Media Center

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

Janus Henderson Announces Changes to Board of Directors
Purplebricks' £1 Sale to Rival Strike Backed by Shareholders
California, New York Pensions Vote Against Toyota Chairman
Netflix Shareholders Withhold Support for Executive Pay Package
Freshpet Files Preliminary Proxy Statement
Illumina Expands Board After Fight With Icahn
Salesforce's Latest Earnings Hint That Its Fortunes Have Turned Around—and It Says Its 'Performance Culture' Is to Thank
ValueAct Calls for Private Dialogue With Seven & i After Losing Board Battle
Big Oil Shareholders Choose Cash Over Climate
Masimo Board of Directors Sets the Record Straight on False and Misleading Claims
MKT Capital Calls on Aurinia's Board of Directors to Respect the Message Sent by Shareholders at 2023 Annual Meeting
Stellantis Does Not Need Italy Among Its Shareholders, Chairman Elkann Says
Korea's Sovereign Wealth Fund Directly Exercises Voting Rights for First Time
Primo Water CEO Tom Harrington to Retire
JANA Partners Files Lawsuit to Stop Freshpet Board’s Highly Entrenching Actions Intended to Disenfranchise Shareholders
Masimo's Proxy Battle With Politan Capital: Activism for Positive Change or Disruption?
Corporate ESG Requirements Are About to Ramp Up. Here’s How CFOs Can Prepare.
2023 Proxy Season: More Proposals, Lower Support
Reassessing the Board Fight That Was Meant to Transform Exxon
Opinion: Brenntag SE — Increasingly Likely Separation Offers Upside Potential
World's Biggest Investment Fund Says Firms Mismanaging Climate Risk Could Face Exclusion From Next Year
The Selective Corporate Definition of 'Long-Term' When a Shareholder Activist Shows Up
Following Setbacks, Climate Advocates Rethink Their Approach
Opinion: Activist Shareholders Threaten Japan’s AGM Season
Opinion: Wagamama Can't Dismiss Its Bad Hedge-Fund Reviews
ESG Activism Down This Proxy Season, ISS says
2022 Asset Stewardship Report: Engagement and Voting
Why Activist Investors Are Going to Have a Busy Year
Opinion: Top Proxy Advisors Think Restaurant Brands International's Patrick Doyle's $117 Million Payday Is Excessive
Opinion: Investor Says 'Yelp Is Not the Company People Think It Is,' While Pushing for a Sale That Is Unlikely to Happen

6/2/2023

Janus Henderson Announces Changes to Board of Directors

Business Wire (06/02/23)

Janus Henderson Group (JHG) announced Ed Garden's resignation from its board, with Trian Fund Management partner Josh Frank appointed an independent non-executive director to succeed him as of June 9. Garden has elected to retire as Trian's CIO to concentrate on managing his personal assets through his family office, and he will remain a Senior Advisor to Trian. "While we are sorry to lose [Garden's] helpful insights, we are delighted to welcome Josh as an independent director on the Board," stated Janus Henderson Board Chair John Cassaday. "Josh is an extremely well-regarded leader in corporate strategy development and corporate governance, and his breadth and depth of experience will be invaluable in helping guide and position Janus Henderson for future success." Janus Henderson CEO Ali Dibadj praised Garden "for the truly valuable contributions he made in developing the strategy we are now executing to help clients define and achieve superior financial outcomes through differentiated insights, disciplined investments, and world-class service." Trian CEO Nelson Peltz declared: "As the Company's largest shareholder, Trian strongly supports [Dibadj] and his management team's vision and execution and believes that the Company is well-positioned to help clients achieve their desired investment outcomes while delivering significant long-term shareholder value. With his fresh perspectives on corporate strategy and governance, Trian is confident Josh will bring new viewpoints to serve the best interests of the firm, its clients, and shareholders."

