's value. Lignite constituted 8.5 gigawatts, or over a fifth, of RWE's generation capacity at the end of 2020, and the company's holdings include three opencast lignite mines. In 2021 ENKRAFT disclosed 500,000+ shares in RWE which gives it the right to request items be added to the agenda for the next annual general meeting, scheduled for April 28. RWE shares were up 2.1% on Thursday after German monthly manager magazin said ENKRAFT was considering putting items on the agenda, including proposing the ouster of supervisory board members.
Pershing Square Holdings Ltd. has changed the date of its virtual annual PSH Investor Presentation from Jan. 27 to Feb. 10. Event and registration details will be posted on the Pershing Square Holdings on Jan. 24.
BHP Group Ltd. (BHP) is on track to win shareholder support to unify public holdings in a single Sydney listing, a move that could ease the global miner’s return to big deals and will see the U.K. lose one of its biggest companies. Both London and Australian investors overwhelmingly approved the move, according to proxy votes. A final announcement on the outcome is expected later on Thursday. Confirmation of the vote will see BHP move to a primary listing in Australia. It will also see the U.K.’s FTSE 100 lose its third-biggest company. Collapsing its dual listing is part of a series of sweeping changes at the world’s biggest miner since Chief Executive Officer Mike Henry took over in early 2020. Henry said last month that the share unification would make the company simpler and more agile. Once mining’s most aggressive dealmaker, BHP is reportedly mulling a return to large-scale M&A and has expanded its dealmaking team, including in London. Proxy votes showed over 96% of both U.K. and Australian shareholders favored dropping the current dual-listing structure. The proposal needs 75% backing from each group to get the green light. The miner has been reviewing the structure for several years after Elliott Management Corp. pushed BHP to reorganize as a single company. Elliott argued that removing the dual listing would eliminate the discount between its shares in London and Sydney, reduce costs and bolster transparency. Under the current arrangement, BHP has two headquarters and two main stock market listings, but is run as a single entity under the same management and board. The company first announced the change to its structure as part of its annual earnings results in August. After the change, the miner will retain secondary listings in London, Johannesburg, and New York.
Voss Capital LLC, a significant shareholder of Griffon Corp. (GFF), has announced that a second director nominee has informed the company that he must withdraw from the proxy contest at Griffon due to a sudden reversal of approval from his employer. Voss issued a statement urging Griffon’s board to investigate whether anyone from Griffon was involved with two nominee withdrawals. In the coming days, Voss Capital will be presenting a detailed series of corporate governance and financial failures on the part of Griffon, as well as a more comprehensive plan for value creation. Voss encourages shareholders to vote the BLUE proxy card to advocate for true shareholder independence.
Kohl's Corp. (KSS) neared session highs, up about 6%, at least partly after a report that the company retained Goldman Sachs (GS) following engagement by Macellum Advisors. TheDeal.com reported the retention of Goldman after Macellum reiterated a call for board changes at the company or a potential sale. The investor has also told the retailer that there are potential acquirers that have shown interest in the company. TheDeal.com didn't appear to specify if Goldman was hired as an adviser or more for defense. Macellum and some other hedge funds threatened a proxy fight last year, though in April Kohl's announced that it entered into a settlement agreement with a group of investors, including Macellum. The Macellum move also comes after Engine Capital sent a letter to Kohl's, pushing the department store chain to sell itself or to separate its e-commerce business.
The Securities and Exchange Commission (SEC) is pressing companies on their voluntary climate change disclosures as it moves closer to mandating corporate reporting on greenhouse gas emissions and climate risks. The regulator asked subsidiaries of Morgan Stanley (MS) and other companies to report any risks they faced from climate change in 2021 or better describe them, according to a Bloomberg Law review of agency letters to the companies. The frequency of the SEC letters has increased after Democrats took control of the commission last year and then-Acting Chair Allison Lee dusted off climate disclosure guidance from 2010. The SEC is expected to publish several more letters to companies while it works on new rules that would mandate climate disclosures in their annual 10-K reports or elsewhere.
Encompass Health Corporation (EHC) announced on Wednesday that it will spin off its home health and hospice business into a new publicly traded company christened "Enhabit Home Health & Hospice." The company stated that its board "believes that the separation of its inpatient rehabilitation business and the [home health and hospice] business into two independent, publicly traded companies will provide significant benefits to both businesses and their stakeholders." The separation is expected to take place in the first half of 2022, dependent on certain regulatory conditions. Encompass Health thinks a spinoff will enhance the strategic and operational flexibility of its core business units while widening the scope of its management teams. It should also permit each business to embrace a capital structure and investment policy that is optimally suited to its financial profile and requirements. Encompass Health shareholders are expected to obtain tax-free shares of Enhabit. The group currently owns 145 hospitals, 251 home health locations, and 96 hospices, while its health and hospice segment recorded revenues of roughly $273.9 million in the third quarter of 2021. Encompass Health disclosed in its last earnings call in October that it would favor a spinoff over a merger or sale, but investor Jana Partners pushed back in December, calling on it to re-engage with other parties that could make a merger practical. "Jana Partners and other shareholders believe combining the home health and hospice business with another industry player would better position the company to manage more challenging conditions in the healthcare industry, including a shortage of nurses," reported Reuters. Jefferies analysts wrote in a note that the spinoff announcement should assuage investors' uncertainty, "and prompt [them] to revisit and re-run their sum-of-the-parts analyses, which, given where comparable companies are trading, point to potential stock upside to $90 per share." Leading Enhabit will be CEO Barb Jacobsmeyer, who previously ran Encompass Health's in-patient rehab segment and replaced April Anthony. Crissy Carlisle, Encompass Health's former head of investor relations, has been tapped as the new company's CFO.
Securities and Exchange Commission Chair Gary Gensler said Wednesday that the regulator is considering tighter disclosure deadlines for hedge funds building sizable stakes in companies. The agency is considering changing the rules under which hedge funds disclose that they have acquired 5% of a public company’s stock, Gensler said. The Schedule 13-D filing is currently set at 10 days, which gives hedge funds more than a week to keep buying in secret. “I would anticipate we’d have something on that,” Gensler said, adding that he is worried about “information asymmetry,” because the public doesn’t know there’s a big player buying up shares during the 10-day period. “Right now, if you’ve crossed the 5% threshold on day one, and you have 10 days to file, that activist might in that period of time, just go up from five to 6% or they might go from five to 15%, but there’s nine days that the selling shareholders in the public don’t know that information,” Gensler said. The 13D disclosure rule was passed in the 1960s to protect corporate management by informing them of activities from activist shareholders and corporate raiders. Critics of the rule have claimed that the 10-day deadline is already too tight and that hedge fund managers have a tougher time making a profit if they must reveal their strategies to the public so soon. “It’s material nonpublic information that there’s an activist acquiring stock, who has an intent to influence and generally speaking, there’s a pop if you look at the economics from the day they announced … there’s usually a pop in the stock at least single-digit percent,” Gensler said. “So the selling shareholders during those days don’t have some material information.”
