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
CNBC's David Faber takes a closer look at the Activism in 2017 and what to expect in 2018. With Ken Squire, 13D Monitor founder.
Shareholders of Hanjin KAL have voted to keep Korean Air CEO and group Chairman Walter Cho as a board director. Cho fended off a challenge from his older sister and a fund to replace him with a professional manager as about 57% of the group's shareholders voted for his continued directorship. The proxy fight has been a major distraction for the airline as it struggles with the effects of the coronavirus pandemic. Korean Air said this week all executives will forgo 30%-50% of their salaries starting in April.
Shareholders of Kirin Holdings (KNBWY) on March 27 rejected investor Independent Franchise Partners' (IFP) proposal for the company to exit businesses outside of beer and buy back shares worth $5.54 billion. A majority of shareholders also approved board members proposed by management, rejecting nominees recommended by IFP. The proposals by IFP, which owns a 2% stake in Kirin, highlight weaknesses at Kirin, where moves toward diversification have produced mixed results. Analysts say that despite the vote, Kirin is now under strong pressure to prioritize investor returns, and may be forced to agree to less radical demands ahead. In another shareholder vote on March 27, Toshiba Machine (TSHMY) pushed through controversial anti-takeover measures to thwart a hostile bid by a fund backed by investor Yoshiaki Murakami. However, the proposal passed with the approval of just 62% of shareholders—close enough to keep the pressure on the former subsidiary of Toshiba Corp. (TOSYY) Murakami has said that while he will end his hostile bid if a poison pill goes through, he will keep urging more dividends and share buybacks. Analysts say that although people like Murakami are unpopular in consensus-driven Japan, institutional investors are no longer as passive as they once were. "Shareholder activism is not easy in Japan's complacent corporate culture, but will continue to increase as that's the global trend," noted Masayuki Otani, chief market analyst at Securities Japan. The number of activist funds operating in Japan rose to 36 in 2019 from only seven five years ago, according to data from IR Japan Holdings. Shareholders in SoftBank Group Corp. (SFTBY) may already be benefiting. Elliott Management had been urging SoftBank to complete $20 billion in stock buybacks by selling down its stake in Chinese e-commerce giant Alibaba (BABA). Although SoftBank initially spurned that call, it has subsequently announced it intends to raise as much as $41 billion to buy back shares and reduce debt.
Amber Capital's founder Joseph Oughourlian said the firm could hike its 16.4% stake in French media conglomerate Lagardere, where it has pushed for board changes. "We're not ruling out increasing our stake. ... We could raise it ahead of the annual general meeting," Oughourlian told France's BFM Business TV. Amber stepped up pressure on Lagardere on Thursday, saying it would seek to change the supervisory board and called for a review of its strategy ahead of its May 5 shareholder meeting.
Carl Icahn has casually raised the possibility of repricing Eldorado Resorts' (ERI) deal to acquire Caesars Entertainment (CZR). Eldorado is set to acquire all outstanding shares of Caesars for $12.75 a share for cash and ERI common, and at closing, would own 51% of the new company; Caesars shareholders would own 49%. The three big shareholders are Icahn, with 16.79% of shares outstanding; BlackRock (BLK), with 7.57% of shares outstanding; and Canyon Capitol Advisors, with 6.8% of shares outstanding. They control 31.6% of the deal. The coronavirus pandemic has devastated the valuations of the deal, and repricing could reduce debt incurred and help propel the successor stock forward post-crisis. The new company, which would be under the Caesars names, had previously been expected to debut in a robust U.S. economy.
Sources say Stericycle (SRCL) has reached a settlement with Saddle Point Management that gives the firm two board seats, expanding the board from 10 members to 12. James Martell, a former XPO Logistics (XPO) director, and James Welch, former CEO at YRC Worldwide (YRCW), who were nominated by Saddle Point, will join the medical waste company's board. The move comes as some investors call for Stericycle to cut costs, pay down debt, and sell non-core assets. Saddle Point did not press for any changes publicly. Roy Katzovicz, former chief legal officer and an investment team member at William Ackman's Pershing Square Capital Management, founded Saddle Point two years ago but until now has largely stayed out of the public eye. Saddle Point requested confidential treatment from the Securities and Exchange Commission to build its stake in Stericycle. Other investors who made demands more publicly and won board seats include Carl Icahn, Elliott Management, and Starboard Value at companies ranging from Occidental Petroleum (OXY) to Twitter (TWTR).
CIAM has written to shareholders of French reinsurer SCOR to caution about major corporate governance shortcomings at the company, and has called on it to postpone its annual general meeting (AGM), currently scheduled for April 17. CIAM has a greater than 1% stake in SCOR. CIAM said areas of "significant concern" at SCOR have been "largely unaddressed by an unresponsive board." Catherine Berjal, CIAM's chief executive, said only "cosmetic changes" have been made to SCOR's executive pay policy, even though almost 50% of shareholders opposed it in 2019. Pointing to a "poorly drafted pay policy that continues to lavishly reward the chairman/CEO"—without a sufficient tie to performance—Berjal said that last year's AGM sent a "very clear signal" that the executive remuneration policy was inadequate. Berjal also criticized the lack of an independent chairman at SCOR, and asked that the company delineate a clear succession plan for when Denis Kessler, the current chief executive and chairman, exits in 2021. Further, Berjal discussed the firm's environmental, social, and governance (ESG) policy. "For a company operating in the financial services sector, the level of sophistication on the environmental, social, and governance criteria incorporated within the bonus plan is worrying," she wrote. "There is no clear forward-looking quantitative ESG priorities set for 2020, including on the topics ranging from climate change to gender equality." She suggested that a postponement of SCOR's AGM would be more shareholder-friendly, and would allow SCOR to focus on managing the effect of the ongoing Covid-19 crisis.
On March 26, Lindblad Expeditions (LIND) said it named two independent directors, former Sothebys CEO Thomas Smith and ValueAct Capital associate Sarah Farrell, to its board. Smith and Farrell were backed by ValueAct, which owns a nearly 10% stake in the adventure cruise company and is its second-largest investor. The pair will fill two vacant seats on Lindblad's eight-member board. The move comes after ValueAct boosted its ownership in Lindblad to 9.8% from 7.4%. Lindblad's share price has fallen 62% in the last month, as travel virtually stopped due to fears over the coronavirus pandemic. "Lindblad's board has always been a source of wisdom for our management team in all ways and adding two new members with distinct backgrounds and experience simply adds to an already solid board," Chairman Mark Ein said in a regulatory filing.
Discussions between First United Corp. (FUNC) and Driver Management to settle a battle for board seats at the bank holding company broke down when the investor spurned the offer, according to two sources. Driver Management has approximately a 5% stake in the company. "Your 'best and final' offer failed to meet what I clearly described as the minimum acceptable conditions for any cooperation agreement," Driver founder Abbott Cooper wrote in a letter to the board's lead director. "I think it is appropriate to suspend those discussions." The two sides now seem poised for a showdown at a time when several companies have moved to settle with investors amid the panic selling spurred by the coronavirus pandemic. First United, the holding company for Maryland community bank First United Bank & Trust, said it was offering Driver a say in choosing more than a quarter of its 11-member board, including two independent directors who would be selected prior to the 2020 annual meeting. Driver would select one director from the company's nominees and the company would choose one of Driver's proposed candidates, according to First United's proposal. A third independent director would be chosen prior to the 2021 meeting. Driver has for months been calling for the company to sell itself, arguing it has fallen behind competitors in making new loans. In September, Driver anticipated the company could be sold for between $26 and $33 a share. It traded at $12.88 on March 26. This week, Driver criticized the company for mistakes during the 2008 financial crisis and said it was poorly positioned for the current downturn.
In a letter to Pershing Square investors, Bill Ackman said it is "ridiculous" to suggest that his appearance on CNBC last Wednesday pushed the market down an additional 4% that day. Ackman was responding to questions about whether his CNBC TV appearance was intended to drive down markets so the company could profit on previous hedges. Ackman said the hedge already paid off prior to his going on CNBC, as the company had sold more than half the hedge before the show. "By selling the hedge, we generated $2.6 billion of proceeds, the substantial majority of which we invested in both new and existing investments, which we believe will payoff as markets recover," Ackman wrote.
Evergy (EVRG) has postponed by two months the deadline for a special board committee to provide options for the company's restructuring or possible sale, as part of an agreement with Elliott Management Corp. The committee, comprised of current Evergy directors and new directors added at Elliott's urging, will present a formal recommendation to Evergy's full board on July 30 instead of May 30. The deadline for a board vote on the recommendations also has been pushed back two months to Aug. 17. Evergy said in a filing with the Securities and Exchange Commission that the extensions are required due to restrictions on travel and in-person meetings related to the Covid-19 outbreak. Elliott approached Evergy in October, and went public in January with its demand that Evergy either reorganize or pursue a merger. Evergy and Elliott announced an agreement on Feb. 28 calling for the appointment of new members to the utility's board, while having four existing board members retire in May. The two new members—onetime Energy Future Holdings CEO Paul Keglevic and NRG Energy (NRG) CFO Kirk Andrews—were to serve on a new committee established to review the company's options for improving shareholder value "including through a potential strategic combination or a modified long-term standalone operating plan and strategy." Other committee members include Evergy CEO Terry Bassham and existing board member Art Stall. Elliott agreed not to raise the amount of stock it owns or controls in Evergy to more than 9.9%, nor to solicit any other voting arrangements or disparage the utility.
