The weekly wrap | Monday, September 30 – Friday, October 4, 2019
The weekly wrap
This article was first published on Activist Insight Online on October 4, 2019. For more information about the product, click here.
Fresh from vacation, I attended a conference on shareholder activism and ESG (environmental, social, and governance) in Italy at the Bocconi University, organized by international law firm Jones Day and shareholder services provider Morrow Sodali.
Here are some of the highlights from the conference:
Morrow Sodali Chairman John Wilcox hailed the Business Roundtable’s decision to move away from a focus on shareholders to a stakeholder approach. Wilcox believes the entire ESG trend will change how shareholders and companies relate to each other. “This is a movement that has a special characteristic, unlike anything that we have seen before. It’s a movement that has changed expectations of both companies and institutional investors,” Wilcox said.
Yet the rise of ESG leads to additional tasks for already over-burdened directors, particularly in Italy, where unlike in the U.S., their compensation consists of cash only and no stock options. “If you really make the calculations, the hourly compensation [for directors] is around 200 euros an hour. That may sound like a lot of money, but that is just what a junior associate or a hairdresser makes,” Marco Ventoruzzo, a professor of law at Bocconi, said.
“One of the long-term impacts of ESG is likely to be that we will have to pay directors more,” Wilcox added.
Activist hedge funds have also been paying attention to ESG. ValueAct Capital Partners started a dedicated ESG fund, while Blue Harbour Group uses ESG metrics in its investment process. Arturo Albano, head of corporate governance at Amber Capital, told me in a separate interview that Amber is considering implementing ESG criteria into its investment process. “ESG is the next trend,” Albano said.
Another interesting topic was Italy’s Voto di Lista or slate system, under which minority shareholders are granted seats on the board. The system was devised in 2007 to address a peculiarity of the Italian market under which many companies are controlled by majority shareholders. Activists such as Amber have used the system to get on to boards in Italy, and the mechanism has been increasingly used by investors of all stripes. In 2019, 76 board candidates were installed via the slate system at 46 companies, up from 59 minority directors at 34 issuers in 2016, according to data from Assogestioni, a group that represents the interests of investors in the country and often nominates candidates on behalf of minority shareholders.
Elsewhere, Philip Vernardis, vice president of asset stewardship at State Street Global Advisors, EMEA region, said active ownership has become part of State Street’s DNA. Vernardis said the index provider uses the “carrot and stick” approach in its engagement with companies. “The vote is our stick,” he said.
Regarding hedge fund activism, Vernardis expressed frustration at companies entering into settlement agreements before canvassing the sentiment of the wider shareholder base. Indeed, companies and activists are increasingly choosing to settle, at least in the U.S. So far this year, 91.1% of the 101 U.S. demands for board representation settled, versus 86.5% and 81.6% during the same period of 2018 and 2017, respectively, according to data compiled by Activist Insight Online.
Elsewhere in the news:
On October 18, Activist Insight will be sponsoring a conference in Paris, France on corporate governance and shareholder engagement, organized by think tank Droit & Croissance. More details can be found at this link. If you wish to attend, add promo code AI2019 to save 50 euros.
In the latest installment of Activist Insight’s “Beyond the boardroom” podcast, Elana Duré speaks with Sandon Capital’s Gabriel Radzyminski about activism in Australia. You can listen to this episode on iTunes, Spotify, or YouTube.
Elliott Management is reportedly considering buying a stake in Metro Bank after the embattled institution failed to attract investor interest for a fundraising effort. Also this week, scandal-stricken Chairman Vernon Hill said he will resign by the end of the year.
French-based water and waste management company Suezrevealed a new strategic plan for 2030, which aims to cut costs and increase revenue, amid pressure from activist investor Amber Capital.
Brookdale Senior Livingsigned a deal with healthcare real estate investment trust HCP in an effort to simplify its structure and improve its cash balance, amid a proxy fight with Land & Buildings. Shortly after the deal, Brookdale dismissed the activist’s nominee, Jay Flaherty, as “unfit,” something Land & Buildings characterized as a “smear” tactic.
SquareWell Partnershired Edouard Dubois to assist corporate clients to integrate their environmental, social, and governance (ESG) practices into their investment cases to attract and retain investors.
Ukraine-based Cadogan Petroleum is facing a board challenge from shareholders seeking two board seats.
Steven Vestergaard, the former president and CEO of Destiny Media Technologies, advanced a five-person slate to stand for election at the company’s 2020 annual meeting.
Chris DeMuth’s Rangeley CapitalbackedDriver Capital Management‘s calls for a sale of First United, criticizing board chair Carissa Rodeheaver’s response to the activist.
David Kanenwants women’s apparel retailer RTW Retailwinds to focus on e-commerce and reduce expenses, as well as a higher dividend yield. The activist has been agitating at the company, formerly known as New York & Co, since 2017.
Progenics Pharmaceuticalsis selling itself to Lantheus Holdings for stock, likely complicating a campaign for board control launched by Velan Capital in mid-September. Velan lambasted the move, saying the board “abandoned its fiduciary duty” by selling Progenics at a “massive discount.”
Flutter Entertainmentacquired The Stars Group to create the world’s largest online gaming company, a deal that is supported by ValueAct Capital Partners, which has been an “engaged shareholder” in the target.
Hudson’s Bay shareholder Paradise Developmentscame out in opposition to an insider buyout proposal led by Hudson’s Bay Chairman Richard Baker to take the firm private, following in the footsteps of Land & Buildings and Sandpiper Group.
As always, Activist Insight Online reporters will be diligently covering all developments in activism around the world, and Iuri Struta will be highlighting the most remarkable stories in this roundup. If you have suggestions for improving our coverage, or a tip, you can contact us at firstname.lastname@example.org.