Shareholder group SOC, which previously called on Activision Blizzard Inc. (ATVI) CEO Bobby Kotick to resign, is now raising concerns about the executive’s golden parachute, should he exit the company. Kotick has been facing calls for his resignation from many of his company’s workers and investors since news broke last summer of lawsuits against Activision Blizzard over widespread sexual harassment and discrimination at the company. Kotick is expected to leave after Microsoft (MSFT) buys the company. SOC now says it will press for any exit payments for Kotick to be tied to a “civil rights audit” of the company. “Now that I think it's highly likely that he will retire once the deal is through, what are the accountability mechanisms for his years of leadership of the company?” asked Dieter Waizenegger, executive director of SOC. “I think that that needs to be linked to any golden parachute.” Activision’s most recent annual filing indicates that Kotick could receive as much as $293 million in cash and stock, if he departs after a change in control of the company. SOC only owns a small percentage of stock of Activision and other gaming giants, but it has still managed to apply pressure on pay issues and win some concessions, reducing some large bonus payouts. After the summer’s lawsuits, SOC called for an independent investigation at Activision Blizzard and, eventually, Kotick’s ouster. The company's board has stood by Kotick. Last September, the Equal Employment Opportunity Commission agreed to settle its sexual harassment and workplace misconduct lawsuit against Activision. The agreement, pending judicial approval, calls for three years of oversight and an $18 million victims fund. Waizenegger conceded that its hope to overhaul Activision Blizzard’s board of directors through shareholder votes this June will be “a bit more tricky” due to the Microsoft move. Any Kotick departure tied to the deal won’t be soon. The deal isn’t expected to close until Microsoft’s next fiscal year, which ends in mid-2023.
New York State comptroller Thomas P. DiNapoli and the state's pension fund have filed shareholder proposals at five companies seeking an independent audit of their practices related to racial equity. DiNapoli and the pension fund filed proposals at Chipotle Mexican Grill (CMG), Dollar General (DG), Dollar Tree (DLTR), and Match Group (MTCH). New York state's pension fund also refiled a proposal at Amazon.com (AMZN), where 44% of shareholders supported it last year. All five proposals call on the board of directors of each company to commission a racial equity audit analyzing the company's impact on civil rights, equity, diversity, and inclusion, and the impact of those issues on the company's business. The proposals also request that the audits be publicly disclosed on the company's website. "Our state's pension fund is committed to ensuring the companies we invest in address racial equity," said DiNapoli. "Research shows that ensuring equal treatment and opportunities benefits performance."
As the Securities and Exchange Commission (SEC) wraps up a draft of a landmark new climate change rule, environmental campaigners and activist investors want it to require companies to disclose not only their own greenhouse gas emissions but those generated by their suppliers and other partners. Corporate groups, meanwhile, are pushing for a narrower rule that will make it easier and less expensive to gather and report emissions data, and which will protect them from being sued over potential mistakes. The rule is part of a broader effort by the Biden administration to address climate change challenges and cut greenhouse gas emissions 50-52% by 2030 compared to 2005 levels, an ambitious pledge that will require every federal agency to do its part. Progressives and climate campaigners want the SEC to deliver a game-changing rule that will reveal all the emissions for which a company is responsible, while many investors say they need such data to fully assess companies' exposure to climate change and related policy measures. Initially, the SEC under Chair Gary Gensler said it hoped to publish a draft by October 2021. Last month, Gensler said it was aiming to issue a draft in early 2022. Staff are still working on the rule, said two people familiar with the matter, and the SEC's commissioners, who must vote to propose regulations, have not yet seen a draft. A major issue staff are struggling with is whether and how some or all companies should disclose the broadest measure of greenhouse-gas emissions, also known as "Scope 3" emissions, according to the sources and company and investor advocates. Steven Rothstein of investor advocacy group Ceres, which is pushing for Scope 3 disclosures, said SEC staff contacted them in recent months seeking more feedback on Scope 3 issues, including whether to provide a safe harbor. One big challenge for the SEC, say experts, is identifying which Scope 3 metrics help investors gauge a company's financial prospects, and ensuring the rule is flexible enough to generate specific, rather than generic information.
GlaxoSmithKline Plc’s (GSK) research and development chief is set to step down from the role to become chief executive of a Silicon Valley startup, ramping up pressure on the drugmaker as it tries to revive its fortunes and prepares to split in two this year. Hal Barron, a U.S. scientist who’s overseen drug development efforts, will hand over the role of chief scientific officer to Glaxo’s Tony Wood in August. The move comes at a pivotal moment for Glaxo as the company prepares to spin off its consumer business in mid-2022, with the possibility of a sale now on the table after it emerged Unilever Plc (UL) has made three bids for the unit in recent months. Glaxo also faces pressure from Elliott Investment Management, which has raised questions about whether Glaxo has the right management team in place. The investor has questioned whether CEO Emma Walmsley is the right person to lead the new pharma and vaccines business post-split. Wood, 56, joined Glaxo from Pfizer Inc. (PFE) in 2017 and has been central to the development of a number of Glaxo’s biggest drugs, including the HIV treatment cabenuva and cancer drug jemperli. At Pfizer, Wood set up the group that went on to create its Covid-19 antiviral treatment and invented the HIV treatment maraviroc. The company conducted a search process that included external candidates to succeed Barron, who will remain a non-executive director on the U.K. drugmaker’s board and support R&D, according to a statement Wednesday.
Kohl's (KSS) has responded to Macellum Advisors' open letter on Tuesday calling for the retailer to improve its business to boost its stock or explore a sale. Macellum has a roughly 5% stake in Kohl's. In a statement, Kohl's expressed disappointed with the path Macellum has taken and with the speculation in its announcement and letter. The retailer said it has continued to engage with Macellum after agreeing to add two shareholder nominees to its board as independent directors. Kohl's said based on its performance in 2021, the retailer is positioned to exceed its key 2023 financial goals two years ahead of plan, and has accelerated share repurchase activity. The retailer noted that Macellum has been unwilling to constructively engage. "As recently as this weekend, Macellum refused to enter a confidentiality agreement to hear about the company's progress across operating performance metrics, strategic initiatives, and capital allocation plans, and provide input on these matters as a shareholder," Kohl's said.