Investor Amber Capital wants to replace the board of French media group Lagardère (LGDDF), the latest stage in its longstanding campaign for change at the company. Amber, which is the group's largest shareholder with a 16.4% stake, argues that poor governance has allowed heir and managing partner Arnaud Lagardère to destroy shareholder value for years without consequences. The fund has proposed 16 resolutions to put forward a slate of eight new board members at the company's general meeting in May. It will not oppose the appointment of the two new board members Lagardère has proposed, who are former French President Nicolas Sarkozy and Guillaume Pepy, who used to run state-owned rail company SNCF. Amber has selected Patrick Sayer, the former CEO of listed private equity company Eurazeo, as its candidate for board chairman. The move represents an escalation in the conflict that has raged between Lagardère and Amber since it first took a stake in 2016. Amber wants to get rid of the company's "commandite" structure, which makes it so that Arnaud Lagardère cannot be removed as in a normal company, and cut management costs so as to invest more in publishing and travel retail. Two years ago Amber tried unsuccessfully to nominate two members to Lagardère's board at its shareholder meeting, but investors voted against its proposals.
Bill Ackman has invested some of his personal wealth to help manufacture antibody testing kits produced by Covaxx, a newly formed subsidiary of United Biomedical Inc. "The key to a successful reopening beyond the maintenance of social distancing, hand washing, mask use, and other related practices is a broad-based testing regime and tracing program," Ackman said in a Wednesday letter to investors in Pershing Square Capital Management. "This will enable the inevitable viral breakouts to be identified early and minimized with localized quarantines, reducing the impact on the overall U.S. economy and the need for future shutdowns." The letter says that Ackman made a roughly 100 times return on hedges he had put in place to protect Pershing Square's $6.6 billion portfolio against the impact of the virus. His firm paid roughly $27 million for the hedges, which were made in the form of purchases of credit protection on investment-grade and high-yield credit indices. He said he has since redeployed the capital by investing further in his portfolio companies, including Lowe's Cos. (LOW), Agilent Technologies Inc. (A), Hilton Worldwide Holdings Inc. (HLT), and others. Covaxx has already deployed over 100,000 Covid-19 tests in China, and Ackman says its tests offer a broader antibody-based screen that could allow for more accurate data on the virus. United Biomedical mainly produces vaccines for animals, and it has developed blood-screening kits and a test for SARS, or Severe Acute Respiratory Syndrome.
Christopher Hohn's TCI Fund Management has lost more than 30% year-to-date through its flagship vehicle, The Children's Investment Fund. TCI's losses illustrate a trouncing that value-oriented equity managers have experienced as the financial market crashes in response to the coronavirus pandemic. The HFRX Equity Hedge Index was showing a monthly decline of 12.3% as of March 20, with a year-to-date drop of 16%. TCI's fund slumped 8.8% in February after gaining 3.8% in January, and while its exact concentrations are not known, sources say its recent performance suggests a heavy exposure to stocks. Some sources say investors remain bullish on the portfolio as they consider the underlying companies strong and likely to regain value. Others said limited partners likely will withdraw some of their capital, especially given lingering questions about how Hohn navigated the 2008 selloff, when TCI lost 43% compared to a 19% decline for the average hedge fund. It is believed that the poor showing reflected a bullish economic view held by Hohn even as TCI co-founder Patrick Degorce, who ended up leaving the firm in 2008, had been pushing to move more heavily into cash. The vehicle's 2020 performance has marked a stark and sudden reversal from what had been outstanding gains in recent years, returning average annual returns of more than 10%.
Looking to ward off hostile bidders and shareholders seeking to exploit the coronavirus-induced market sell-off, more U.S. companies are adopting so-called poison pills. These tools prevent other companies and investors from amassing ownership stakes above a certain threshold by authorizing the company to sell new stock to its shareholders at a discount. The S&P 500 Index has lost about a quarter of its value in the last month due to the coronavirus outbreak, making the shares of many companies cheaper and more vulnerable to approaches by corporate rivals and hedge funds. A record 10 companies announced poison pills in March, according to FactSet Research Systems Inc. (FDS) and Deal Point Data LLC. FactSet adds that 44 poison pills were adopted in the year ending March 25, double the number during the previous 12-month period. "Companies have been adopting poison pills at a faster pace than we have ever seen in recent years. We expect more will be coming, many more," said Lawrence Elbaum, co-head of law firm Vinson & Elkins LLP's shareholder activism practice. Companies announcing poison pills in the last 10 days include Occidental Petroleum (OXY), Dave & Buster's Entertainment Inc. (PLAY), Delek US Holdings Inc. (DK), Williams Cos. (WMB), Global Eagle Entertainment (ENT), and Chefs' Warehouse (CHEF). Occidental and Delek adopted poison pills to defend against investor Carl Icahn. The others did so after their stock price plummeted, without disclosing a specific threat. Meanwhile, hedge funds with stakes in companies that suffered losses in the stock market recently have raised their stakes. For instance, Jana Partners boosted its stake in Bloomin' Brands (BLMN) to 9.2% from 7.4%, ValueAct Capital raised its stake in Lindblad Expeditions Holdings (LIND) to 9.8% from 7.4%, and Pershing Square Capital Holdings snapped up shares of Starbucks Corp. (SBUX) after having sold a previous stake earlier this year.
A Seoul court has ruled against a South Korean fund's alliance that is fighting for control of Hanjin Group. The Korea Corporate Governance Improvement (KCGI) Fund, along with Bando Engineering & Construction, backs group heiress Cho Hyun-ah, who has called for replacing the current leadership of Hanjin to boost its financial status and shareholder value. The KCGI alliance controlled voting rights for 31.98% of the shares of Hanjin, but the Seoul Central District Court has decided to reduce it to 28.78%. The court has ruled against Bando's injunction that asked for allowing the company to cast 8.2% of its votes. In addition to allowing Bando to cast only 5% of the votes, the court ruled against a KCGI injunction that asked for banning a group consisting of Korean Air employees from exercising voting rights with 3.79% of shares. Hanjin KAL shareholders are set to vote Friday on the reappointment of Cho Won-tae as chairman of the group. Together with employees' shares, Cho Won-tae is believed to have secured total voting rights equal to 37.49% of shares, including those of Delta Air Lines (DAL).
Cevian Capital has boosted its stake in CRH (CRH) over the past week as the coronavirus outbreak and subsequent turmoil in the stock market weigh on the company's stock. Cevian disclosed on March 24 that it owns 3.51% of the Irish building materials firm, up from 3.14% as recently as last week. "When this passes CRH's fundamentals will still be strong, and the business well positioned to benefit from increased public construction spending which seems increasingly inevitable," said Cevian managing partner Christer Gardell. The company's stock has tumbled 36% so far this year.
On March 25, Occidental Petroleum Corp. (OXY) said it would add three of Carl Icahn's associates to its board, ending its battle with the investor that began after its acquisition of rival Anadarko Petroleum. The company said Andrew Langham, Nicholas Graziano, and Margarita Paláu-Hernández will join Occidental's board as independent directors. Icahn said in a statement, "We believe Oxy is a good company with good assets."
Kirin Holdings Co. (KNBWY) is in a battle with London-based Independent Franchise Partners (IEP), which owns a 2% stake and is calling on the Japanese beer maker to focus on alcoholic drinks and shed noncore businesses. This comes as foreign shareholders have been successful in securing buybacks and higher dividends from Japanese companies. On March 23, SoftBank Group Corp. (SFTBY) said it would buy back as much as $18 billion in shares after pressure from Elliott Management Corp. The New York hedge fund pushed its ideas behind closed doors, and many investors say that such an approach generates better results when working with Japanese companies. At Kirin, IEP nominated two board candidates, corporate-governance expert Nicholas Benes and pharmaceutical executive Kanako Kikuchi. The company agreed that current board members would conduct interviews with the nominees but said both candidates flunked, which ramped up the battle. Kirin management opposes all of the investor's proposals, which are up for a shareholder vote on March 27. IEP wants Kirin to sell its stakes in Fancl and Kyowa Kirin Co. (KYKOF), buy back ¥600 billion ($5.4 billion) in shares, and allow Benes and Kikuchi to join the board.
Starboard Value LP supports Green Dot's (GDOT) appointment of Daniel R. Henry as chief executive. "We believe that Mr. Henry has the requisite skill set and industry experience to lead the transformation at Green Dot and focus on reinvigorating growth and improving profitability," Starboard Value LP said in a statement. "We look forward to continuing our constructive dialogue with the company regarding operations, strategy, finance, and governance." The company's shares rose 13% on March 25 in early trading.
SoftBank (SFTBY) has demanded that Moody's remove all of its ratings on the Japanese conglomerate after the ratings agency issued a two-notch downgrade that cut its debt deeper into junk status. SoftBank, which is led by the Japanese dealmaker Masayoshi Son, said Wednesday that Moody's has "biased and mistaken views." Moody's downgraded SoftBank's ratings two days after the conglomerate said it would sell $41 billion of its assets to pay down its heavy debt load, which Elliott Management is encouraging, and increase the scale of a share buyback. The ratings agency said it downgraded SoftBank because of the "aggressive financial policy," saying the value of the group's portfolio would be reduced if it sold off its lucrative stakes in the Chinese ecommerce giant Alibaba. The Moody's downgrade could increase borrowing costs for SoftBank.
