Siemens AG aims to shed about 75% of its struggling power and gas unit in one of the most radical moves to date by Chief Executive Officer Joe Kaeser to untangle the sprawling conglomerate and try to boost its valuation.
We are currently in the middle of a sea change in investor relations. A mixture of global corporate governance developments and a surge of interest in ethical behaviour from consumer and regulator alike has led to a metamorphosis from shareholder relations to stakeholder relations. Our latest report delves into the key themes of 2019 and the expectations for 2020 and beyond.
People want corporate America to commit to include: paying a fair wage; paying a living wage; providing good benefits and work-life balance; and providing a diverse workplace with equal opportunity and pay equity.
Brett Icahn is emerging as the likely successor to one of the most famous investors of all time. But his father is not ready to hand over the reins just yet. At 83, Carl Icahn, the billionaire financier legendary for waging guerrilla warfare with corporate targets from TWA to Dell, finally has a succession plan. It’s a little complicated. Fed up with New York, Icahn says he’s moving his hedge fund to Miami and laying the groundwork to hand it over to his son, Brett.
On May 8, 2019, SEC Chairman Jay Clayton testified to the Senate that “[o]ur first goal, which has been a priority of mine since I became Chairman, is focusing on the interests of our long-term Main Street investors.” He went on to say that “the question we ask ourselves every day: how does our work benefit the Main Street investor? Each proposal or action we take is guided by that principle.” [1] [emphasis added] Perhaps one of the most important benefits of owning stock in a U.S. publicly traded corporation is the opportunity to engage that company as a part-owner. For decades, Main Street investors have had the mechanism of the shareholder proposal process to communicate with company management when they see a problem, identify inefficiencies, or are displeased with how the company has spent investor dollars.
On the surface, Jeff Gramm’s book Dear Chairman is just a fascinating history of the investor rights movement told through activist letters dating back to the 1920s. As such, at least according to Charles Schwab, “It should be required reading for anyone who wants to participate in our great ownership system, as an investor or manager.” But you could argue that the book is equally suitable for inclusion on a reading list aimed at students of modern literature.
Activist shareholders are significantly likelier to target companies led by female chief executive officers than their male counterparts, and female CEOs face a greater likelihood of dismissal, according to recent studies. Because activists can have influential sway over a business’s corporate governance — and because women are increasingly gaining corporate leader roles and board positions — all business executives, board members and their support staff should be prepared to counter any challenges that appear to rest on negative stereotypes about women.
One of the hardest problems in any organization, whether a democratic government or a corporation, is figuring out how to strike a balance between short-term interests and long-term goals. For some companies — especially product-centric tech companies led by founders — one solution has been the creation of dual-class, or tiered, share structures, which give founders and other insiders more voting rights than other holders of the stock. Today, about 11% of the U.S. market capitalization is made up of dual-class stocks, including many tech stocks that became public in the past two years.
A recent Delaware case, Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust, highlights the importance of advance notice bylaws and the careful application of the terms of such bylaws by public companies who may be subject to activist campaigns. As backdrop, following Delaware cases in 2008 (Jana Master Fund Ltd. vs. CNET Networks, Inc. and Levitt Corp. vs. Office Depot, Inc.) which interpreted ambiguous advance notice bylaw provisions in favor of insurgent shareholders attempting to nominate their own slate of director nominees, a large number of public companies (particularly large-cap companies and public companies incorporated in Delaware) amended their advance notice bylaw provisions to eliminate perceived vulnerabilities in their advance notice bylaws and expand the information required to be provided by shareholder proponents (known as second generation advance notice bylaw provisions).
Mass shootings and the growing wave of socially responsible investing doesn't seem to be influencing behavior at one of the nation's largest mutual fund companies. In the past few months, American Funds' Smallcap World Fund, which is managed by investing giant Capital Group, has spent at least $17.3 million buying up shares of one of the nation's largest gun manufacturers. The investment, 2.1 million shares as of the end of June, has made the SmallCap World Fund the largest single investor in American Outdoor Brands, which up until 2017 was known as Smith & Wesson.
Shareholder activism is a loaded concept that often evokes negative emotions and summons images of corporate raiders and barbarians. This perception is seldom challenged. What we rarely read about are entrenched chief executive officers and directors who have forgotten their role as stewards of shareholders’ investments. Sometimes, these shareholder representatives own little stock themselves. When a shareholder questions the status quo, these new views are often rejected out of hand. This “insider-versus-outsider” mindset threatens both the spirit of corporate democracy and the fiduciary duty that boards of directors owe their shareholders.
The Adam Smith doctrine posits that the natural end point of laissez-faire capitalism is perfect competition. Yet, when left to their own device, markets can lead to oligopolies, or quasi-monopolies, and their tacit corollaries: collusion and higher prices.
It seems like just yesterday that shareholder activists pitched at Sasol’s annual general meeting in November 2018 to challenge the company on its environmental and social compacts, in particular what they saw as its failure to provide stakeholders with adequate climate risk disclosure or to set greenhouse gas emission reduction targets.
Over the past few years, short-seller activism has grown from a “low profile affair” to a major challenge for securities regulators and governing boards – and Canadian markets are no exception. In many cases, the consequences of a short-selling activism campaign for a company can be profound: a plunge in share price, the diversion of valuable time and resources, the need to rebuild the company’s reputation and, in some instances, the initiation of a formal regulatory investigation based on the allegations made in the campaign. In this chapter, we examine the emergence of short-selling activism, review the legal and regulatory landscape governing its practice in Canada, compare some regulatory approaches in other jurisdictions and explore the potential responses available to boards of targeted companies. We also discuss some trends in short-selling activity in Canada, and spotlight three prominent examples over the past several years.
Until the end of the year, Pfizer will differ from its industry peers in one unique way: It will be the only U.S.-based traditional big pharmaceutical company in which the CEO doesn't also serve as the chair of the company's board.
The leaders of some of America’s biggest companies are chipping away at the long-held notion that corporate decision-making should revolve around what is best for shareholders.
Warren Buffett and Carl Icahn butted heads in a showcase of their vastly different styles when it comes to profiting from corporate crises. “The Quiet Man” from Omaha won Round One over “The Music Man” from Queens. Who will be the final victor? Maybe both.
Pearl Meyer’s “On Point: Non-Employee Director Pay Practices” survey provides real-time insights on the latest trends in non-employee director (NED) compensation practices and potential responses to increased external scrutiny. This online survey was conducted in March and April of 2019, with participation from 204 companies, including 143 publicly traded, 52 private for-profit, and nine not-for-profit (NFP) organizations.
Tristan Harris wants to reverse the harmful effects he believes technology has had on all of us. Harris, a former Google design ethicist, first rose to national awareness after a presentation he gave within Google in 2013 spread throughout the industry. In it, he argued that many tech products were designed to be addictive, causing people to spend too much time on them and distracting them from living their lives. He urged designers to alter their approach.
Many public pension funds engage in activism by using their pooled ownership of stock to affect changes in the corporations they own. The merits of activism depend on: (1) the conflicts of interest between corporate managers and shareholders, and (2) the conflicts of interest between portfolio managers and investors. These conflicts lead to two types of activism: shareholder activism and social activism. Portfolio managers can use their position to monitor conflicts that might arise between managers and shareholders (shareholder activism), but they can also abuse their position by pursuing actions that advance their own moral values or political interests at the expense of investors (social activism).
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