Jonathan Duskin is chief executive officer of Macellum Advisors, which has renewed its call for Kohl's (KSS) to shake things up on its board or explore a sale. In an interview with Yahoo Finance Live, Duskin discussed how Macellum is following up on proposed changes at Kohl's. Duskin said Kohl's sluggish stock price and the retailer's poor performance prompted Macellum to pull no punches in its latest note. Macellum gave Kohl's another year after putting two directors on the board, he said, but things have not gotten better. Duskin said he is not on the board and does not know if Kohl's has a management team or a board problem. "I look at the skill set of the boardroom, and I don't see a lot of retail experts," he said. Duskin said he thinks it's a little premature to call for a change in the CEO ranks at Kohl's. But Duskin added that he thinks the board is really entrenched and more change in the boardroom needs to happen.
Australia Treasurer Josh Frydenberg's proxy advice regulations will be challenged in their first week of operation after Independent Senator Rex Patrick vowed to seek a disallowance motion on Feb. 10. Frydenberg announced shortly before Christmas that the government would circumvent the Senate and rein in proxy advisers by issuing regulations rather than going through Parliament. The Department of Prime Minister and Cabinet's Office of Best Practice Regulation has called the regulations "not consistent with good practice." The Office added that the regulation "lacks sufficient evidence of a conflict of interest between proxy advisers and their clients and does not clearly demonstrate that the preferred option yields the highest net benefit over the status quo." Beginning Feb. 7, proxy advisers will be required to secure an Australian Financial Services Licence (AFSL) and disclose recommendations to companies on the same day advice is provided to clients. The most contentious change, effective from July 1, will mandate advisers' independence from their clients, thus terminating the current structure of the Australian Council of Superannuation Investors, which is both owned by industry super funds and their primary source of proxy advice. "Given the potentially significant impact on one of the existing proxy adviser firms, the RIS [Regulation Impact Statement] would have benefited from more thorough analysis as to why the conflict of interest requirements under the Australian Financial Services Licence would not have been sufficient alone to manage the potential conflict of interest between proxy advisers and clients," the Office of Best Practice Regulation observed.
Ides Capital Management has nominated two directors to the board of Safety Insurance Group (SAFT), and submitted a letter asking the firm to repurchase shares, cut costs, and improve financial disclosure. The investment company said it was making the candidates public because its concerns about the lagging stock price and its proposals for changes had been largely disregarded in recent months. "The Board's overarching failure to be responsive, the repeated lack of both preparation and willingness to engage, the absence of candor, and the pre-arranged press release all indicate that the Board had no intention of constructive engagement," the letter stated. The press release announced governance changes that include enlarging Safety Insurance's board to seven members, naming a lead independent director, and appointing a new chair to its nominating and governance committee. Ides wrote in its letter that the announced changes "fall woefully short of what is required to put the Company on a better path forward." Ides has owned an approximately 1% stake in Safety Insurance for about a year. Last month, Ides nominated insurance industry executives Olga Kondrashova and Farooq Sheikh to Safety Insurance's board. In its letter the investor advised the company to buy back 10% of its shares and continue those repurchases over time, initiate the process of having all directors stand for election annually, and improve its proxy adviser audit scores. Ides also demanded that Safety Insurance hold quarterly earnings calls. The company's stock price has risen 14% in the last year but still has trailed the benchmark SPDR S&P Insurance ETF, which grew 25%. Its share price gained 22% over the last three years while the benchmark gained 49%.
Exxon Mobil Corp. (XOM) has set a goal to reduce or offset greenhouse-gas emissions from its operations to zero by 2050. The oil giant confirmed it had developed detailed emission-reduction plans for major facilities and assets and can profitably navigate the nascent transition to greener energy sources. In a 2021 proxy fight, Engine No. 1 elected a trio of new directors to the company's board after criticizing its transition strategy. Exxon's new goal doesn't cover emissions from use of its products, such as gasoline, other fuels made from refined oil, or natural gas burned in homes, which make up most of the emissions connected to the company. It also doesn't pertain to oil fields or other assets it is invested in but doesn't operate.
Sources say Principal Financial Group Inc. (PFG) is in advanced talks to sell two of its units to Talcott Resolution Life Insurance Co., which is owned by investment firm Sixth Street. The deal would follow a strategic review undertaken by the company after Elliott Management Corp. pressured it to shed its low-growth and capital-intensive businesses. Principal has said it will use part of the proceeds to fund an increase in its share buyback program. The sources said a deal for Talcott to acquire Principal's U.S. retail fixed annuity business and its universal life insurance with secondary guarantees unit could be announced as early as this week. Principal added two independent directors to its board last year as part of its agreement with Elliott.
Sources say Starboard Value-supported Acacia Research (ACTG) has told Kohl's Corp. (KSS) that it is interested in a bid. Hedge fund Macellum Advisors GP LLC is increasingly pressuring Kohl's to expand its board and hire bankers to consider a sale should it fail to raise its stock price, which is currently up 2.13% on a day when the broader market is down. The sources say there is no assurance that a deal will happen. Through its partnership with Starboard, Acacia has some $1 billion in available capital, and the sources said Starboard would provide extra capital to support a bid. They added that Starboard and Acacia would likely team with Oak Street Real Estate Capital LLC to try and divest Kohl's real estate assets and raise even more capital for a transaction. Those assets are estimated to be valued at $7 billion to $8 billion.
Asset Value Investors (AVI) continued to pressure Third Point Investors (TPNTF) on Tuesday by calling for shareholders to support a resolution to appoint Richard Boléat to the company board. Last month AVI pledged to continue its campaign against Third Point, having failed to remove director Josh Targoff. Joining AVI in this dispute are three other shareholders including Metage Funds Limited and Global Value Limited, which cumulatively own more than 18% of Third Point's ordinary shares. The dissidents have requisitioned TPIL's board to convene at an extraordinary general meeting where a vote will be put to shareholders to install Boléat. AVI Executive Director Tom Treanor has been outspoken about alleged governance issues at Third Point since the dispute began. "We continue to believe there is a place in the London market for a reformed TPIL," he said. "But the company and its shareholders have been badly let down by its directors over the years, too many of whom seem to have been content to ignore basic principles of governance, or to tolerate aggressive overreach from the manager. A vote for Richard provides a solution and mandate from shareholders. By electing Richard to the board, we would hope to see a review of the company's governance and discount control mechanisms, and a properly independent investigation of where things have gone wrong." AVI went on to note that a review of Third Point Investors on its governance and discount control mechanisms is justified, and should be held independently. The firm said Boléat should be appointed a board director as he is an "independent" director specializing in hedge, private equity and debt funds, special purpose vehicles, and investment management groups. "He has deep experience of the London-listed investment companies' market and has a reputation for adhering to and promoting sound corporate governance principles," AVI added. Moreover, Boléat has no current or historic associations with the firms calling for his board appointment.