HP Inc. (HPQ) is asking its shareholders to reject a takeover proposal submitted by Xerox Holdings Corp. (XRX). The company warns that a complex takeover would be "disastrous" during the economic turmoil caused by the coronavirus. Xerox has offered to buy HP for $24 a share in cash and stock. The deal has a value of about $35 billion. However, Xerox says it will put its acquisition plans on hold until the coronavirus situation has improved.
Occidental Petroleum Corp. (OXY) is reducing salaries for its U.S. employees by up to 30% in an effort to reduce expenses, according to an internal e-mail made available to The Wall Street Journal. The Houston-based oil-and-chemical company is dealing with high debt from an ill-timed acquisition, plummeting oil prices, and falling demand due to a halt in economic activity because of the coronavirus pandemic. Occidental CEO Vicki Hollub's salary will be slashed by 81%, while the company's top executives' compensation will be reduced by an average of 68%, the e-mail states. Employee bonuses and perks, including commuter subsidies and gym memberships, are scheduled to end next month. Meanwhile, Occidental is close to reaching a truce with Carl Icahn that would bring the investor into the oil company’s boardroom, The Wall Street Journal reported March 22. A deal would mark the end of a protracted battle with Icahn, who took aim at Occidental after the company outbid Chevron (CVX) for Anadarko. Occidental's market capitalization has since plummeted below $10 billion, from more than $46 billion at the time of the offer. The company had held off Icahn for months, but had to give up significant ground as oil prices dropped below $25 a barrel because of a price war between Saudi Arabia and Russia and weakened demand due to the coronavirus pandemic.
Elliott Management slashed its stake in Telecom Italia (TIIAY) by nearly 3% in response to a financial crisis, but this should not alter the investor's influence on the operator. A filing by the Italian Companies and Exchange Commission (Consob) indicated that Elliott Management reduced its stake from 9.72% to 6.97% in a bid to rebalance its portfolio after Italy's economy was roiled by efforts to combat the Covid-19 pandemic. A source said that this action does not change Elliott Management's commitment to Telecom Italia as a shareholder, and the investor has the full backing of the company's board and management. The hedge fund has had a significant impact on Telecom Italia since emerging as a shareholder in early 2018. Elliott Management revamped Vivendi (VIVHY), the operator's single largest investor at the time, to assume control of the board, sparking a contentious feud between the two shareholders. The investors have been on relatively peaceful terms since last year, as they agreed on a common strategy for Telecom Italia.
Investor Bill Ackman of Pershing Square Holdings Ltd. (PSH) has taken off credit market hedges and reinvested the money after turning "increasingly positive" on stock and credit markets. Ackman initially took out the credit protection on investment-grade and high-yield credit indices at the start of March amid mounting coronavirus panic in global markets. Ackman told PSH investors on Wednesday that subsequent market falls, combined with federal monetary support and steps taken by state governments to contain the disease, had made him more positive. Pershing Square completed its exit from the hedges on March 23, generating proceeds of $2.6 billion, and had reinvested most of the money in existing holdings Agilent (A), Berkshire Hathaway (BERK), Hilton (PK), Restaurant Brands (QSR), and Lowe's (LOW). The fund also bought into several new holdings, including Starbucks (SBUX), which it had exited in January. However, Ackman expects markets and the firm's performance to remain volatile, and he also reiterated his call to close the whole country for 30 days.
The Securities and Exchange Commission (SEC) on March 25 announced that it is extending the filing periods covered by its previously enacted conditional reporting relief for certain public company filing obligations under the federal securities laws, and that it is also extending regulatory relief previously provided to funds and investment advisers whose operations may be affected by COVID-19. In addition, the SEC's Division of Corporation Finance has issued its current views regarding disclosure considerations and other securities law matters related to COVID-19. To address potential compliance issues, the SEC issued an order that, subject to certain conditions, provides public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due between March 1 and July 1, 2020. The March 25, 2020, order supersedes and extends the commission's orignal March 4, 2020, order. Among other conditions, companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed. The commission also issued orders that would provide certain investment funds and investment advisers with additional time with respect to holding in-person board meetings and meeting certain filing and delivery requirements, as applicable. The March 25, 2020, orders supersede and extend the filing periods covered by the commission's original March 13, 2020, orders. Among other conditions, entities must notify the division staff and/or investors, as applicable, of the intent to rely on the relief, but generally no longer need to describe why they are relying on the order or estimate a date by which the required action will occur. The Division of Corporation Finance on March 25 issued Disclosure Guidance Topic No. 9, providing the staff's current views regarding disclosure and other securities law obligations that companies should consider with respect to COVID-19 and related business and market disruptions. The guidance encourages timely reporting while recognizing that it may be difficult to assess or predict with precision the broad effects of COVID-19 on industries or individual companies.
Toshiba Machine (TSHMY) has taken its case against a takeover by investor Yoshiaki Murakami to shareholders and regulators. Murakami and his daughter are linked to funds that hold a 12.7% stake in Toshiba Machine. In late January, the funds launched a hostile takeover seeking a stake of as much as 43.8% in the company. However, Toshiba Machine's stock price has lost half its value over the past two months during the coronavirus crisis, which has prompted Murakami's fund to offer to pull its bid if the company agreed to a $108 million share buyback. Murakami faces the prospect of a tender offer that will probably be lossmaking because Toshiba Machine rejected the proposal. Moreover, shareholders are set to vote on anti-takeover measures during Toshiba Machine's extraordinary general meeting on Friday. Japan's Ministry of Finance recently closed a loophole that allowed Murakami, a resident of Singapore, to operate as a domestic investor by using Tokyo-based vehicles.
SoftBank Group (SFTBY) had discussions with investors including Elliott Management and the Abu Dhabi sovereign investment vehicle Mubadala about possibly taking the company private. The talks came as SoftBank founder Masayoshi Son moved to revive shares in the group, which has $55 million in debt, after a stock market rout last week. Eventually SoftBank decided instead to move ahead with a plan to sell down about $41 billion in assets to pay down debt and boost its share buyback to $23 billion, sending the company's shares up 41% last week. At the end of last week, SoftBank's shares had an equity value of around $50 billion before any potential premium would have been applied. Son began considering a leveraged buyout after Elliott's Gordon Singer expressed interest in buying more SoftBank shares last week as their price fell. During those discussions, Son and some of his key lieutenants began to study the formation of an investor consortium to take SoftBank private. The plan was eventually abandoned for a number of reasons, including the complications around getting an investor consortium together quickly for such a large deal, Tokyo-listing rules, and other tax considerations. Son has often vented his frustration with the public markets, arguing that SoftBank's equity value is at a steep discount to the value of its holdings. By the end of last week, SoftBank said that the discount had stretched to 73%, the widest in the company's history.
Two investors who push management to perform better are trying to raise cash to buy stakes in companies. Glenn Welling, who runs the $1.1 billion Engaged Capital, wants to raise as much as $250 million in new money, and Johnathan Litt's $500 million Land & Buildings Investment Management is forming a new investment vehicle. Litt wants to invest in companies with strong balance sheets that are trading at large discounts and own assets such as data centers, warehouses, and lab space. Litt's team will host a conference call on Wednesday to discuss the opportunities in public real estate being created by the COVID-19 sell-off. Welling has approached only existing investors. Engaged's three largest investments at the end of 2019 were Hain Celestial Group Inc. (HAIN); Rent-A-Center Inc. (RCII), whose stock has fallen 51% since January; and Medifast Inc. (MED), whose stock has fallen 42% since January. Others including Bill Ackman's Pershing Square Capital Management and Carl Icahn have also bought more stock in companies they owned. Panic selling has driven the S&P 500 index down some 30% since January, creating a buying opportunity for some as previously expensive companies may now be attractive.
Hudson Executive Capital LP has stated that the proxy materials filed by USA Technologies (USAT) contain "material representations" meant to "disenfranchise shareholders and entrench management." Hudson, which owns 16.2% of USAT's common stock, says it reached out to the new chairman and CEO of the company last week to engage in good faith settlement discussions to reach a resolution and expedite necessary changes at the company, which it says USAT cut off. Hudson objects to USAT's continued insistence that a majority of current directors participate in the new board, as these individuals were responsible for USAT's Nasdaq delisting, "unfathomable accounting gaffes, detrimental financing agreements, [and] ill-advised capital allocation decisions," as well as a stock price that has fallen 44% since the Oct. 17 appointment of Don Layden as interim CEO. "We are further troubled by the fact that management has entered into a new transaction processing agreement with long-run consequences one month prior to the shareholder vote," says Hudson.
British insurer Prudential said March 24 it was actively evaluating other options in relation to its U.S. business Jackson along with preparations for a minority public offering, because of ongoing market turmoil related to the coronavirus pandemic. "Our business continues to be financially resilient," Prudential said in a statement. The insurer earlier in March said it planned to float a minority stake in Jackson amid demands from investor Third Point for a complete break-up.
USA Technologies Inc. (USAT) argues in a March 24 letter to shareholders that it has been trying to end an ongoing proxy contest with Hudson Executive Capital but will not make changes that it says would "risk significant value destruction." It says that Hudson has refused to honor a past handshake agreement wherein it would have the right to select four out of eight directors, instead forcing out the current USAT CEO and installing a Hudson insider as executive chairman. As such, USAT recommends that shareholders vote for all of USAT's director candidates, saying the company benefits from solid business fundamentals, a clear market strategy, and positive long-term industry trends. In addition, USAT says it continues to take action to reduce costs and enhance compliance, and that the USAT board and its candidates are on course to manage the COVID-19 crisis and emerge as a stronger company.