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6/2/2023

California, New York Pensions Vote Against Toyota Chairman

Reuters (06/02/23) Dolan, David; Leussink, Daniel; Shiraki, Maki

The California Public Employees' Retirement System (CalPERS) and the Office of the New York City Comptroller have opposed the re-election of Toyota Motor (T) Chairman Akio Toyoda. They also supported a resolution calling for improved disclosure of Toyota's climate change lobbying. This follows governance issues raised by two leading proxy advisory firms, with Glass Lewis recommending that shareholders block Toyoda's re-election, citing his responsibility for an insufficiently independent board. Climate activists and green investors have taken aim at the carmaker in recent years, calling out its sluggish launch of battery-electric vehicles. Toyota has previously said its board satisfies governance standards established by the Tokyo Stock Exchange for independent oversight, and it would act with "objectivity, independence, and an ability to conduct appropriate supervision." It noted that Toyoda had been re-nominated to the board because he would extend Toyota's offerings to include "mobility" services. The company's board has urged investors to oppose the climate lobbying disclosure resolution, claiming Toyota was committed to carbon neutrality by 2050 but required the flexibility to adjust rapidly, including in its disclosure policies. Toyota said it makes societal contributions through manufacturing, adding that it has been negotiating with CalPERS and heard its views that outside directors should make up more than half of the board. CalPERS said it had voted approximately 20 million shares on the Toyota proposals, less than 0.2% of the stock on issue, but the pension's voice carries weight among global investors. The New York City pension funds owned 6.7 million shares in Toyota Group companies as of March 31, and their stake in Toyota Motor remains uncertain. New York City Comptroller Brad Lander called the Toyota board inadequately independent. The automaker has claimed that its rollout of alternatives to gasoline-engine cars is generally better for lowering carbon emissions and more practical than simply an EV transition. In April, Toyota sold 8,584 EVs globally, comprising more than 1% of its global sales in a single month for the first time. It aims to sell 1.5 million EVs per year by 2026. Toyota shares closed up 3.4%, exceeding the 1.2% increase in the Nikkei index. Company stock has yielded 13% including dividends this year, compared to the Nikkei index's 21%.

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6/2/2023

Netflix Shareholders Withhold Support for Executive Pay Package

Reuters (06/02/23) Chmielewski, Dawn

Netflix (NFLX) shareholders on Thursday refused to vote for the company's proposed 2023 executive pay package following striking Hollywood writers' push to reject the resolution. The Writers Guild of America West (WGAW) called on investors to oppose the package, describing it as "inappropriate" during the strike. "While investors have long taken issue with Netflix's executive pay, the compensation structure is more egregious against the backdrop of the strike," wrote WGAW President Meredith Stiehm. According to her, Netflix can afford to pay $68 million a year to writers seeking better compensation if it had the means to spend more than $166 million on compensation last year for top executives. Netflix said the vote count would be disclosed in a regulatory filing. The executive pay package was supported last year by just 27% of shareholder votes cast, after which Netflix said it made revisions that included setting a salary cap for its co-chief executives and a performance-based bonus plan. This year, Netflix Executive Chairman Reed Hastings is set to receive a $500,000 wage and $2.5 million in stock, while co-CEOs Ted Sarandos and Greg Peters will each collect $3 million in annual pay. Sarandos stands to collect a stock payout of $20 million and qualifies for a bonus of up to $17 million. Meanwhile, Peters will receive $17.3 million in stock and a bonus of up to $14.3 million.

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6/1/2023

Salesforce's Latest Earnings Hint That Its Fortunes Have Turned Around—and It Says Its 'Performance Culture' Is to Thank

Fortune (06/01/23) Pringle, Eleanor

Salesforce (CRM) reported first quarter revenue of $8.25 billion—up 11% year-over-year—fortifying the company’s full year revenue promise of up to $34.7 billion, a boost of approximately 10% year-over-year. It’s been a hard-won struggle however, after Salesforce shed 8,000 members of staff after its stock price fell by around 50% in 2022. Perhaps unsurprisingly, the culture of the company has shifted as a result. As well as CEO Marc Benioff being blasted by his employees for “evasiveness” around the layoff issue, the staff fondly referred to as “Ohana”—or family—now find themselves embedded in a high-performance culture. As he discussed Salesforce’s latest financial results on a call with investors this week, Benioff said Salesforce had “reignited [its] performance culture by focusing on productivity, operational excellence, and profitability.” The CEO was echoed by his chief operating officer, Brian Millham, who similarly reiterated that a change in culture was a key driver of the company’s success thus far. “Our focus on performance, culture, and operational excellence contributed to our strong first quarter results,” he explained. The transformation was spurred by incoming investors, including Elliott Management and Starboard Value, which threw down a gauntlet for the company to cut costs and boost profit margins.