Farallon Capital Management L.L.C. has issued a statement reiterating its call on Toshiba Corp. (TOSYY) to rebuild trust with shareholders ahead of the company's upcoming extraordinary general meeting of shareholders. In its announcements on Jan. 7, 2022, and Nov. 12, 2021, Toshiba stated its intention to hold an EGM before the end of March to seek the vote of shareholders on the company's proposed strategic reorganization to spin off Toshiba group's business and separate it into three standalone companies. Farallon is deeply concerned by reports that the company is considering a shareholder vote regarding the separation plan on the basis of a 50% approval threshold (ordinary resolution), rather than the 66 2/3% approval threshold (special resolution) that will ultimately be required to approve the separation plan in 2023, as publicly stated by the company, even if the company makes use of METI's Industrial Competitiveness Enhancement Act. Farallon believes that Toshiba should seek approval at the EGM from its shareholders at the 66 2/3% approval threshold before it risks expending significant time, cost, and management resources on the separation plan. Farallon continues to believe that the core issue afflicting Toshiba is the lack of trust between management and its shareholders, resulting in four years of prolonged conflict. The separation plan without shareholder trust would achieve nothing but the creation of three discrete companies, with each inheriting the same issues as Toshiba.
Dan Loeb is facing hurdles from rebel shareholders in his 822 million pound London-listed fund Third Point Investors (TPIL). Asset Value Investors (AVI) has called for a new independent director at the fund. AVI, which Loeb recently described as a "gadfly," is alarmed about the approximately 14% discount to net asset value at which the fund trades. AVI seeks to close that gap through more assertive share buybacks. The move puts Loeb in a precarious situation because as a backer of shareholder rights and an investor in the fund, he has little reason to object to the proposal to appoint Richard Boleat, an experienced fund director. However, if it leads to more aggressive buybacks, Loeb's assets under management could decline. AVI estimates that its last attempt to shake up the board was blocked thanks to VoteCo, an independent trust that controls 40% of TPIL votes for U.S. regulatory reasons. Another victory courtesy of VoteCo, which Loeb does not control, would be detrimental. This dispute may be one that Loeb can afford to lose.
Kohl's (KSS) investor Macellum Capital Management issued a new letter on Tuesday saying the retailer is a company "without accountability" and the executive team is "incapable" of developing the right assortment and value proposition that resonates with shoppers. "The Kohl's board of directors needs a shareholder in the room that has a sense of urgency," said Jonathan Duskin, Macellum managing partner. "There is a sense of entitlement on the board and also combined with complacency." In April 2021, Kohl's settled with an activist group led by Macellum. The settlement involved a board shakeup and the approval of a new $2 billion stock buyback plan. Macellum contends this go around that Kohl's has done nothing to drive shareholder value, pointing to a 22% plunge in the stock price since the two reached a settlement on April 13. The investor is pushing for a board refresh and for Kohl's to pursue strategic alternatives such as spinning off its e-commerce operations, selling the company or spinning off billions in dollars of real estate it owns. Duskin thinks Kohl's is easily worth $100 a share if it were to truly sign off on these value creating moves. Kohl's shares currently trade at $50. "The Kohl’s board and management team continuously examine all opportunities for maximizing shareholder value. Our strong performance in 2021 demonstrates that our strategy is gaining traction and driving results. We appreciate the ongoing dialogue we are having with our shareholders and look forward to our scheduled March 7 investor day during which we will share more details about our strategic initiatives and capital allocation plans," said a Kohl's spokeswoman. Engine Capital also recently criticized Kohl's a few weeks ago. In its own sharply worded letter, Engine Capital demands Kohl's considers a sale in its entirety or splits off its online business.
Macellum Advisors GP LLC is renewing its push to get Kohl’s Inc. (KSS) to take steps to boost its lagging stock. Macellum has a nearly 5% ownership interest in the department-store chain. It's been urging the retailer to make changes, including altering its board of directors, sources report. To date, Kohl's has rejected Macellum's request to add directors with retail experience or a shareholder to its board. The hedge fund was part of a group that led a proxy fight at the retailer in 2021. It is now expected to do so again. Kohl's stock climbed early last year, but is down almost 20% since the investors reached a settlement in April 2021. Macellum is informing Kohl's that if it doesn't change its board, the company should hire bankers to weigh a sale or other transaction. Late in 2021, another hedge fund, Engine Capital LP, said it owned approximately a 1% stake and called for Kohl’s to weigh a sale. Over the past year, Kohl’s has made some changes, including reinstating a dividend and increasing its share repurchases. It is also investing in its new partnership with cosmetics chain Sephora and updating more than 50% of its more than 1,000 stores. Macellum, with a concentration on retail, nominated nine directors early in 2021 along with three other investors—including Macellum CEO Jonathan Duskin—and called for Kohl’s to monetize its real estate and make changes in its operations. Kohl’s has said it previously ascertained that such sale-leasebacks for its real estate wouldn’t add value. The group ultimately reached a settlement agreement as Kohl’s stock was rebounding that put two of its nominees and a third director on the board. The agreement prevented Macellum and the other investors from agitating at the company until last week.
Unilever PLC (UL) is looking to push further into beauty, health, and hygiene products at the expense of its slower-growing food brands, laying out its biggest strategic shift in years after disclosing on Saturday a $68 billion approach for GlaxoSmithKline PLC's (GSK) consumer-health business. The maker of Ben & Jerry's ice cream and Dove soap stated that purchasing GSK Consumer Healthcare, which sells everything from Advil painkillers to Aquafresh toothpaste, would be accompanied by significant divestitures as it looks to "rejigger" its portfolio. A successful acquisition would rank as Unilever's biggest-ever purchase, greatly expand its presence in vitamins and oral care, and give it a new foothold in over-the-counter medications. Glaxo said Saturday that Unilever had made three proposals late last year, which it spurned on the basis that they undervalued the business and its future prospects. Some investors, including Elliott Management Corp., have called for Glaxo to weigh an outright sale of the consumer business, rather than a spinoff, saying that the proceeds from any sale could be used to increase funding for R&D, pay down debt, and buy back shares.