On March 24, Occidental Petroleum Corp. (OXY) named former CEO Stephen Chazen as non-executive chairman. The move reportedly was made to appease investor Carl Icahn. It had previously been reported that Occidental was close to adding two of Icahn's associates to its board.
In light of the coronavirus pandemic New York Gov. Andrew Cuomo on March 20 issued Executive Order No. 202.8, allowing New York corporations to hold annual shareholder meetings solely through remote communication. The Executive Order alleviates the concerns of many New York public companies that have been trying to comply with New York law while protecting the health of the shareholders and other constituencies that typically attend annual meetings. The Executive Order is effective through April 19, 2020. Absent such an Executive Order, the New York Business Corporation Law mandates that New York corporations hold annual meetings at a physical location, although they may give their shareholders the choice to attend through remote communication. Meanwhile, New Jersey Gov. Phil Murphy on March 20 signed a law allowing New Jersey companies to hold hybrid or virtual-only annual meetings during a state of emergency, so long as the board of directors authorizes and adopts guidelines and procedures concerning this type of meeting.
Land & Buildings is pulling its slate of board nominations for American Homes 4 Rent (AMH). Land & Buildings says governance and operational issues continue at American Homes. "If we do not see continued improvement in the areas we have highlighted, we will not hesitate to run a proxy contest next year," Land & Buildings said.
In November, the Securities and Exchange Commission (SEC) proposed rules that would require proxy advisory firms to disclose more about their process and give companies the opportunity to make revisions before submitting final recommendations to clients. Institutional investors such as New York City Comptroller Scott Stringer have had a negative reaction to these recommendations, which they say will further insulate corporations. Patti Brammer of the Ohio Public Employees Retirement System is concerned that the proposals would negatively impact the independence of proxy recommendations, adding that if costs rise as a result of the new regulations, issuers should bear some of the burden. A recent study from MSCI Inc. looked at more than 2,300 shareholder proposals and found that 30.9% of them were submitted by individual investors, and that 55.3% of those proposals obtained more than 30% of total votes cast. MSCI's Ric Marshall says these findings undermine the notion that shareholder proposals are simply filed by gadfly investors. SEC Commissioner Elad Roisman voted for the proposals, but said in a March 10 speech at the Council of Institutional Investors that, based on feedback from stakeholders that use proxy advisory firm services, he understands "that there is concern that these days devoted to issuer pre-review could disrupt current voting practices." Proxy advisory firm Glass Lewis & Co. says it continues to engage with SEC on the proposals.
SoftBank Group Corp. (SFTBY) is planning to raise as much as $41 billion to buy back shares and reduce debt in an attempt to improve investor confidence. The move comes as the company has suffered greatly under the recent market decline. SoftBank has also been under financial pressure after its $100 billion Vision Fund recorded two straight quarters of losses. Furthermore, the coronavirus has compounded the company's struggles. Shares of the company rose 19% after it announced the stock buyback plan. The company's plan is bigger than the $20 billion of purchases sought by Elliott Management, which has pressured the company to improve shareholder returns.
As part of an agreement with Starboard Value LP, Box Inc. (BOX) said it would appoint three new directors to its board. Starboard is the third-largest shareholder in the cloud service provider, with a 7.7% stake, behind Vanguard Group and BlackRock (BLK), according to Refinitiv data. Former GoPro (GPRO) CFO Jack Lazar will join the board immediately. A second director will be selected from a list of candidates provided by Starboard, and the board will choose a third director ahead of its annual meeting of stockholders in June. Two current board members, including CFO Dylan Smith, will not stand for re-election, and another board member will retire. Box also formed a committee to work with management to suggest ways to improve growth and margin. Starboard first revealed a stake in Box in September and said it might talk to the company about exploring a sale and making operational improvements. "We see a number of opportunities for substantial shareholder value creation," said Starboard managing partner Peter Feld.
Sources say Hestia Capital Partners LP and Permit Capital Enterprise Fund LP plan to nominate two directors to the 11-member board of GameStop Corp. (GME), in which they jointly own 7.5% of shares. The move comes less than a year after reaching a cooperation agreement with the video game retailer, which agreed to add a director to the board who was proposed by the investors. The investors, which criticize GameStop's board for poor strategic planning and capital allocation, reportedly plan to nominate Hestia partner Kurtis Wolf and Paul Evans, an executive who has experience as a CFO and board member. Hestia and Permit argue that missteps have caused GameStop's share price to fall 63% over the last year, and that one new director was insufficient to change board dynamics. "We believe adding a large stockholder, as well as another stockholder supported voice with financial expertise, will give stockholders a greater say in the future of the company, something that is greatly needed," Wolf and Permit partner John Broderick wrote in a letter to shareholders.
Twitter Inc. (TWTR) expects its financial performance to decline this quarter due to lower advertising spending caused by the coronavirus. The social media company says it will record an operating loss in the first quarter and that sales will decline "slightly" compared with the first quarter of 2019. Previously, Twitter expected sales for the first quarter would rise and operating income could reach $30 million. The company has also been under financial pressure lately after Elliott Management Corp. purchased a stake in the company. Elliott Management would go on to call for the removal of co-founder and CEO Jack Dorsey. The company has since reversed that demand and has taken a board seat.
Investor Bill Ackman says he has made a "recovery bet" on the economy by investing $2.5 billion in equities. Ackman has taken off all the hedges he put in place for his Pershing Square Capital Management through shorts in the credit market, which were put in place to offset the effects of the coronavirus. His fund has used the proceeds to reinvest in several of his portfolio companies, including Lowe's Cos. (LOW), Hilton Worldwide Holdings Inc. (PK), and Berkshire Hathaway Inc. (BERK). Ackman believes the sell-off of companies such as Hilton have been overdone, noting that Hilton in particular does not have a lot of debt and has strong cash flow. Others, like Boeing Co. (BA), will need support to get through the current turbulence, either through government aid or the private sector, according to Ackman. Ackman has called for increased virus testing across the country and also wants a federally mandated nationwide shutdown over the next 30 days.
Since last summer, investor Carl Icahn has been betting $5 billion against shopping malls in the CMBX 6 index, which tracks $25 billion in commercial mortgage-backed securities. Icahn's mall short has grown from $400 million in November to $5 billion today, representing 25% of his total assets of $20 billion. His position puts him against mutual fund giants like Putnam Investments and AllianceBernstein, who are betting that the diversified securities will come out fine even if malls default. Mutual funds had been winning the battle until now, as the coronavirus pandemic pushes shoppers inside and pushes stores to close. On Monday, the value of the BBB negative-rated swaps represented by CMBX 6 fell to 68 cents on the dollar, down from 95 cents before the coronavirus forced retailers to close en masse. The A-rated swaps, which face less chance of default, dropped in value to 81 cents from $1.06. And last week, one of the 39 malls covered by the CMBX 6 index, the Newgate Mall in Ogden, Utah, started the process of filing for bankruptcy, sources said. Icahn's gains are currently helping him offset losses from other investments tanked by coronavirus fears, including Occidental Petroleum (OXY), down 75% this year, and hotel and gaming chain Caesars Entertainment (CZR), down 50%. Still, without someone to buy his swaps, Icahn might have to wait until the securities mature in 2022 to cash in on the CMBX 6 gains.
SoftBank Group Corp. (SFTBY) will sell about $14 billion of shares in Chinese e-commerce company Alibaba Group Holding Ltd. (BABA) in an effort to raise $41 billion to support businesses battered by the coronavirus pandemic. The Japanese conglomerate may raise the rest of the money by selling a stake in domestic telecommunications arm SoftBank Corp. (SFTBY), as well as part of Sprint Corp. (S) after its merger with T-Mobile US Inc. (TMUS). On Monday Son revealed he would unload $41 billion of stock and alleviate investor concerns that at one point shaved more than 40% off SoftBank's value from a February peak. Investors were surprised by the scale of the plan and sent the stock soaring 21% on Tuesday in their biggest intraday gain since listing, a few days after dropping about the same amount. Even so, Softbank's shares are still down about 33% from their 2020 peak, underscoring persistent concerns that plummeting technology sector valuations will damage the heavily-indebted company, which has ties to many unprofitable startups. The reversal sees Masayoshi Son finally using part of his $120 billion stake in Alibaba to repurchase shares and pay down debt, which investors have pushed for him to do for years. "This buyback is music to our ears," said Atul Goyal, senior analyst at Jefferies Group. "But the timing of this announcement is not ideal. We would have ideally preferred such an announcement from a position of strength and not because the stock came under tremendous pressure."
The flagship fund of Daniel Loeb's Third Point declined by nearly 8% in the first two weeks of March, bringing its year-to-date losses to about 13% and putting the firm on track for its worst ever first quarter. The $13.4 billion investor returned 17% net of fees to investors last year. Meanwhile, Scott Ferguson's $3.2 billion fund Sachem Head Capital Management has suffered losses this month in the upper range of 10% to 20%, leaving the fund down a similar amount. Last year Sachem Head started campaigns against five companies and gained 24%. The losses come as the hedge fund industry's most prominent managers are hit by the equity markets' rapid descent into a bear market and a plunge in other risky assets. Third Point has suffered big paper losses on some of its largest bets, including a $2 billion stake in Prudential (PRU), whose shares have dropped over 50% since Third Point last month unveiled a set of demands for it to separate its U.S. and Asian businesses and exit the United Kingdom. Third Point's $700 million stake in EssilorLuxottica, which is among the group's largest holdings, has also taken a hit with shares down more than 30% since the end of February. Loeb is also engaged with Sony (SNE), which has rejected his demands to spin off its semiconductor unit and sell a stake in insurer Sony Financial. Sony's shares have declined about 20% in the past month but are still trading higher than they were when news of Third Point's position emerged.