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6/1/2023

MKT Capital Calls on Aurinia's Board of Directors to Respect the Message Sent by Shareholders at 2023 Annual Meeting

Business Wire (06/01/23)

Aurinia Pharmaceuticals Inc. (AUPH) shareholder MKT Capital Ltd. berated the company for its response to the outcome of its May 17 Annual General Meeting of Shareholders, where Chairman George Milne and Compensation Committee Chair Joseph Hagan received less than majority support from investors and consequently submitted their resignations to the board. "It has been two full weeks since shareholders sent a clear message for immediate change in Aurinia's boardroom," stated MKT Capital founder Antoine Khalife. "Despite the Company's claim that it 'respect[s] the outcome of this year's vote and the opinions of all of our shareholders,' there has been no indication that the Board has accepted the resignations of Messrs. Milne and Hagan. This unjustifiable delay further illustrates the Board's blatant disregard for shareholders' wishes and proclivity for issuing misleading communications. It is imperative that Aurinia respects the will of the majority of its shareholders by announcing the Board has accepted the tendered resignations and will consult significant investors on the selection of highly qualified and independent replacement directors who will prioritize the creation of shareholder value." Khalife added, "We continue to believe that the best risk-adjusted path forward is for Aurinia to commence a strategic review process, and we encourage our fellow shareholders to reach out directly to the Company to make their views known. We have engaged with a large number of shareholders who fear additional dilution and would strongly favor a sale of the business at the right price. They believe this outcome compares very favorably to allowing the Company to proceed with a standalone plan. While it is our sincere hope that the incumbent directors finally wake up and embrace what shareholders—the true owners of Aurinia—actually want, we are fully prepared to move forward with requisitioning an extraordinary general meeting to replace each and every one of the directors if they continue to disregard the will of shareholders."

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6/1/2023

Stellantis Does Not Need Italy Among Its Shareholders, Chairman Elkann Says

Reuters (06/01/23) Piovaccari, Giulio

Stellantis (STLA) Chairman John Elkann said on Thursday that the carmaker is sufficiently healthy to not require Italy as a shareholder, in response to business lobby calls for the country to invest directly in the group. Il Sole 24 Ore quoted Paolo Scudieri with the Italian automotive association ANFIA as saying Rome's direct investment in Stellantis is "necessary" and "right" in order to offset the French government's stake. Paris now constitutes a "relevant" shareholder in Stellantis with a share of approximately 6%. The French government formerly invested in Peugeot maker PSA, which merged with Fiat Chrysler into Stellantis in 2021. Elkann, who is CEO of leading Stellantis shareholder Exor (EXXRF), commented, "I think states invest in companies when companies are doing bad. And Stellantis is doing very good." He elaborated that France's status as a shareholder was warranted by PSA's past problems, which required French government intervention. Prior to the September elections which installed Giorgia Meloni's center-right government, Industry Minister Adolfo Urso pushed for state lender CDP to acquire an interest in Stellantis. Urso is a booster for parties promoting a new strategic investment fund Rome is establishing, potentially allowing the government to purchase stakes in listed companies outside of the financial industry and to assume a more activist industrial policy. However, a provision that the fund can invest in companies headquartered in Italy appears to exclude a stake Stellantis, which is headquartered in the Netherlands.

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6/1/2023

Primo Water CEO Tom Harrington to Retire

Tampa Bay Business Journal (06/01/23) Georgacopoulos, Christina

Tom Harrington, CEO of Primo Water (PRMW), is slated to step down from his position and retire at the end of 2023. He became the company's CEO of its North American division in 2014 after Primo Water acquired Atlanta-based DS Services, where he served in various roles for a decade, including CEO, president, and COO. Harrington was appointed CEO of the wider Primo Water enterprise in 2019 as its leaders were launching efforts to overhaul the company. Harrington will stay in his role until Primo’s board of directors finalizes an executive search for his replacement; his retirement is effective as of Dec. 31. The board will consider candidates from inside the company as well as from outside. Harrington currently holds a seat on Primo’s board, but the company did not say if he would remain a director upon his retirement. Harrington said, "It has been my honor to lead Primo Water's talented team through a critical and transformative period during my tenure as CEO. Our strategy is clearly working, we're pleased with our past accomplishments, and we're even more excited about our future. With our strategy in place and exciting prospects for the future, now is the right time to begin the transition to Primo Water's next phase of leadership." Primo Water Corp. is the seventh-largest public company in Tampa Bay, Florida, with $2.2 billion in net revenue last year and a footprint that encompasses more than 20 countries. Earlier this year it was engaged by an activist investor.