Triton Investment Management raised its offer for Clinigen Group Plc (CLIN) to win the backing of shareholders including Elliott Investment Management, but the stock declined amid doubts that the sweetened bid will sway key investors. Triton offered 925 pence in cash for each share of the U.K. pharma company, up from 883 pence on Dec. 8, and described it as final in a statement Monday. Clinigen shares fell as much as 2.6% to 881 pence in London trading. The new bid may not be attractive enough to persuade investors including Elliott, which is now Clinigen’s largest shareholder, and No. 2 Slater Investments Ltd. to vote in favor next month. “We still think the price undervalues the company and we are skeptical about the intention from Elliott to tender their shares,” said Gregory Lafitte, an analyst at Tradition. The revised offer values the pharmaceutical company at about 1.3 billion pounds ($1.8 billion) on a fully diluted basis. The price offered is 14 times Clinigen’s adjusted Ebitda and 19 times its free cash flow, Triton said. The proposal “fully reflects” the value of Clinigen’s business and its prospects, according to Triton. Clinigen’s board backed the offer. Tradition’s Lafitte, meantime, said shareholders could get a better premium. Taking into account future growth, he cited a price per share between 995 pence and 1,180 pence. No third party has expressed interest in buying Clinigen since the original bid in December, the company’s directors said in the statement. The higher offer will be financed by a combination of debt and equity to be invested by the Triton Funds. A vote on the transaction scheduled for Jan. 18 was moved to Feb. 8.
13D Monitor President Kenneth Squire reports that hedge fund investors lobbied for meaningful corporate change in 2021, with a total 89 campaigns. "These investors also used different methods to improve outcomes for shareholders, including waging campaigns despite owning less than 5% of a company's common stock," he mentions. "This is known as 'under the threshold' [UTT] activism." Total activism numbers were very consistent from 2020 to 2021, with both years seeing 89 new campaigns. "Last year stood out by being "the first year since we began covering [UTT] activism in 2014 that the number of UTT situations exceeded the number of 13D situations," according to Squire. He cites 41 material 13D campaigns and 48 UTT campaigns compared to 48 material 13D campaigns and 41 UTT campaigns in 2020. "We believe this reflects two main things: (i) activists increasingly being able to be more effective with lower percentage holdings and (ii) activists using swaps and derivatives to circumvent 13D requirements while exceeding 5% economic exposure," he contends. 13D filings have declined each year since 2017, with just 41 new activist 13D filings last year, from 48 in 2020, 61 in 2019, 65 in 2018, and 71 in 2017. The average market capitalization for engaged companies is the highest since 2015. "Moreover, despite fewer 13D filings, the amount of total dollars invested in new 13D campaigns ($10.5 billion) is roughly the same for the 41 such filings from last year as it is for the 48 13D filings in 2020," Squire writes. Meanwhile, 2021's UTT campaigns indicated a reversion to its 2018 levels of 48 engagements after seeing 41 engagements in 2020 and 2019. Some major shareholders also returned in 2021. Elliott Management and Starboard were among the most aggressive, with Starboard launching seven campaigns compared to eight in 2020. JANA Partners helmed seven in 2021 from just one in 2020, while Carl Icahn ran four in 2021 versus two in 2020. Consistency with 2020 is also reflected by the 13D filer base's diversity, with 34 unique filers in 2021 and 33 in 2020, compared to 49 in 2019. The information technology, consumer discretionary, financials, and healthcare sectors were the top four industries pursued by investors in 2021, accounting for 56.18% of all campaigns. IT last year surpassed consumer discretionary as the sector attracting the most activism since 2016. Settlements, full wins, and losses were fairly consistent. "In 2020, 68% of 13D engagements settled versus 38% of UTT situations," Squire notes. "Moreover, only 18% of 2020 decided 13D situations have resulted in a loss versus 34% of decided 2020 UTT campaigns while 15% of 13D engagements have resulted in a full or partial win versus 28% of UTT situations. Moreover, this is consistent with the aggregate number of 13D and UTT campaigns between 2014 and 2020."
European Commission President Ursula von der Leyen wants to increase women's representation on company boards and is trying to unblock European legislation for a women's quota that has been stuck since 2012. Under the proposal, listed companies in the bloc must fill at least 40% of non-executive board seats with women. The target would be achieved by giving priority to the candidate of the under-represented sex when equally qualified persons apply for the same job. Companies that do not reach that goal would be required to explain why and detail the steps they will take to meet the target. The proposed directive would not apply to firms with fewer than 250 employees or to unlisted companies. Although a majority of 18 of the 27 EU countries support the directive, that is not enough for the super majority needed for approval. Denmark, Estonia, Croatia, Hungary, the Netherlands, Poland, Sweden, and Slovakia have opposed the proposal, arguing that the issue should be regulated at a national level. Germany also had opposed the directive, but the new government will take another look at the issue, which could help tip the balance in favor of the legislation. Meanwhile, Belgium, France, Italy, Germany, Austria, Portugal, Greece, and the Netherlands have adopted national mandatory gender quotas for listed companies.
A boardroom dispute at Generali (ARZGY) is expanding after the No. 2 investor in Italy's largest insurance company resigned from the board in a challenge to the reappointment of CEO Philippe Donnet. Donnet's bid for a new term as CEO underlies the struggle among Generali's chief investors, including construction and newspaper magnate Francesco Gaetano Caltagirone, who stepped down from the board on Jan. 13. "It seems we may be reaching some 'crunch point'," Autonomous Research said. Caltagirone has joined with eyewear billionaire Leonardo Del Vecchio to challenge the authority of investment bank Mediobanca (MDIBY), Generali's No. 1 investor. Caltagirone holds 8.04% of Generali, behind Mediobanca's 12.8% stake. Del Vecchio is the No. 3 investor with nearly 7%. The two entrepreneurs accuse Mediobanca, which generates a significant portion of its income from Generali, for holding back the insurer's expansion, according to people familiar with the issue. Donnet, who is backed by Mediobanca and a majority of board members, unveiled in December Generali's first buyback in 15 years and higher dividends. Generali said recently that Caltagirone complained he had been prevented from giving his "critical contribution" to such matters as the group's new business plan or board nominees. The company's current board could begin the selection process for its renewal as early as next week. Meanwhile, with Italy's financial companies currently in consolidation mode, the shareholder tensions are spurring talk of potential M&A action involving both Generali and Mediobanca.
Elliott Investment Management and Vista Equity Partners are in serious talks to buy software-maker Citrix Systems Inc. (CTXS), according to sources. Elliott and Vista have tapped banks to finance their offer, the sources said. A deal could be announced within a few weeks, though talks could still end without an agreement, they said. Vista is still considering using its portfolio company Tibco as part of the transaction. Bloomberg News previously reported that Elliott and Vista were weighing a joint bid for Citrix. Citrix has been weighing options including a potential sale, Bloomberg News reported in September. Those considerations came as Elliott took a 10% stake in Citrix, its second time investing in the workplace software maker.