Delek US Holdings (DK) announced that it is adopting a limited-duration stockholder rights plan after Icahn Enterprises (IEP) accumulated a 14.86% stake in the company and held talks with management. The plan will provide stockholders of the Brentwood, Tenn.-based company with the right to purchase shares at a discounted price, which will dilute the stock and prevent a hostile takeover. Delek declared a dividend of one "Right" for each outstanding share of the company's common stock payable to its shareholders of record on March 30. Investor Carl Icahn wants to combine the independent refiner, transporter, and marketer of petroleum products with the refiner CVR Energy (CVI). Icahn holds a 71% ownership stake in CVR Energy. Delek said the rights pact was followed because the company's present share value does not mirror its long-term worth due to the impact of the coronavirus pandemic. As of Thursday, Delek stock had lost 65.6% year to date compared with a 62.2% decline for the petroleum refining industry.
Occidental Petroleum Corp. (OXY) is approaching a truce with Carl Icahn that would give him two board seats and a third, independent director agreed upon by the company. In return, Icahn will bless Occidental's plan to bring back former CEO Stephen Chazen as chairman. Occidental CEO Vicki Hollub is expected to retain her position. The deal would allow Occidental to resolve a major conflict as it grapples with the dual shocks of a Saudi-Russian oil price war and the coronavirus pandemic, which have sent the stock market plummeting and put crude oil below $30 a barrel. Occidental has lost nearly 90% of its value in less than two years and earlier this month it implemented cost-cutting measures that included cutting its dividend by nearly 90%. Icahn, who had been seeking to replace the entire board and who owns about 10% of the company shares, has lost over $1 billion on his investment between his initial purchase last year and the additional shares he bought recently. A settlement would allow both sides to avoid the expenses of a prolonged proxy fight before the company's annual meeting this spring.
Hedge fund D.E. Shaw has raised $2 billion in commitments after opening up to new capital for the first time in seven years. The firm turned away further investor interest, capping how much it will accept at $2 billion, according to a source. That's the amount it thinks it can put into attractive investments in current turbulent markets, the source said. The capital commitments are for D.E. Shaw's $13 billion flagship Composite fund, which declined 0.5% in 2020 through March 20, the source said. The fund trades across a variety of asset classes. D.E. Shaw is one of a number of firms raising cash to take advantage of steep price dislocations across stocks, bonds, and commodities. Global markets have seen volatile swings this month, prompted by the coronavirus pandemic and an oil price war between Russia and Saudi Arabia. D.E. Shaw accepted cash only from existing investors, and will take in the capital beginning April 1.
Some WeWork board members are readying to oppose SoftBank Group Corp.'s (SFTBY) move to back away from part of its bailout of the shared-office provider, presaging what could be a tough internal fight just as the startup grapples with fallout from the coronavirus pandemic. Independent WeWork directors have spent recent days considering legal remedies and other options after SoftBank hinted it would back out of a deal to spend up to $3 billion to purchase shares from the company's employees and investors. A spokesperson for the board's committee of independent directors said they were "committed to taking all necessary actions to ensure that the tender offer which SoftBank has promised to our employees and shareholders is completed." A spokeswoman for SoftBank, which accounts for 50% of WeWork's board, said it "continues to honor its obligations" in the deal.
As the coronavirus wreaks havoc on equity markets, bonds, and energy prices, short-seller Marc Cohodes is warning that the resulting near-freeze in leveraged lending will punish private equity funds that own highly indebted companies. Cohodes is betting against the hedge fund industry, which he says is headed for losses as firms mark down holdings. However, Cohodes believes the fallout could be a boon for long-short hedge funds once clients start moving their cash out of private equity and start looking for skilled stock-pickers. Investor Bill Ackman also warned of risks to private equity if the crisis persists, though he is still buying shares of Blackstone Group Inc. (BX) amid the sell-off. The market for leveraged loans has ballooned in the past decade amid record-low interest rates, but the COVID-19 pandemic has triggered fears of a global recession and nearly shut markets for such loans and high-yield bonds. Worries are growing because of the quality of some borrowers, as a Morgan Stanley (MS) report in November found that almost 60% of the companies acquired in leveraged buyouts had debt loads above six times earnings, compared with 51% in 2007. In the short run, banks may ensure that indebted companies have access to revolving credit lines and increase them or allow some borrowers to switch to payment-in-kind to preserve cash. Last year, Omega Advisors founder Leon Cooperman cautioned that private equity returns can't last with higher borrowing costs, as falling rates were the main reason leveraged buyouts generated high exit multiples.
In an agreement with Blackwells Capital, Colony Capital (CLNY) will nominate a consulting firm CEO and form a joint venture with Blackwells that will acquire Colony common stock on the open market. In exchange, Blackwells—which owns about 2% of Colony common stock—will withdraw its slate of five nominees for the Colony board, vote its shares in favor of the board's nominees, and support all the board-recommended proposals at the 2020 annual meeting. Colony will nominate Jeannie Diefenderfer, founder and CEO of the consulting firm courageNpurpose and a former Verizon Communications (VZ) executive, for election to the board. As for the joint venture, Colony will commit $13.23 million in common stock and/or cash, and Blackwells will commit $1.47 million in cash. Colony will be the managing member of the joint venture, with Blackwells retaining customary minority protections. Blackwells Chief Investment Officer Jason Aintabi said, "We stand behind [Chairman and CEO Tom] Barrack, and his vision in rotating to a global digital platform along with the recruitment of a first class executive in Marc Ganzi to lead Colony." Aintabi had previously called for the removal of Barrack and opposed Colony's plan for Ganzi to succeed him.
Impala Asset Management LLC has filed documents nominating two directors to the board of Harley Davidson (HOG). If it succeeds, Impala has CEO candidates in mind who could take Harley back to its roots and focus on its core market, the 35- to 60-year-old Americans who buy expensive motorcylces. That would take the company away from its current strategy, which has seen it enter new market segments such as electric motorcycles in the United States and low-priced bikes overseas. In its filing, Impala criticized Harley's board and former CEO Matt Levatich's "More Roads" strategy, saying that it hasn't stopped the company's sales slide. The fund wants Harley to spend its resources on marketing and sprucing up its core line-up of chrome cruisers. The investment firm also believes the American brand has been tarnished by a series of moves that have alienated its core customer base, including closing its Kansas City plant and moving that work to Thailand. Harley has two new middleweight bikes due out in late 2020, and its plan also calls for investment in classic heavyweight bikes. Harley's first electric bike received rave reviews from critics, but its rollout to dealers was delayed in October because of last-minute quality issues. Harley's share of the heavy motorcycle market in the United States has slipped from 50.7% to 49.1%; sales in the United States dropped for a fifth year in 2019.
In a recent interview with the Silicon Valley Business Journal, Box Inc. (BOX) CEO Aaron Levie discussed his company's new agreement with Starboard Value LP to replace three board members. The hedge fund holds a 7.7% stake in the cloud content management company. "We worked with Starboard very collaboratively to agree on: how do we bring in individuals with additional experience, people that have built massive companies and can help see around the next set of corners that we're going to face as a business as we continue to grow and drive more profitability? It made a lot of sense that we would bring very experienced operators around the table. And then it really becomes a math exercise of how to make the seats available and make sure that we can build, again, a board of very experienced, strong operators," he said. "It's a pretty natural evolution when you look at kind of going from a startup to a public company where you do have a much more independent board of experienced operators. So we saw this as a pretty natural evolution of the board of directors. And, you know, Starboard certainly was an additional catalyst to that. But our agreement with them, I think, was structured around the fact that we want to drive shareholder value." He added, "I think from the very beginning, we decided that our interests were extremely, extremely aligned—I mean, we felt the company was undervalued. We felt like we could be growing faster. We felt we could drive greater profitability. I think that that was very aligned with what Starboard felt about the business as well. So, I think when you have that type of alignment with an...investor, it's a lot easier to collaborate and find a mutually agreeable solution to the problem."
ShareAction said on March 26 that the use of virtual annual general meetings (AGMs) by companies during the coronavirus outbreak should be temporary. In a letter to the head of Britain's business ministry, Alok Sharma, the responsible investment campaign group said making virtual AGMs the norm could prevent investors from attending and holding companies to account. "A significant proportion of retail shareholders are older people who tend to be less comfortable with using the kind of technology required to host a digital AGM. In addition, physical AGMs allow retail shareholders and the board a unique and unscripted opportunity to meet and have conversations in person," wrote policy manager Rachel Haworth. "If attendees can only submit questions in advance and cannot 'raise their hand' and ask them in real time, this could allow companies to cherry-pick which questions they answer." The letter comes after the London Stock Exchange said it would support temporarily allowing companies to hold their AGMs electronically this year because of the pandemic. Meanwhile, the Chartered Governance Institute published guidance on annual meetings during the epidemic, which was developed in conjunction with the Financial Reporting Council and law firm Slaughter & May. According to the guidance, virtual-only meetings are not viable given they may not constitute valid meetings, but the articles of some companies allow them to hold hybrid meetings, or a combination of physical and electronic meetings. However, companies have the option of changing their articles to allow online meetings.