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6/1/2023

JANA Partners Files Lawsuit to Stop Freshpet Board’s Highly Entrenching Actions Intended to Disenfranchise Shareholders

Business Wire (06/01/23)

JANA Partners, which along with its affiliates and partners owns 9.5% of Freshpet Inc. (FRPT) has filed a complaint in the Court of Chancery of the State of Delaware against Freshpet and the company’s board of directors. The complaint seeks a declaratory judgment and a determination that the board’s recent actions to entrench itself, and refusal to reverse them, constitute breaches of fiduciary duties; and an order requiring that the number of directors up for election at the company’s 2023 Annual Meeting of Stockholders be returned to its original size, such that four director seats, rather than three, stand for election at the meeting. JANA filed the complaint in response to the highly entrenching actions Freshpet took on May 17, 2023, which included changing the size and composition of its board such that the number of directors up for election at the meeting was reduced from four to three, and unexpectedly accelerating the date of the meeting—in the midst of settlement discussions with JANA regarding board composition, conflicts, and governance issues—from its usual mid-Fall meeting date to July 25, 2023. JANA’s filing contends that the board’s extraordinary actions, taken well after JANA publicly disclosed its interest in obtaining representation on Freshpet’s board, constitute a breach of the board’s fiduciary duties, and that JANA should have the opportunity to nominate four Class III directors at the meeting. JANA has also filed a motion to expedite these proceedings to resolve this critical issue ahead of the recently-advanced deadline to nominate directors for consideration at the meeting. The board’s decision to accelerate the date of the 2023 Annual Meeting, announced on May 17, 2023, required that stockholders submit any director nominations within just nine days of the announcement, a clear entrenchment tactic by the board to avoid accountability to Freshpet’s shareholders. On May 24, 2023, JANA announced that it will be nominating four highly qualified candidates to Freshpet’s board at the company’s 2023 Annual Meeting, scheduled for July 25, 2023.

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6/2/2023

Masimo's Proxy Battle With Politan Capital: Activism for Positive Change or Disruption?

NASDAQ (06/02/23) Ward, Ben

Politan Capital's proxy battle at Masimo Corp. (MASI) is being closely watched by shareholders and the med-tech industry. The outcome could alter the company's corporate structure and strategic direction and put shareholders in a better position, according to Politan, which holds a 9% stake in the company. Masimo's stock price has fallen 14.9% this month. Politan submitted a formal notice on May 1 to present a stockholder proposal and nominate candidates to Masimo's board at the June 26 annual general meeting. In a May 23 letter to the board, Politan called for independent oversight and greater accountability on the board to improve corporate governance and unlock its potential for profitable innovation and growth. Masimo released a presentation on May 31 in support of its management team and strategic approach, emphasizing the strength of its core pulse oximetry business and recurring revenue from long-term contracts, among other things. The presentation followed a disclosure that Masimo founder, CEO, and Chairman Joe Kiani purchased more shares in the company. Politan argues that its nominees, Michelle Brennan and Quentin Koffey, possess the skills, experience, and shareholder alignment needed to address Masimo's governance and strategic challenges. Although Piper Sandler analyst Jason Bednar said Politan has the potential to influence higher earnings, he noted that the proxy fight was far from a guaranteed positive for shareholders.

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6/2/2023

Corporate ESG Requirements Are About to Ramp Up. Here’s How CFOs Can Prepare.