Mercury Systems (MRCY) is unlikely to back down on its poison pill plan after Starboard on Friday urged the company to terminate the shareholder rights plan yesterday, according to Jefferies. MRCY rose 2.1%. "MRCY's immediate adoption of a 1-year shareholder rights plan with unanimous board support demonstrates management support, given share price outperformance vs. Russell 2000," Jefferies analyst Sheila Kahyaoglu wrote in a note. The Starboard push comes after it was reported last month that investor Jana Partners took a stake in the company and plans to push for a strategic review. Jana is said to have about a 6.5% stake in the defense and electronics maker and wants to discuss its ideas with management as it sees the company as undervalued. Kahyaoglu argues that there are "natural" purchasers of Mercury Systems given its peers have been acquired over the past decade. He sees a scenario where MRCY could be worth $80/share in a takeout (a 40% premium to its current price), as the company traded at $80 as recently as April. Jefferies has a buy rating and $68 price target on MRCY.
Deleted tweets from William Birdthistle, the new director of the Securities and Exchange Commission's (SEC) division of investment management, supported law professors for filing multiple lawsuits against Bill Ackman's Pershing Square Tontine Holdings (PSTH) special purpose acquisition company (SPAC). The plaintiffs claim SPACs fall under the Investment Company Act of 1940 because they own government securities while seeking a merger partner. "My personal view is that the plaintiffs' argument is quite persuasive," Birdthistle said in a Sept. 2 interview with David Lat on Substack. "The existing business model of SPACs is incompatible with the Act." In the deleted Twitter thread, he explained that Yale's John Morley and former SEC Commissioner Rob Jackson at New York University deemed Ackman's SPAC an unregistered investment fund under the Act, and then he mocked Ackman for making "a cringeworthy sign-off...to his shareholders: 'We have got your six.'" Birdthistle further quoted Ackman as saying, "As the law professors who brought the case should very well know (as both are securities law experts) holding cash and government securities while seeking a business combination does not make PSTH an illegal investment company, nor does it make any of the hundreds of other SPACs that do the same, illegal investment companies." He then suggested that Ackman was "confusing several possible defenses to the complaint: First, holding only cash might have evaded the '40 Act, but PSTH did hold securities. Second, holding only government securities might have helped evade 'investment company' status under Section 3(a)(1)(C), which does not count government securities towards the 40% threshold for inadvertent investment company status. But under Section 3(a)(1)(A)...engag[ing] primarily in holding any securities would also trigger investment status." Birdthistle continued that the hedge fund manager held the securities "for more than a year after its IPO, which sounds like the business it was primarily engaged in." He then cited the Universal Music Group (UMG) deal that had already collapsed by the time of the lawsuit, which weakened the professors' case against Ackman. Had it succeeded, Birdthistle speculated, "the SPAC would have satisfied the first definition of 'investment company' as 'proposing to engage primarily' in the investing in securities." He tweeted, "Ackman takes a personal dig at Prof. Jackson, saying he should have done something about SPACs when he was an SEC Commissioner. But redeeming $4 billion w/in 48 hours of a complaint looks like one of the most expensive backhanded compliments the litigation world has ever seen." Ackman suggested he might redeem the SPAC if the SEC backs his new special purpose acquisition rights company that would eliminate the issues presented by the complaint by not holding money from investors before finding a deal. Forty-nine law firms wrote a letter opposing the lawsuit in August, prompting Birdthistle to tweet that the letter "cites nothing in support of its position. No cases or SEC guidance. It's just an assertion that a company can act like '40 Act fund so long as it ultimately uses the money for something else. What are they telling their clients who actually bother to comply with the 40 Act?"
Say-on-pay results at Russell 3000 companies in 2021 were generally the same or slightly below those in 2020, at least due in part to Covid-19 responses, according to Semler Brossy's annual survey. Approximately 97.2% and 97.7% of companies, in 2021 and 2020, respectively, received at least majority support on their say-on-pay vote, with approximately 93% receiving above 70% support in both years. Approximately 2.8% of say-on-pay votes for Russell 3000 companies failed in 2021 as of September 2021, which was slightly higher than the 2.3% failure rate for 2020 measured in September 2020. The most common causes of say-on-pay vote failure were problematic pay practices, pay and performance relation, special awards, shareholder outreach and disclosure, rigor of performance goals, Covid-related actions, and nonperformance-based equity awards. Companies continue to attract attention from proxy advisory firms, institutional investors, activist shareholders, and other stakeholders with respect to their executive compensation programs. Companies should consider their recent annual say-on-pay votes and general disclosure best practices when designing their compensation programs and communicating about their compensation programs to shareholders. This year, companies should understand key say-on-pay trends as they addressed the Covid-19 pandemic as well as guidance from Institutional Shareholder Services and Glass Lewis.
As word circulated late last year that Stephen Harper, Canada’s 22nd Prime Minister, was planning to launch an activist investing fund with Carl Icahn, some eyebrows were raised in political circles, as the world of activist investing would seem to be a deeper and more hands-on venture into the corporate realm than most ex-politicians have attempted. But the prospect of a former prime minister shaking things up in corporate boardrooms may not be as jarring when one considers Harper’s political legacy. Trained as an economist, Harper was instrumental in upending Canadian politics through the formation of the right-wing Reform Party and later helped unite the country’s sharply divided conservative political factions. When it came to governing, he actively courted business leaders to his team, including recruiting Onex Corp. (ONEXF) managing director Nigel Wright to become his chief of staff. “Harper was, in the best sense of the word, an activist as Prime Minister,” said Karl Moore, associate professor of strategy and organization at McGill University’s Desautels Faculty of Management. “Activist investors have done some good things, and a few not so good to shake things up … and one could argue Stephen Harper did that as Prime Minister,” added Moore. Ed Waitzer, a former chair of Bay Street law firm Stikeman Elliott LLP, said Harper will undoubtedly “add value” to his latest venture in activist investing with partner Courtney Mather, a former portfolio manager at Carl Icahn’s investment fund manager Icahn Capital — if they get the firm up and running as planned. The firm will reportedly be called Vision One, and the intent is to engage with mid-sized companies — including those in the consumer and industrial sectors — in which they could unlock value through governance improvements, among other changes. Harper would be chairman and Mather, whose professional designations in chartered alternative investment analysis, financial analysis, and financial risk management, would serve as chief executive and chief investment officer.