In its climate proxy voting guidelines for 2020, Institutional Shareholder Services (ISS) says that factors used to evaluate a company's environmental performance fall under five primary categories: climate norms violations; disclosure indicators; current performance indicators including greenhouse gas emissions data; future performance indicators drawing from the ISS Carbon Risk Classification (CRR); and Carbon Risk Classification. The factors are used to assess a company's risks associated with the impacts of climate change, along with its preparedness to face and mitigate those risks in an increasingly carbon-restricted economy. ISS says it will generally recommend voting against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal. It will also recommend voting against proposals to reduce quorum requirements for shareholder meetings, and will generally recommend voting to ratify auditors unless the auditor's independence or competence is in serious question. ISS will generally support management proposals to move the scheduling or location of a shareholder meeting if the request is reasonable, but vote against shareholder proposals to do so unless the current scheduling or location is unreasonable. ISS will vote case-by-case on the issue of auditor indemnification and limitation of liability, as well as on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services. It will also vote case-by-case on shareholder proposals asking for audit firm rotation.
Several hedge funds that have suffered losses due to the impact of the Covid-19 pandemic on the markets are seeking to raise fresh money, including LMR Partners, Baupost Group, Citadel, and Capital Four Management. These hedge funds have to stem losses on their existing cash piles before they can earn performance fees for improving performance. "Fresh money would reset the bar, allowing them to share in more of the upside they expect—or claim—to be able to generate," says Bloomberg Opinion columnist Mark Gilbert. "And there are undoubtedly opportunities in the market carnage." He cites Bill Ackman, who said this week that his Pershing Square Capital Management firm has done "about the most bullish thing we've done" in investing $2.5 billion in equities in a "recovery bet" in recent weeks. In a Bloomberg Television interview, Ackman said, "We are all long. No shorts." Gilbert notes that "the current market dislocations may, if anything, make it harder [for hedge funds] to get in and out of trades quickly and profitably." He adds, "Investing in a hedge fund is bound to have good times and bad times; clients have to be willing to accept there will be periods of losses, provided the performance over time is good enough to justify the fees. But it takes a certain amount of chutzpah to ask investors to increase their allocations to a losing strategy, even in normal financial times. As things stand, it's outrageous...It would take a special kind of optimism—the blind kind, perhaps—to throw good money after bad by investing in a hedge fund that has failed to distinguish itself so far in the prevailing maelstrom."
A recent S&P Global research note indicates that shareholder campaigns against a company's strategy or management often lead to a credit rating downgrade. "We found that the credit impact of the activism was largely unfavorable, albeit only moderately so, with most related downgrades being of one notch," the rating agency wrote. "Assuming the trend in 2015-2019 continues, a company subject to shareholder activism has a one-in-nine chance of seeing a rating action, with that action twice as likely to be negative as positive."
The havoc wrought by the coronavirus could give investors leverage to place new limits on CEO compensation packages and link them more closely to an array of social and environmental issues when companies' annual general meetings (AGMs) convene this spring. Executive pay is one of the issues expected to dominate AGMs worldwide, many of which will be held virtually via video-conferencing to avoid virus spread. Many firms were linking executive pay to new measures even before the outbreak. Now there is considerably more political and reputational risk. "There is a massive corporate reckoning coming," warns Todd Sirras, managing director of U.S. consultancy Semler Brossy, which advises companies on executive compensation. He expects boards will increasingly adopt pay plans tied to such new metrics as worker health or carbon emissions. In a study of about 4,800 North American and European companies with some type of pay incentive, about 11% included an environmental or social metric for the 2018 financial year, voted on at meetings held in 2019, according to Institutional Shareholder Services. Brett Miller, head of data solutions for ISS ESG, the responsible investment arm of ISS, estimates the number could reach 25% for the financial year 2019 and increase even more as boards add new targets due to the pandemic.
Japan has finalized amendments to its Stewardship Code, adding medium- to long-term sustainability considerations—including environmental, social, and governance factors—to the stewardship responsibilities of institutional investors, as well as expectations that they clearly specify how they incorporate sustainability issues within their investment decisions. The code is now applicable to other asset classes besides Japanese listed shares, as far as it "contributes to fulfilling stewardship responsibilities." Moreover, the code requires service providers of institutional investors to contribute to the enhancement of the functions of the entire investment chain, as well as have clear policies and structures for conflicts of interest, management, and disclosure. Asset managers also must disclose these governance structures, and directly exercise their voting rights and participate in stewardship activities on their own behalf. Existing signatories of the code have until the end of September 2020 to update their disclosures to reflect the changes. Institutional investors that intend to sign up to the revised code are called to inform the Financial Services Agency of their intention to do so.
With corporations facing unprecedented economic hardships as a result of the coronavirus pandemic, Forbes columnist Michael Peregrine writes that it is only a matter of time before the consequences trickle down to the various boards of directors. He urges boards to anticipate this trend and plan for it. Peregrine credits the National Association of Corporate Directors' risk-oriented publications for effectively detailing such "black swan" incidents as global economic depression, national political upheaval, and public health catastrophes for its members. In his view, the consequences of the inevitable "blame game" may be felt by boards in two different ways. "First," Peregrine writes, "it may accelerate the recent willingness of the Delaware courts to move away from their long-held, director-friendly standard of conduct for board risk oversight duty." Second, it may recast how the board approaches its enterprise risk evaluation.
The recent swings in the financial markets because of the coronavirus pandemic could provide investors with more of a reason to question companies about nonfinancial risks. Environmental, social, and governance (ESG) investing was accelerating in popularity prior to the virus beginning to circulate, as investors sought out companies that have taken steps to manage nonfinancial risks related to climate change, board diversity, or human rights matters in the supply chain. However, the pandemic has demonstrated more broadly the importance of other factors that are significant to ESG investors. These include disaster preparedness, continuity planning, and employee treatment via benefits like paid sick leave. Companies should expect more investors to ask questions about resilience and contingency planning, seeing the issues in light of the pandemic as relevant to a company's long-term performance, according to Jeff Meli, global head of research at Barclays PLC. Eventually, those discussions could evolve to broader ESG considerations, including topics such as whether telecommuting could curb a company's carbon footprint, he said. "There is obviously a lot of volatility and a lot of big open questions just in the very near term that need to get answered," Meli said. "...Over the long term, I think if anything this would likely accelerate the focus on ESG from an investor standpoint." Barclays plans to provide ESG assessments for each of the companies it covers, and Citigroup Inc. (C) in a note to clients said investors are asking more questions about issues like employee benefits and mortgage relief, with the goal of identifying corporate strategies to limit the economic fallout from the pandemic. The bank said the pandemic likely will impact priorities in ESG, as well as discussions on the pros and cons of having temporary workers and stock buybacks becoming the new concern of corporate governance.
More than 40% (105) of the no-action letters responded to by the Securities and Exchange Commission staff from Oct. 1, 2018, through July 31, 2019, related to a variety of environmental, social, and governance (ESG) matters, according to a survey by Shearman & Sterling. The largest group related to environmental matters, sustainability, and climate change (34 no-action letters). Other top topics for shareholder proposals included human rights issues (18), political contributions and lobbying (10), and inequitable employment practices and the gender pay gap (8). The most common reasons for requesting exclusion were the ESG-related proposal concerned the ordinary business of the company or micromanaged the company (64), the proposal had been substantially implemented (40), or the proposal was economically irrelevant (9). Relatively few (18) of the ESG-related no-action letters included discussion of board analysis of the shareholder proposal. Meanwhile, 66 cited the "economic relevance" (Rule 14a-8(i)(5)) and "ordinary business" (Rule 14a-8(i)(7)) exemption or both. Also, 64 ESG-related no-action letters included arguments for exclusion based on micromanagement. Twenty letters were decided based on the micromanagement question.
Morrow Sodali's 2020 Institutional Investor Survey reveals that environmental, social, and governance (ESG) risks and opportunities played a greater role for all respondents when investing and engaging with companies during the last 12 months, with climate change being top of investors' list (86%). Continuing the trend identified last year, 91% of respondents say engagement at board level is the most effective way for investors to influence board policies and engagement. Almost half of investors would consider voting against a director to influence outcomes. Investors are more likely to support activists' case if the company portrays weak governance practices (64%) and if it can be shown that there is a track record of misallocation of capital (50%). Also, investors now prioritize presence of ESG risks (32%) before a credible activist business strategy when deciding whether to support ESG activists. Overwhelmingly, 91% of respondents expect companies to demonstrate a link between financial risks, opportunities, and outcomes with climate-related disclosures. Investors widely agree (81%) that stakeholder engagement approach and outcomes should be included in companies' disclosure when they explain their corporate purpose.
New European Union (EU) regulations requiring investment managers to disclose sustainability risks and sustainability factors relevant to their investment activities are set to take effect on March 10, 2021. The regulation on Sustainability-Related Disclosures will apply to alternative investment fund managers (AIFMs), UCITS management companies, and portfolio managers and investment advisers authorized under MiFID. The aim is to enhance transparency regarding integration of environmental, social, and governance matters (ESG) into investment decisions and recommendations. The United Kingdom will implement the regulation, which will apply to U.K. AIFMs, UCITS management companies, and portfolio managers authorized under MiFID. AIFMD rules apply to EU/U.K. managers of EU AIFs (e.g., Irish or Luxembourg structures), as well as managers of non-EU AIFs under the national private placement regimes through cross-references in Articles 36 and 42 of AIFMD (that establish such regimes). This could mean that the pre-investment disclosure obligations will apply not only to if they market their funds in the EU/United Kingdom who market their EU or non-EU funds, but also to non-EU AIFMs (e.g., U.S. or Swiss investment managers) who market their Cayman and other non-EU funds under Article 42 private placement regimes in the United Kingdom or any EU jurisdictions. Asset managers and investment advisers will need to develop policies and procedures, website disclosures, and pre-contractual disclosures—as well as disclose sustainable investments—to comply with the new regulations.