Wall Street Journal (06/02/23) Mutoh, Anna

The growing need for companies to address environmental, social, and governance (ESG) issues is placing new responsibilities on financial executives. For instance, chief financial officers will be tasked with creating systems for collecting data to meet upcoming rules from the U.S. Securities and Exchange Commission (SEC). Some may think allowing finance departments to handle ESG responsibilities is the best path forward, but experts say creating an internal task force is the better option. Robert Michlewicz, chief executive of Visual Lease, says this task force should be able to reach out to the entire company and collect the necessary data. A system will also be needed to store and interpret the data. Collaboration with chief technology officers will be needed to ensure this process is automated. For international firms, it will be important to stay updated with rules imposed by the SEC, the European Union’s Corporate Sustainability Reporting Directive, and the International Sustainability Standards Board. According to a 2023 Rate the Raters survey conducted by the SustainAbility Institute at global sustainability consulting firm ERM, many investment teams are now mandated by their companies to incorporate ESG ratings and data into their investment decisions, but more than half of companies and investors said they have only moderate trust that ESG ratings accurately reflect ESG performance. More than half of the companies surveyed said they engage with at least six ESG ratings providers. Unlike credit-ratings firms, which generally hold annual meetings with companies, ESG ratings firms don’t meet as often with those they rate and the ratings system isn’t standardized. “It’s far less of an interactive process,” said Clare Scherrer, CFO of Smiths Group (SMGZY), a London-based engineering company. What has worked well, according to finance chiefs, is to take the time to work with ratings firms, explain how the company works, and respond proactively rather than leaving the raters to rely on publicly available information that might be difficult to locate. This prevents wasted effort on issuing reports that aren’t relevant, some CFOs said. “If you don’t own the narrative, somebody will create the narrative for you, and you might not like that narrative,” said Curtis Ravenel, a member of the secretariat of the Task Force on Climate-Related Financial Disclosures, speaking in a recent webinar. “At the end of the day,” Smiths Group's Scherrer said, “if an investor is going to put $50 million to work in your company, they want to understand directly what your priorities are, what you’re doing, and how you are reporting.”

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6/1/2023

2023 Proxy Season: More Proposals, Lower Support

Harvard Law School Forum on Corporate Governance (06/01/23) Washington, Paul; Spierings, Merel

Thus far this year, shareholders have filed 803 proposals at Russell 3000 companies, compared to 801 in the first half of 2022 and 798 proposals filed in all of 2021. The sharpest increase in shareholder proposals has been in the area of executive compensation, driven by a dramatic rise in the number of proposals targeting severance arrangements. About 83% of the shareholder proposals filed this year have been at S&P 500 companies, compared to 79% in the first half of 2022, suggesting that shareholders are continuing to focus on companies where they can get the most attention, not necessarily the companies that may merit the most attention, as smaller companies generally have less robust ESG programs. While the number of shareholder proposals is increasing, support is declining across the board. Continuing the trend seen in 2022, support dropped for shareholder proposals in every category: governance, executive compensation, environmental, social, and human capital management. As in 2022, governance proposals continued to gain higher levels of average support than those in other areas. A number of factors appear to be contributing to the decline in support, including the proscriptive nature of some proposals, the steps companies have already taken to address the topics raised by proposals, and major institutional investors taking a more discerning, case-by-case approach in evaluating shareholder proposals as compared to a few years ago. Among the various categories, environmental proposals have seen the sharpest drop in support, from 34% to 21% in the first half of 2022. Within that context, shareholder proposals on climate continued to dominate environmental proposals and be the most resilient in terms of average support. Anti-ESG proposals continue to underperform their pro-ESG counterparts: thus far, support for such proposals is averaging 7% in the S&P 500 (6% in the Russell 3000), down from 8% in 2022 (9% in the Russell 3000). The only topic where anti-ESG proponents seem to be getting traction this year is on CEO/chairman separation, a traditional governance topic.

