Posts Tagged 'Shareholders'

How to Be an Activist Investor

by Alex Davidson for The Wall Street Journal

You, too, can be an activist investor.

Just ask hedge-fund manager Eric Jackson, who started a crusade for change at YahooInc. more than seven years ago armed with only a blog post and YouTube.

“It’s never been easier for an individual shareholder to express a point of view,” says Mr. Jackson, who used social media to galvanize support for shareholder-friendly changes at Yahoo and against members of the compensation committee responsible for approving executives’ pay packages. At the time, he and his supporters collectively owned 0.2% of Yahoo’s shares outstanding.

Conventional thinking has been that ordinary individual investors, too busy with their own work and families, don’t have the time or desire to agitate for change. With the stock market in a six-year bull market and index funds proliferating, many people have, in fact, been content to sit back and be passive investors.

But some individual investors, buoyed by the belief that good corporate governance leads to improved returns, are showing a greater interest in engaging with companies on issues such as executive pay and board structure. And shareholders—even those with limited resources—have plenty of options when it comes to being heard.

So how does one go about becoming an activist?

As with any other activity or sport, there are different levels at which investors can get involved. Read more here.

Alibaba shareholder disenfranchisement: worse than you think

by Donald Clarke for FT Alphaville

Alibaba shareholders are aware that they can’t elect a board majority even if they hold a majority of shares. But they might be surprised to learn that they can’t evennominate directors—any directors—let alone elect a few to a board minority, no matter how many shares they own.

By now everyone knows about Alibaba’s special governance structure. News reports and Alibaba’s own disclosures tell us that the founders, via an entity called the Alibaba Partnership, can appoint a board majority no matter how few shares they own. What seems to have escaped general notice, however —and is nowhere specifically stated in the prospectus —is how the rest of the board is selected. Remarkably, public shareholders have no right even to nominate directors, let alone elect one, no matter how much stock they own. Read more here.

How to Defend Against Activist Investors

By Vikas Shukla, July 2nd 2013, Value Walk

Institutional investors no longer see an activist as a quick-buck investor. They see activists as smart investors, who have done plenty of research before putting significant capital to work.

Activist investors are increasingly going after large corporations. Over the past few months, we have seen many activist investors attacking the corporate governance or M&A. A few examples include Daniel Loeb’s call to split Sony Corporation (NYSE:SNE)’s entertainment business, and Carl Icahn’s resistanceto Michael Dell taking Dell Inc. (NASDAQ:DELL) private. That has kept the company boards busy too. Recently, we featured the Harvard Law School Forum’s views on how a company can guard against shareholder activism. Continue reading…

Executive pay among corporate governance issues for 2013

Becky Yerak, Chicago Tribune, December 24, 2012

Wall Street isn’t far from its record highs in 2007, but shareholder activists continue to keep management and boards of directors on their toes.

In 2013, trends to watch for in executive compensation and corporate governance include the first round of shareholder votes on the pay of top management at smaller businesses.

Also, more companies are publicly documenting their efforts to keep investors in the loop, right down to assuring them that new directors have passed thorough background checks.

And many corporate watchdogs wonder when the Securities and Exchange Commission will propose rules — mandated by a 2010 law — that require companies to give hard numbers on the ratio between the pay of the chief executive and their average midlevel worker, data that could create new tension between those critical of executive pay and those who set it. Until then, passions over pay levels might remain cooler than they have in years.

Executive compensation isn’t the “hot button issue it was two or three years ago,” said William Atwood, executive director of the Illinois State Board of Investment.

Say-on-pay votes and enhanced corporate transparency about compensation since the 2010 Dodd-Frank Wall Street Reform & Consumer Protection Act have “increasingly ameliorated shareholder angst” on the topic, he explained.