The coronavirus outbreak has made it likely that many businesses nationwide will stop paying rent on April 1. Delaying or skipping rent payments could ward off some bankruptcies and layoffs. Some tenants will try to renegotiate their leases, while others will take advantage of the moratorium on evictions implemented in many cities. Other businesses will be forced to liquidate. Without rental revenue, however, many properties could default on their mortgages, forcing already struggling banks to write down loans and raise capital to cover for their losses. Many big-name investors are pointing to commercial mortgages as a stress point in the nation's financial system, with Carl Icahn saying on CNBC earlier this month, "You're going to have this blow up, too, and nobody's even looking at it." Icahn said he is shorting bonds tied to commercial mortgage debt, and he compares the surge in these property loans in recent years to the pre-2008 housing bubble. Meanwhile, Colony Capital Inc. CEO Thomas Barrack has warned of a "potential blockage" in the commercial mortgage market as stable properties suddenly fail to generate cash flow. "Addressing this major looming crisis in liquidity in a coordinated manner will be essential in averting a crisis in credit and a long-term economic recession," he said.
There are several key areas that corporate boards may want to consider amid the Covid-19 pandemic. Regarding issues of health and safety, boards must set a tone at the top through communications and policies that protect employee well-being and act responsibly to slow the spread of Covid-19. Boards should also monitor efforts to identify, manage, and prioritize potentially significant risks to business operations, including any outbreak-related vulnerabilities that may increase the risk of a cybersecurity breach. Moreover, boards need to consider and continually reassess their business continuity plans in light of developments. Key issues to consider include employee/talent disruption, supply chain and production disruption, financial impact and liquidity, internal controls and audit function, key person risks and emergency succession plans, incentives, and board/governance continuity. Companies must further consider whether they are making sufficient public disclosures about the impacts of Covid-19 on their business and financial condition. Given the Securities and Exchange Commission's (SEC's) emphasis on discussing how boards oversee the management of material risks, companies may want to expand proxy statement disclosure of board oversight of Covid-19-related risks. Further, companies may want to consider buying back stock to take advantage of significantly depressed stock prices. Boards must continue to communicate with significant shareholders while monitoring for changes in stock ownership.
In this video, Pershing Square Capital Management's Bill Ackman says he is going all long on markets because the United States is getting to the proper place with respect to the coronavirus pandemic.
In this video, Pershing Square's Bill Ackman says a 30-day national lockdown would be the most effective way to battle the coronavirus pandemic.
Proxy advisory firm Glass Lewis will not recommend against the use of virtual-only shareholder meetings in response to the COVID-19 pandemic. For companies opting to hold a virtual-only shareholder meeting due to COVID-19 during the 2020 proxy season, Glass Lewis will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses its rationale for doing so, including citation of COVID-19. Additionally, should these companies opt to continue holding virtual-only shareholder meetings in subsequent years, future proxy statements should include robust disclosure concerning shareholder participation. Glass Lewis' standard policy on virtual shareholder meetings will apply after June 30, 2020, and it expects robust disclosure in the proxy statement concerning shareholder participation. Shareholders have previously expressed concerns regarding companies' use of this meeting format, which has the potential to silence dissenting shareholders and could insulate management and the board from criticism and controversy. However, given the ramifications of the ongoing pandemic, even groups and shareholders that have argued ardently against the practice of holding virtual-only meetings are considering whether the current circumstances warrant an exception. Glass Lewis is generally neutral on the use of virtual-only meetings, so long as they are structured to ensure meaningful shareholder participation and companies disclose the shareholder protections they are providing.
The Laurel Hill Advisory Group reports that average support for say-on-pay votes at Canadian companies in 2019 was 90.9%, down from 91.9% average support in 2018. This aligns with the 2019 amendments to the Canada Business Corporations Act that will make it mandatory for "prescribed corporations" to hold a say-on-pay vote, though this will not take effect until after the 2020 proxy season. Investment managers have noted that institutional investors seem to be increasingly exercising independent judgement related to say on pay. Laurel Hill notes that this might happen because CEO and executive pay has increased faster than total shareholder return, or because CEO and executive pay is considered to be misaligned with the size and stage of the business. Generally, the tipping point for when management is expected to engage with shareholders opposing a say-on-pay vote is 80% for Glass Lewis and 70% for Institutional Shareholder Services (ISS). The Canadian Coalition for Good Governance recommends that boards enhance disclosure of any adjustments made to financial performance measures within the issuer's executive compensation structures. For director pay, ISS will now recommend a "withhold" vote in the event of two consecutive years of high director pay unless the company provides satisfactory reasons for this in its disclosure. It may be useful for directors to monitor director pay among peer company boards and consider where their pay levels fall. Beginning in 2019, ISS' research reports for Canada began including additional information on company performance using economic value-added (Eva) metrics, which apply uniform adjustments to financial statement accounting data. Therefore, ISS will incorporate Eva metrics into its quantitative pay-for-performance models.
Lisa Culbert, counsel for legal design and operations, and Ramandeep Grewal, partner, with Stikeman Elliott in Toronto, say recent amendments to the Canada Business Corporations Act (CBCA) require diversity disclosures of "designated groups" beyond gender, and unlike the Canadian Securities Administrators' (CSA) National Instrument 58-101 Disclosure of Corporate Governance Practices, venture issuers are not exempt from the CBCA diversity disclosure requirements. The four designated groups covered by the CBCA requirements are, as defined under the Employment Equity Act, women, indigenous people (First Nations, Inuit, and Metis), persons with disabilities, and members of visible minorities. The requirements apply to proxy circular disclosure regarding the board and senior management. Further, NI 58-101 and the new CBCA diversity disclosure provisions require disclosure of director tenure limits. Culbert and Grewal note that "there is growing guidance on what some consider to be lengthy tenure," pointing to the expanded version of the ISS Governance QualityScore, which identified lengthy director tenure as nine years. Under the QualityScore, a five-board maximum emerged as the new standard in 2019 for non-executive directors and a two-board maximum for the CEO, in addition to sitting on the board of the company where they are CEO. Culbert and Grewal's 2019 analysis of the annual proxy circular disclosure of the S&P/TSX 60 found that 40% of issuers have between 21% and 30% representation by women on their board. Regarding gender diversity targets, 47% of issuers have no reported target, while 36% have a target of 30% women board members. Most issuers do not impose term limits, but 14% have set term limits of 15 years.
Proposed rules from the Securities and Exchange Commission (SEC) would transform how proxy advisory firms make recommendations and raise the thresholds for submitting shareholder proposals, while the economic impacts of the coronavirus pandemic could affect proxy vote outcomes for certain public companies, according to Courteney Keatinge at proxy-voting advisory firm Glass, Lewis & Co. "Particularly when it comes to compensation, when companies are not doing very well financially, [shareholders] don't want to see executives doing very well either," she said. The SEC on March 4 released "conditional" regulatory relief, providing companies impacted by COVID-19 up to 45 extra days to file disclosures due between March 1 and April 30. Issuers who delay disclosures must provide "a summary of why the relief is needed in their particular circumstances," the SEC mandated. SEC Chairman Jay Clayton admitted that the virus turmoil may prevent certain issuers from compiling these reports within required time frames. "We also remind all companies to provide investors with insight regarding their assessment of, and plans for addressing, material risks to their business and operations resulting from the coronavirus to the fullest extent practicable to keep investors and markets informed of material developments," he said. The SEC on March 13 issued guidance on the process companies should follow if they opt to change the date, time, or location of an annual meeting. That includes publishing a news release, filing the announcement on EDGAR, and taking "all reasonable steps necessary" to notify other intermediaries in the proxy process and other relevant market participants of the changes. Keatinge said more companies may follow Starbucks' (SBUX) lead and host virtual-only shareholder meetings this proxy season. SEC guidance on virtual meetings directed issuers planning to conduct such meetings to alert all market participants of such plans in a timely manner and disclose clear directions on the logistical details of the meeting, including how stockholders can remotely access, participate in, and vote.
Amid the ongoing pandemic, dozens of large companies are extending pay and benefits to employees whose livelihoods are affected by the coronavirus. AT&T Inc. (T), for example, is offering up to 160 hours of paid time off to workers whose children are at home and need supervision. For its part, JPMorgan Chase & Co. (JPM) is giving $1,000 bonuses to some branch and operations workers who can't work from home, to help defray costs such as child care and transportation. Facebook Inc. (FB) said it would give full-time workers an additional $1,000 in their next paycheck and would continue to pay contractors. But there have been exceptions. Airlines and hotels have instituted unpaid leaves and furloughs. Large companies typically have more resources to weather disruption than do small companies. They are also acting with consideration of the court of public opinion. Some 54% of companies say they will continue for some period of time to pay hourly staff whose workplaces shut down due to the virus, and 51% will pay people who stay home because of cold and flu symptoms, according to a survey of 805 big companies by consulting firm Willis Towers Watson. The pandemic in certain respects is turning out to be a natural experiment in stakeholder capitalism, the vision laid out last August by the Business Roundtable. The group adopted a definition of corporate purpose that promotes "an economy that serves all Americans," scuttling its previous focus on shareholders above all others. The group's statement of purpose, signed by more than 180 chief executives, specifically referred to employees as stakeholders. Joshua Bolten, the president and CEO of the Business Roundtable, recently pointed out that stakeholders' interests are aligned. If employees, customers, suppliers, and communities aren't supported, "there will be no business for shareholders to own when we come out of this crisis," he said. Still, there are limits to what even large companies can do. And once the first big company starts to lay off workers, others may quickly follow suit.