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5/31/2023

Reassessing the Board Fight That Was Meant to Transform Exxon

New York Times (05/31/23) Sorkin, Andrew Ross; Mattu, Ravi; Warner, Bernhard

At Exxon Mobil's (XOM) annual shareholder meeting on May 31, investors will vote on a series of proxy measures calling on the company to reduce emissions and accelerate its decarbonization efforts. However, climate investors and others do not expect a repeat of Engine No. 1's victory two years ago, when the San Francisco-based hedge fund won three seats on Exxon's board, and argue that its efforts have achieved negligible results. According to Harvard Business School senior lecturer Mark Kramer, "Exxon has continued to invest aggressively in expanding its oil and gas production." Meanwhile, As You Sow President and chief counsel Danielle Fugere noted that Engine No. 1 "has not made a discernible difference in the way Exxon is addressing climate change." Further, Follow This founder Mark van Baal said the hedge fund was "the biggest disappointment in the fight against climate change." However, a spokesperson for Engine No. 1 stressed several changes at Exxon, including the introduction of net-zero targets for its Permian Basin operations in Texas and New Mexico, early-stage carbon-capture and hydrogen projects, and investments in lithium mining. The spokesperson noted that "none of those initiatives were in the company's plans before Engine No. 1's engagement." Moreover, Legal & General Investment Management contends that the hedge fund's proxy fight "changed the narrative."

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5/31/2023

World's Biggest Investment Fund Says Firms Mismanaging Climate Risk Could Face Exclusion From Next Year

CNBC (05/31/23) Meredith, Sam

Norway's $1.4 trillion sovereign wealth fund Norges Bank Investment Management says it is willing to exclude companies that mismanage climate risk starting in 2024, shortly after it pledged to support shareholder proposals at Chevron (CVX) and Exxon Mobil's (XOM) respective annual meetings on Wednesday. The proposals aim to force U.S. oil companies to bring their climate agendas in line with the Paris Agreement and commit to total carbon emission cuts by 2030. The fund said it evaluates every shareholder proposal individually, and points out differences between European and U.S. oil majors' strategies to address Scope 3 emissions generated by customers' utilization of their oil and gas. “We are a particularly active owner when it comes to climate,” said Carine Smith Ihenacho at Norges. The fund announced in 2022 that it would exercise a tougher position on companies that do not adopt credible climate plans. “We clearly said it is in our long-term interest that the companies in our portfolio will get to net zero by 2050 because, for our financial returns in the long term, we think that will be beneficial,” Ihenacho noted. “As an active owner, we really want to influence and push the companies towards setting net-zero 2050 targets and also push them towards having credible transition plans. By that, we mean science-based transition plans.” Norges has invested in more than 9,000 companies in 70 nations, while Ihenacho said dialogue and voting are the main tools the fund aims to wield when engaging with corporate directors on environmental, social, and governance factors, although it could soon be forced to sell out of holdouts. “I think our starting point is very much that we want to be an owner and want to influence the companies,” Ihenacho said. “Selling out is not going to solve the climate crisis at all. You just sell to somebody else who may care less about climate as an owner than we do. Having said that, it may come to a point where we feel the company is absolutely not listening to us, they are not reporting anything, we see no changes, we may then sell out. We may decide to sell out.” Ihenacho continued, “The earliest there will be any companies either on an observation list or excluded will be next year or maybe the year after that. We will try to use our ownership tools first.” Dutch investor and campaign group Follow This has proposed resolutions at several oil producers demanding faster green transition plans. Chevron and Exxon Mobil have advised shareholders to reject such resolutions at their respective annual meetings.

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5/31/2023

The Selective Corporate Definition of 'Long-Term' When a Shareholder Activist Shows Up

Forbes (05/31/23) Mansouri, Richard

Companies often use the term “long-term” to defend their track records, so it would be beneficial to understand how these companies actually define “long-term” and whether such definition takes into account the time that has already been spent by the companies’ directors in their efforts to provide long-term value. Typically when an activist appears, a company tends to overlook the fact that its board has been in place for a lengthy amount of time, and that the directors on such boards have been amply compensated throughout. Many directors have been on the board for a period of time already nearing “long-term” as accepted by most conventional definitions. The 2022 U.S. Spencer Stuart Board Index found that the average tenure of a director on the board of an S&P 500 company was approximately 7.8 years and the average annual total compensation of such board members was about $316,000. This was for attending an average of about eight board meetings annually. A hypothetical director serving an average tenure of 7.8 years would receive nearly $2.5 million in aggregate compensation over such a tenure. Meanwhile, shareholder activists tend to invest in companies whose stock price has underperformed and there have been numerous situations where shareholders of public companies engaged by activists have witnessed significant underperformance over many years before an activist has shown up, while the directors of such companies have been receiving sizable rewards. When a shareholder activist appears, companies often make significant efforts to explain why they have underperformed and why such underperformance will be rectified if the existing directors were granted more time. Companies also will seek to present their stock price performance by selecting a favorable time frame and/or peer group against which to measure such performance. Often absent from this presentation is the aggregate compensation received by each board member over their tenure compared to the returns experienced by shareholders who have invested real dollars in such company's stock. Companies often play the "long-term" card as they seek to persuade other shareholders and proxy advisory firms that their currently serving directors are more worthy to serve on the board than directors proposed by activists, yet seem to forget that such existing directors have already been there for quite a while. It is challenging to justify voting for an incumbent director who has presided over an extended period of underperformance, particularly if other qualified directors proposed by shareholder activists are also up for election.