But big investors’ attention is increasingly turning to political contributions made by companies, which will be under more pressure to disclose what they’re doling out and their policies for doing so, Atwood said… Continue reading

Social Media & Corporate Governance

Santiago Chaher & award winning Stephen Davis

At the ICGN Annual Conference 2011 (#ICGN11) in Paris Santiago Chaher from @CorpGovLeaders and Eric Jackson encouraged the audience to discuss the growing influence of Social Media in governance practices and shareholder activism. The following questions were then asked to the audience:

(1) How are social media changing the behavior of institutional investors–both in respect of value creation and in relationships with beneficiaries?

(2) How can corporate boards adapt to risks and opportunities posed by social media?

(3) How are social media affecting the behavior and influence of stakeholders in relation to companies and investors?

The session was live tweeted and you can see the story line here or just look for the hashtag #SMCG.

What are your thoughts? We would like to continue the conversation! Thanks

A Collective Vision

by  John R. Engen for Boardmember, April 2011.

It takes a village—boards, shareholders, and, yes, management—to foster truly effective corporate governance, not an array of rules and best practices. Proxy advisory firms should be scrutinized, and possibly regulated. Director independence, while important, might be just a tad overdone. Oh, and for all its warts and recent foibles, the U.S. corporate governance system actually works pretty well.

Those are a few of the more provocative conclusions of a blue-ribbon panel that last September issued a 32-page report on the state of governance in corporate America. 

The Commission on Corporate Governance, sponsored by the New York Stock Exchange, included lawyers, academics, and representatives from some of the country’s biggest companies, brokerage firms, and institutional investors.

Its major task was to compile a list of 10 “principles of governance,” which was the central focus of the report. The principles are meant, in part, to offer up some informed discussion points where the various commission constituencies found common ground and hopefully spur debate—and possibly some policy changes.

“The underlying objective is to tell people who want to create more requirements that they should step back and not impose any more one-size-fits-all, check-the-box requirements,” says Stephen Lamb, a Wilmington, Delaware-based partner with Paul, Weiss, Rifkind, Wharton & Garrison and a commission member. “Those things don’t lead to effective governance.” (continue reading… )

Uncle Sam and the Hostile Takeover

by Jonathan Macey for Yale Law School, March 21st, 2011.

The following commentary was published in The Wall Street Journal on March 21, 2011.

Conflicts between a public company’s top management and shareholders are seldom more intense than when an activist investor emerges with plans to make a substantial investment in the company’s stock. These investors sometimes are hedge funds or “value investors” like Warren Buffett. Whoever they are, after they take a huge stake in the target company they have strong incentives to agitate vigorously for reforms that will increase the value of their investments.

Shareholders benefit from the reforms of corporate governance initiated by these activist investors. So does the economy generally, because the overall economy performs better when companies perform better. But managers are not so fond of this process because activist investors push incumbent senior managers hard to improve their performance. Occasionally they even fire them.

Since incumbent managers sometimes lose to activist investors in fair corporate elections, their preferred strategy for dealing with them is to hire legal talent and team up with friendly regulators to make new rules and to concoct anti-takeover devices like poison pills.

For example, J.C. Penney adopted a poison pill last October, soon after learning that the hedge fund Pershing Square Capital Management and the publicly traded Vornado Realty Trust had acquired a sizeable position in the company. The particular poison pill it adopted would dilute the voting rights of the two activist investors’ shares if they further increased their holdings or attempted a takeover of the company by giving other shareholders the right to buy J.C. Penney shares at half-price. (continue reading… )

NACD Director Professionalism Course Tackles Pressing Proxy Season Issues

by PRNewswire, March 21st, 2011.

Sessions Designed to Help Directors Become Strategic Assets for Shareholders

As the 2010 proxy season began, the National Association of Corporate Directors (NACD) devoted its March Director Professionalism course to providing directors with the tools needed to navigate the new environment created by Dodd-Frank and the Securities and Exchange Commission (SEC). The two-day program brought together more than 50 dedicated corporate directors and governance experts to discuss topics ranging from risk management and transparency to the enhanced responsibilities of the board’s key committees.