GlaxoSmithKline's (GSK) decision to reject Unilever's (UL) offer for its consumer healthcare unit looks like a bold move, Aimee Donnellan writes in an opinion piece. CEO Emma Walmsley has been facing pressure from Elliott Management and other investors. Walmsley offered a strong sales forecast in an effort to maintain investor support for her plan to spin off the consumer business. A spinoff would need to show that it can trade similar to industry leader Procter & Gamble (PG) to match Unilever's offer, which may be a stretch. Walmsley's projections look optimistic, but some investors are looking instead at Colgate-Palmolive (CL). Investors would have the chance of a gain if a higher bid emerged from Unilever or a U.S. rival like Procter & Gamble, or if Walmsley hits her targets. Hope may be enough for Walmsley to keep shareholders on her side.
Australia's reforms intended to improve transparency and accountability of proxy advice are a common-sense step to increase confidence in the system, writes Tim Reed, president of the Business Council of Australia, in an opinion piece. The four major proxy advisors in Australia have been exempt from rules for providing timely and accurate information to the market. Proxy advisors remain the most opaque part of Australia's system of corporate governance, despite their increasingly important role in the market. Approximately 9 million Australians now have an investment outside their home or superannuation, and around 12 million have at least one superannuation account. The government's proposed changes are modest and measured as they would simply make law what is already considered best practice. The proposal would also bring Australia more in line with rules in the U.S. and Britain, and improve overall governance of locally listed companies.
Larry Fink’s efforts to get companies to adopt climate-friendly policies have led some to call him an activist. The BlackRock Inc. (BLK) chairman and chief executive prefers a different label: capitalist. In his annual letter to the CEOs of the companies in which BlackRock invests, Fink said businesses that don’t plan for a carbon-free future risk being left behind. The quest for long-term returns, and not politics, is what animates the money manager’s efforts, he wrote. “Stakeholder capitalism is not politics,” Fink wrote. “It is not a social or ideological agenda. It is not ‘woke.’” Fink is responding to critics who say BlackRock shouldn’t seek to influence companies’ policies on governance, climate change and other hot-button issues. “We focus on sustainability not because we’re environmentalists, but because we are capitalists and fiduciaries to our clients,” Fink wrote in his letter. BlackRock made waves last spring when it voted to replace three Exxon Mobil Corp. (XOM) directors over the oil giant’s reluctance to quickly transition to cleaner energy sources. BlackRock executives have been fretting over how to position the firm in the wake of the Exxon vote, according to people familiar with the matter. Much thought has been given inside the company to the balancing act it must perform as it appeals to socially conscious investors while maintaining close ties with oil-and-gas companies and their supporters, the people said. In his letter, Fink sought to remind corporate leaders that BlackRock is on neither side of the political divide. Setting goals for companies to lower emissions, he wrote, is “critical to the long-term economic interests of your shareholders.” Companies must continue to evolve, or risk being replaced by more adaptive competitors. And the transition to a net zero world will transform every industry, he wrote. “Our conviction at BlackRock is that companies perform better when they are deliberate about their role in society and act in the interests of their employees, customers, communities, and their shareholders,” he wrote.
A joint report from the nonprofit FCLT Global and the Wharton School of the University of Pennsylvania indicates that public companies that focus on several stakeholders are most likely to be lucrative and least volatile for investors over the long term. As companies feel increasing pressure to address social responsibilities, they have made themselves accountable to various stakeholders, including regulators, lenders, creditors, communities, suppliers, and governments. The lead authors, including Ariel Babcock, Witold Jerzy Henisz, Allen He, Rachelle Sampson, and Xuchong Shao, examined the annual reports of more than 3,000 global companies from the MSCI’s All Country World Index and identified the presence of stakeholder-oriented language. Once the language was identified, researchers compared the presence of the language to the companies’ financial and environmental, social, and governance (ESG) performance. Compared to companies that are only focused on shareholders, the authors found that firms that "paired strong stakeholder language," which researchers referred to as the talk, with strong performance on material ESG measures (the walk) delivered a 4% higher return on invested capital (ROIC) over a three-year period, invested twice as much in research and development as a percentage of sales, experienced 1.5% higher sales growth over a three-year period, delivered more stable returns, and were 50% more likely to issue long-term guidance. Specifically, firms that had the highest scores for both stakeholder-oriented language and performance on a range of capital allocation and ESG metrics averaged 0.85% higher ROIC compared with the sample median. In contrast, firms that had high talk and low walk scored on average 0.36% below the median. Firms with both low walk and low talk scored 0.44% below the median.
The author suggests the polarization of opinion regarding Bill Ackman has opened up an opportunity to buy shares in Ackman’s latest investment vehicle at a discount to its underlying value. In the summer of 2020, Ackman launched a special-purpose acquisition company (SPAC), Pershing Square Tontine Holdings Ltd. (PSTH). With PSTH, Ackman raised $4 billion at $20 a unit, giving him a significant pool of capital. While searching for a suitable acquisition, SPAC funds are kept in trust, primarily invested in U.S. Treasury securities. Once a deal is pending, investors can either remain invested or redeem their shares for their pro-rata portion of the trust account. SPACs often trade at a small premium to this “liquidation” value until a deal is announced. In contrast, PSTH is trading at a discount to this liquidation value, currently fetching $19.89 a share. In the spring of 2021, PSTH entered into a complex transaction to acquire 10% of Universal Music Group NV. While this transaction may have been an interesting investment for shareholders, PSTH involvement with Universal Music quickly unravelled owing to Securities and Exchange Commission concerns and shareholder litigation. In July, 2021, PSTH terminated its involvement. In PSTH’s case, if an investor does not like the transaction, they can redeem. The more likely negative is an investor’s ability to redeem is delayed either owing to litigation or perhaps shareholder approval to extend the life of the SPAC. "In either case, I do believe an investor’s downside continues to be protected," the author states. "Unlike some structures, directors did not receive discounted founders’ shares," he adds. With PSTH, directors purchased units and out-of-the-money warrants worth approximately $9 million and, together with Ackman’s other funds, have additional share purchase commitments of $1 billion at the time of a transaction. "The bottom line is insiders do have 'skin in the game," according to the author, who concludes that "in an accident-prone and expensive market, PSTH is a comfortable holding."