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5/30/2023

Opinion: Activist Shareholders Threaten Japan’s AGM Season

Financial Times (05/30/23) Lewis, Leo

Every year, the June corporate annual general meeting season (AGM) in Japan stands as a reminder of the delicate equilibrium in which the Tokyo market operates: shareholders are granted immense disruptive powers but have been reliably reluctant to use them, writes Financial Times Asia business editor Leo Lewis. There have been many predictions that this balance might eventually crumble, though it has long held firm. But AGM season 2023, say both companies’ investor relations departments and investors, already feels as if it will be different, writes Lewis. At the most visible end, there are more shareholder activists engaging Japanese companies than ever before, and several of them, such as Elliott, have prominently expanded their Japan teams since 2022. Mizuho Securities and others are forecasting that the season will see Japanese companies confronting a record number of proposals from shareholders. Their approach is also shifting: where previously they issued blunt demands for share buybacks and quick asset sales, many now push for systemic shifts in capital allocation, climate policy and transparency. But a more fundamental challenge is also gathering strength from the traditional end of asset management. This is bound by an increasing list of rules-based mandates to hold companies to account on grounds of board diversity and ESG, and threatens to unleash at least some of that long-underused shareholder power on chief executives who fail to address their governance shortcomings. "Japan’s AGM season has always been eye-catching, often for the wrong reasons," says Lewis. Because such a high proportion of the country’s companies — 2,283 is the current tally — end their financial years at the end of March, June is an obvious time to hold shareholder meetings after the business of full-year reporting and the registering of proposals is done. But this has been taken to extremes. Back in the mid-1990s, 96% of companies held their AGMs on the same day in June. These days, given the intensifying need to appear shareholder-friendly, the season is slightly more spread out: just under 80% of companies hold meetings over seven days at the end of the month. Behind that clustering is a technical fear. Japanese companies do not, by convention, have staggered boards, and in the case of almost all of them, shareholders are called upon to elect the directors, including the chief executive as representative director. In theory, given that any one of these could be ousted by a support rate of below 50%, that means every year’s AGM comes with the notional threat of a total wipeout of a company’s gubernatorial bench. For decades, this theoretical risk was offset in ways that allowed chief executives to sleep easy. Friendly companies formed latticeworks of “allegiant” shareholders who, in combination with docile investor bases, in effect guaranteed that support rates for nominees would arrive in the very comfortable 85% to 95% zone. But companies can now see that changing rapidly, as stewardship obligations force pension funds and life insurers to be less docile and old habits, such as having boards without a decent contingent of independent members, now create vulnerability for CEOs. Those companies whose financial years end in December have already held their annual meetings, and the struggles that some have had with investors now stand as a warning to the thousands of others holding their meetings over the next four weeks. Fujio Mitarai, the chief executive of Canon (CAJPY) and a towering figure in corporate Japan, scraped through with just 50.59% support. Major shareholders, including BlackRock, voted against Mitarai because Canon currently has no female directors and he was held responsible. The top management of retailer Seven & i Holdings (SVNDY) survived more comfortably, but only after a sustained attack from ValueAct Capital and intensive efforts by the company to win over shareholders.