“The March Director Professionalism course tackled the most pressing issues that boards are facing during this period of change for corporate America,” said Ken Daly, the president and CEO of NACD. “The course also underscored what it truly means to be a director who adds value — one who is fully prepared for and knowledgeable about the responsibilities of boards in this new era of increased accountability and scrutiny.”

The latest Director Professionalism course, held March 3-4 in Park City, Utah, offered more than 17 sessions taught by active public company directors and corporate governance experts, including Michele Hooper, veteran director of several prominent corporate boards, including PPG IndustriesWarner Music GroupUnitedHealth GroupAstraZeneca PLC and NACD;Professor Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware and a director for HealthSouth Corporation Thomas Bakewell, former director, Lindenwood University and Bethesda Health Group; and Robert M. Galford, managing partner, Center for Leading Organizations and chair of the Compensation and Governance Committees, Forrester Research.

“Directors must be prepared for the regulations and requirements that have broadened the scope of their work,” said Hooper, who led sessions on the new challenges and opportunities facing nominating/governance committees and effective corporate governance strategies in today’s regulatory environment. “The nominating/governance committee has an incredibly important role. It not only determines the skill sets, experiences and qualifications required to optimize the board’s composition, but the committee also sets the tone for corporate governance on the board.” (continue reading… )

Why Shareholders Don’t Want Shareholder Democracy

by John Carney for CNBC, March 17th, 2011.

Have you ever noticed how few public companies are run on anything like a democratic basis?

They have some of the trappings of democracy. Elections for directors; ballots on important—and sometimes unimportant—questions of corporate governance or strategy; investor meetings that sometimes resemble a New England townhall.

But, in practice, their democracy is a lot like the democracy in a one party state—you get the vote, but only party candidates and platforms stand any chance of winning.

To some advocates of good corporate governance, this is a scandal. It almost looks like there’s a bit of authoritarianism lurking at the heart of the free-market. If democratic capitalism is good enough to run our country, why isn’t it good enough to run our corporations?

In reality, however, corporate governance gives far more respect to individual liberty than any political democracy does. Unlike being a US citizen and a resident, it is quite easy to withdraw your membership from a corporation—simply sell your shares. No corporation can force you to accept its strategy or leadership. If you don’t like it, you don’t have to be a shareholder. (continue reading… )

The State of Engagement between U.S. Corporations and Shareholders

by Noam Noked for The Harvard Law School Forum, March 15th, 2011.

The following post comes to us from Jon Lukomnik of the Investor Responsibility Research Center Institute and Marc Goldstein of Institutional Shareholder Services, and is an abridged version of a study conducted by ISS for the IRRC Institute, which is available here

Study Summary

At a time when engagement is front and center in the public debate about corporate America, this study provides the first-ever benchmarking of the level of engagement between investors and public corporations (issuers) in the United States. As evidenced by the provisions of the Dodd-Frank legislation, various SEC rule-makings and the lawsuits contesting them, engagement has emerged as a central governance process for public companies in America. Despite that fact, there has never been a comprehensive picture of investor/corporate engagement and thus no consensus definition of engagement. This study attempts to rectify that lack. It surveyed 335 issuers of stock and 161 investors, including both asset owners (e.g. pension funds, trusts, etc.) and asset managers.

The study reveals both consensus and dissonance. There is broad consensus that engagement between issuers and investors is common and increasing both in terms of frequency and subject areas; that engagement is expanding beyond financial and strategic issues and “traditional” governance topics to include more environmental and social issues; that issues related to executive compensation remain atop the agenda; and that engagement is evolving as increasingly-sophisticated investors demand more detailed information on all of these topics. Yet engagement also means different things to different people: While some use the term to refer to a campaign to persuade a company to change its behavior, others (particularly issuers themselves) classify routine conversations with investors about financial results as engagement as well. The study also reveals some distinct differences between investors and issuers in terms of the time frame of engagements and the definition of a successful engagement. (continue reading… )

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