A new paper by Cornell University researchers looks at trends in board racial diversity and factors that drive the lack of diversity. The researchers used a comprehensive database covering the race and ethnicity of directors of U.S.-based firms listed on either the NYSE or NASDAQ exchanges from the first quarter of 2013 through the end of September 2021. They found that in the first quarter of 2013, less than 10% of board seats of U.S. public companies were held by racial minorities despite minorities accounting for about 25% of the U.S. population. By 2019, racial minorities held only about 12% of board seats, with over 40% of all U.S. boards still including only white directors. However, about 25% of all new 2020 board appointments went to racial minorities, and that figure rose to 40% by Sept. 30, 2021. Among the factors driving the lack of diversity, the researchers cited "homophily-based networks (people forming networks with those who are demographically similar to themselves) and/or racial bias." They added that "the introduction of the NYSE Board Advisory Council had no significant effect on the propensity of NYSE-listed firms to appoint racially diverse directors." Further, while the California quota increased the number of minorities appointed to boards, they found that the mandate so far "has primarily benefited racial groups that are not traditionally underrepresented."
Baja Ventures founder Betsy Atkins reports that corporate governance standards shift on an annual basis, in order to keep up with the rapidly changing business ecosystem and remain in tune with the evolving priorities of all stakeholders. She notes that environmental, social, and governance (ESG) issues led corporate governance dialogue in 2021 and will extend into this year. "Boards should anticipate increased scrutiny from all stakeholders who are now weary of 'greenwashing,'" Atkins advises. "Greenwashing is the practice of allocating resources to market a company as more 'ESG friendly' than it actually is. In 2022 I expect stakeholders will apply more pressure for companies to act on their ESG goals with transparency and clear reporting." Atkins also expects diversity and inclusivity to remain prioritized for big institutional shareholders, regulators, customers, and workers. She cites Spencer Stuart's estimation that Black, Latino, Asian, American Indian, Alaska native, and multiracial individuals constituted 47% of newly elected board members in 2021, up from 22% in 2020. Another impactful trend was "the great resignation" and "the war for talent," and directors should expect board-level discussions on human capital strategy and oversight to ramp up. "Boards can expect an ongoing adjustment of the relationship between employees/employers as remote work, work from home, company culture, etc. continue to evolve," Atkins emphasizes. Also important is the rapid adoption of artificial intelligence (AI) across all functional organizations and industries, and Atkins says boards "must be up to speed on the current state of AI/ML [machine learning] and optimizing the company's data. Consider inviting an external expert to present to the board to be sure all directors are able to thoughtfully weigh in on both the internal implementation (and potential issues) of AI/ML in their own company as well as prepare to meet emerging best practices and legislative/regulatory action surrounding AI." Atkins further recommends that boards anticipate rising demand for a corporate "social voice" amid expectations among consumers and employees that corporations take a public stand on socioeconomic and political issues. "Boards must be prepared to help guide management on when and how the company should publicly take a position," she argues. "It may be difficult to strike the right balance between pressure for transparency from employees and investors while also not inadvertently offending/alienating some of your stakeholders. This is the time to consider engaging a specialized boutique PR agency that focuses in social media and can guide the company's external messaging (when appropriate)."
Lockdowns in Europe led to surging sales in the food-delivery sector and to investors rushing into established companies and rapid grocery startups last year. Observers anticipate that the industry will be marked by battles over market share through consolidation this year. Cat Rock Capital Management is among the shareholders pushing Just Eat Takeaway (GRUB) to sell or spin off Grubhub just months after it acquired the U.S. business. Just Eat has previously said Grubhub has "strategic value" and expects the unit to be part of further consolidation. On Just Eat's analyst call on Wednesday, CEO Jitse Groen said: "To be quite honest with you, we are open to anything that makes Grubhub stronger that makes Just Eat Takeaway strong." Although management now has indicated to some investors they're open to the idea of a sale of Grubhub, advisors are also pitching a take-private deal or breakup. Just Eat is also working to sell its 33% stake in Brazilian delivery company iFood.
"I think Kohl's (KSS) in the department store land is another show-me story," JPMorgan retail analyst Matt Boss said on Yahoo Finance Live. Boss cited supply chain challenges brought on by the pandemic as one key issue that will hamper Kohl's for the front part of the year. He rates Kohl's shares at a Neutral. Boss added Kohl's continues to have problems gaining market share in the competitive women's apparel space. In order for the stock to drive higher, the analyst believes Kohl's must start fostering better store traffic to its new Sephora cosmetics shops and expanded active apparel departments. Boss isn't alone in thinking Kohl's may have a tough year. UBS analyst Jay Sole slashed his rating on Kohl's to Sell this week. Besides trying to show Wall Street it could deliver, Kohl's execs have other problems on their hands. Engine Capital — a new investor in Kohl's — dropped a critical new letter several weeks ago to the Kohl's board of directors. In the letter, Engine Capital demands Kohl's consider a sale in its entirety or split off its online business (similar to what Jana is asking Macy's (M) to do). The Engine Capital campaign marks the second time Kohl's CEO Michelle Gass and Kohl's have been engaged for the underperformance of the stock and business in 2021. Back in April 2021, Kohl's settled with the investor group led by Macellum Advisors. The settlement involved a board shakeup and the approval of a new $2 billion stock buyback plan. Kohl's shares are up 7% the past two years, underperforming the S&P 500's 44% gain.
Following its landmark victory at Exxon Mobile Corp. (XOM) in 2021, Engine No. 1 is expanding its interests beyond climate issues to engage companies this year on diversity and workforce issues. Engine No. 1's Michael O'Leary said the firm will seek more explanation from portfolio companies this spring about their obligations to employees as stakeholders, their workforce demographics, and other matters. He said in an interview, "You saw the way something can go from being seen as a gadfly proposal to being truly understood as a core value-driver. Just as with climate, we expect to see that spread to other issues like the workforce, and racial diversity." Three directors nominated by Engine No. 1 secured board seats at Exxon last year through a traditional campaign. O'Leary indicated that some of the engagement going forward will come from the firm's new exchange traded fund (ETF), Transform 500. The fund, which launched over the summer and invests in the 500 largest U.S. companies, has $285 million of client cash. The new fund's approach is part of a trend of pressing companies on environmental, social, and governance (ESG) issues. O'Leary said that of the roughly 35 companies where the Transform 500 ETF cast proxy ballots since its launch, it backed nearly all of 14 or so shareholder proposals on environmental or social issues. He expects the 90% support rate for such measures to continue this year.
Shareholder activism rebounded in 2021 by activists and defense advisors. Boards and management teams are looking out for some regulatory changes ahead that could change how they do business. Vinson & Elkin’s LLP’s Shareholder Activism practice co-head, Lawrence Elbaum, discuss 2021’s shareholder activism rebound and what to look forward to in 2022 with Bloomberg TV.