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5/26/2023

ESG Activism Down This Proxy Season, ISS says

Pensions & Investments (05/26/23) Bradford, Hazel

Shareholder activism on environmental, social, and governance (ESG) issues and dissent over executive compensation at U.S. companies are down this proxy season, according to an analysis by ISS Corporate Solutions (ICS) released Friday. With more than 40% of Russell 3,000 companies holding annual meetings in May, "trends evidenced thus far this proxy season suggest waning support for shareholder proposals overall, with median support levels down 5% compared with calendar 2022," Jun Frank, managing director at ICS, said. Of environmental and social shareholder proposals voted on at annual meetings held by May 24, only one environmental proposal, on methane emission disclosure, and three social proposals on diversity and human/labor rights, received majority support. That compares to the same period last year, when five environmentally focused shareholder proposals and seven addressing social issues received majority support, the ICS analysis found. Median support declined across all categories except for proposals blending E&S issues, such as those related to climate lobbying activities and health and safety issues with environmental implications. "When all is said and done, we expect support for shareholder proposals to be down over past years and potentially closer to pre-pandemic norms," Frank said. Between 2020 and 2023 there was a 14% increase in shareholder proposals at annual meetings held between January through May, but ICS attributed that in part to the rise of anti-ESG shareholder resolutions that have grown by more than 400% since 2020. Looking at shareholder support for executive pay at annual meetings through May 17, ICS found less investor dissent than in 2022, when dissent peaked. So far in 2023, there were 43 instances where voting support for executive pay was less than 70%, compared to 72 during the same period in 2022 and 66 in 2021. That suggests less scrutiny from shareholders, and "is also likely indicative of companies positively responding to recent concerns by actively engaging with their shareholder base and incorporating meaningful changes to their compensation programs," said Roy Saliba, ICS managing director.

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5/25/2023

Why Activist Investors Are Going to Have a Busy Year

The Economist (05/25/23)

Activist investor proposals appear at first glance to be on a downward trend this year, but this may be misleading. Many companies are pushing for settlements in the face of new regulations that they fear will favor dissident shareholders. In February, Trian terminated its proxy battle against Disney (DIS) after the entertainment giant unveiled a restructuring plan. Meanwhile, Elliott Management halted plans to nominate directors to Salesforce's (CRM) board in March after the software firm gave a seat to the boss of ValueAct. Activists regard these settlements as victories. Such shareholders view many companies as ripe for managerial shake-ups as the cost of capital appreciates, while also going after bigger game. The first quarter of this year saw a record number of campaigns involving businesses with market capitalizations topping $50 billion, while technology firms accounted for 25% of U.S. campaigns in 2022. The flagging of the pandemic-driven digital explosion gives activists an opening to cut costs or divest unprofitable businesses. Moreover, tech giants' massive market capitalizations let investors leverage large sums without exceeding ownership limits that would trigger disclosures of their stakes before they are ready to launch their campaigns publicly. U.S. investors will also increasingly extend their activism model overseas, with efforts in Asia and Europe building momentum.

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5/24/2023

Opinion: Investor Says 'Yelp Is Not the Company People Think It Is,' While Pushing for a Sale That Is Unlikely to Happen

MarketWatch (05/24/23) Poletti, Therese

TCS Capital Management LLC CEO Eric Semler is calling for a sale of Yelp Inc. (YELP) despite eight straight quarters of double-digit revenue growth and a home services business that is growing faster than its core restaurant business. Semler, whose firm owns 4% of Yelp's outstanding shares and is a top five investor, argues that the problem is not with the company but with investors that do not appreciate Yelp's value. He said Yelp's top executives also are not generating confidence with their large paychecks and stock sales. "Yelp is not the company people think it is," Semler said in an interview with MarketWatch. "You have a thriving business with a ridiculously absurd valuation, so it makes sense for something to happen." In a May 23 letter to Yelp's board, TCS Capital Management voiced "serious concern and disappointment with the abysmal performance of Yelp's stock price" and called on the board to "immediately explore strategic alternatives." However, MarketWatch columnist Therese Poletti said the big question is whether the company could be sold to a strategic or private-equity buyer for at least $70 a share, as Semler suggests. According to Semler, Yelp could merge with Angi Inc. (ANGI), where he pushed for change and previously sat on the board, with other options including GoDaddy Inc. (GDDY) and Microsoft Corp. (MSFT). "That is still a pretty narrow range of potential buyers, largely because the most obvious candidate would never happen," said Poletti, noting that U.S. regulators would never allow a deal with Alphabet Inc.'s (GOOG) Google. She added, "While Semler seems to have some decent ideas, this is yet another effort that may end up with Yelp still standing alone."

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