Adoption of dual-class voting stock structures among Fenwick – Bloomberg Law Silicon Valley 150 firms (10.9% in 2017, 13% in 2018, and 12.7% in 2019) has surpassed the companies included in the Standard & Poor's 100 Index (9.0% in 2016 to 2019) in recent years, according to Fenwick's annual survey of corporate governance practices. Classified boards increased from 50.7% in 2018 to 52.7% in the 2019 proxy season for the SV 150, while the S&P 100 increased to 5.0% in the 2019 proxy season from 3.0% in the prior year. Among S&P 100 companies, majority voting rose from 10% to 96% between the 2004 and 2019 proxy seasons, and among the SV 150 the rate has risen from zero in the 2005 proxy season to 57.3% in the 2019 proxy season. Stock ownership guidelines have generally increased over time in both groups, but the SV 150 only recently surpassed the level of the S&P 100. The SV 150 continues to add female directors at a higher rate than S&P 100 companies; the share of SV 150 companies with at least one woman director increased from 82% to 91.3% over the past year. Most SV 150 companies would meet California's new standard mandating inclusion of women on boards of directors in 2019. SV 150 companies tend to have fewer executive officers than S&P 100 companies, and the average number per company in both groups continues to decline. Companies in the SV 150 paid on average $4.3 million on audit fees compared to $22.9 million paid by S&P 100 companies, with an average increase of 3.7% from the prior year.
Investment funds that use engagement as a strategy are starting to adopt the tactics of private equity firms. Some investors have created their own private equity investment arms and provide a diversified portfolio of strategies for investors. Elliott, with its private equity arm Evergreen Coast Capital, is a prime example of this investment product diversification. Investment funds are looking to use their spare capital to acquire entire companies. At the same time, some private equity firms have also started to acquire minority positions in companies as a way to force a dialogue about a buyout. Golden Gate, Hudbay Minerals, and Sycamore Partners are among the firms that have tested this approach. This convergence is a reflection of the strength and institutionalization of the engagement strategy, along with private equity's pursuit of flexibility. The current frothy valuations and competitive investment landscape suggest that private equity and investment funds will continue to utilize each other's strategies in pursuit of stronger returns.
Martin Lipton, founding partner, and David A. Katz and David E. Shapiro, partners, Wachtell, Lipton, Rosen & Katz, stress the important role that directors on corporate boards play in navigating the path forward amid the COVID-19 pandemic. There are several issues that directors face, including maintaining close contact with the CEO and working with management to ensure the safety and well-being of the company's employees, other stakeholders, and the public at large. Directors also must understand the risks to the company and its stakeholders from the COVID-19 pandemic, and discuss, as a board, management's strategies for minimizing and mitigating these risks. They should review the viability of the enterprise from a short-term and long-term perspective and make changes accordingly; receive a board-level briefing on company indebtedness, understand the company's near-term liquidity needs, and work with management to secure liquidity needs; and provide the CEO and management with assistance in handling communication with internal and external constituents. Among other things, directors should frequently communicate with, and seek guidance from, applicable regulators and other government agencies with oversight; respond to activist engagement; work with management in engaging shareholders and other stakeholders on corporate operations, impact to strategy, and other important concerns, including environmental, social, and governance issues; review compensation plans and consider whether changes are necessary; evaluate the company's current and future dividend and buyback policy as well as capital allocation and liquidity generally; and maintain respect among board members and promote effective decision-making through stressed and stressful conditions.
Michael Albano, Sandra Flow, and Francesca Odell, partners at Cleary Gottlieb Steen & Hamilton LLP, said companies considering whether to move to a virtual or hybrid annual shareholder meeting in response to the COVID-19 outbreak must determine whether they are permitted to under the company's state law of incorporation and its bylaws and take steps to properly notify shareholders of any change. If virtual meetings are permitted under state law, companies should then examine their bylaws to determine whether they would permit holding a virtual or hybrid meeting. Management and/or the board of directors generally will have discretion in determining the proper venue and format for the annual meeting. Next, companies must take steps to comply with filing requirements and other obligations set forth by the Securities and Exchange Commission (SEC) and state law. The SEC's Coronavirus Guidance indicates that if a company has already filed its proxy statement and has notified shareholders of the location and timing for its annual meeting, any change needs to be communicated. The company should issue a press release disclosing the change in format, file the release with the SEC as supplemental proxy materials, and add it to posted proxy materials. If a company has yet to file its proxy statement and is considering the possibility of moving to a virtual or hybrid meeting, disclosure indicating the possibility of a change and the reason for such a change should be included in the proxy statement, both in the meeting notice and in the meeting logistical information. Further, companies should consider the overall benefits and costs of moving to a virtual or hybrid meeting. They should recognize that certain meeting elements, such as the presentation of shareholder proposals, may be more cumbersome, and virtual meetings can create more uncertainty in shareholder vote counts because shareholders can more easily attend and change their vote at the last minute. Among other things, companies should consider whether they have the necessary infrastructure, procedures, and conduct rules in place to host a virtual annual meeting.
BlackRock (BLK) is increasing its focus on sustainability-related issues and relevant disclosures in 2020, due to the growing impact of these issues on long-term value creation. The investment manager is also mapping its engagement priorities to specific U.N. Sustainable Development Goals, such as gender equality and clean and affordable energy, and providing a high level, globally relevant key performance indicator (KPI) for each priority so companies are aware of its expectations. Board composition, effectiveness, and accountability remain a top priority for BlackRock, which expects to have access to a non-executive, and preferably independent, director. For environmental risks and opportunities KPI, BlackRock plans to hold relevant committee members, or the most senior non-executive director, accountable for inadequate disclosures and the business practices underlying them. For matters of corporate strategy and capital allocation, BlackRock plans to engage with companies to review its reporting expectations and encourage them to make the connection between long-term planning and business-relevant sustainability risks and opportunities. BlackRock expects pay outcomes to be correlated with a business relevant long-term performance metric, and will hold compensation committee members accountable for pay outcomes. Human capital management also will be a priority this year for BlackRock, which expect boards to oversee strategies in this area.
The National Association of Corporate Directors (NACD) polled almost 200 directors for a "pulse survey" on how boards are reacting to disruptions caused by the coronavirus pandemic. The research found that 76% of directors surveyed report that their boards have discussed COVID-19 with management, while 49% report they've reviewed internal corporate communications strategies. Slightly fewer—42%—have taken steps to establish expectations for board/management communications. The NACD survey further showed that 67% of directors expect to evaluate the effectiveness of management's plans to protect the health and welfare of the employee population at their next board meeting. Seventy-four percent say that their board gets enough information from management, and 71% say management's response so far has been effective.
The Wall Street Journal quotes various corporate governance experts, who say temporary succession planning could become a more pressing issue in the coming weeks as companies brace for the possibility of C-suite absences related to the coronavirus. If needed, CFOs are likely contenders to temporarily fill a CEO or chairman post in such a crisis. National Association of Corporate Directors CEO Peter Gleason observes that most boards have been in close enough contact with the management team that they know the capacity of the executive officers very well. But amid the pandemic, he noted, boards would also need to prepare a scenario in which the emergency successor is also ill because he/she was in the same environment as the executive who contracted the virus. Gleason asks, "Is there somebody a layer down who can man the ship for a short period of time?"
Wall Street Journal columnist John D. Stoll contends that a movement that was designed to make corporate boards better and more diverse "may instead leave some of them flat-footed" as their companies deal with the coronavirus crisis. In particular, he is concerned that fewer "overboarded" directors—those who hold a half-dozen or so public board seats at the same time—will leave some companies vulnerable. JPMorgan Chase & Co. (JPM), for instance, was once connected to 48 different companies via its directors' affiliations. Today, that number has dwindled to nine. Stoll asserts that such affiliations have proven invaluable in previous times of crisis. "When GM was skidding toward bankruptcy," Stoll notes, "Ford Motor Co. relied on a longtime board member with deep connections and multiple board seats—ex-Goldman Sachs Group Inc. President John Thornton—to help it survive its own liquidity crisis."
According to the Proxy Preview 2020 report from As You Sow, the Sustainable Investments Institute, and Proxy Impact, 429 environmental, social, and governance (ESG) shareholder resolutions have been filed this proxy season. Two-thirds of the filings address climate change, political spending, and treatment of women on boards and in the workplace. More than 300 of these proposals are expected to be voted on this spring. Heidi Welsh, co-author of the report and executive director of the Sustainable Investments Institute, said more investors are pressuring companies to address such ESG issues, even as the Securities and Exchange Commission works to change the rules for the shareholder proposal process despite strong opposition from many investor groups. "Companies (that) don't want to publicly air these matters on their proxy ballots may get what they want in the rule this spring, but curtailing shareholder rights doesn't mean these risks will evaporate. The ultimate outcome will depend on litigation and the 2020 election results," said Welsh. Further, As You Sow CEO Andrew Behar said the 2020 proxy season "will test if investors and companies will help define a new economic paradigm or if these endorsements are just empty words," pointing to the Business Roundtable's recent policy change to support stakeholder capitalism.