This week I was at the Council of Institutional Investors’ (CII) Spring 2019 Conference in Washington, D.C. Here are some of the key talking points:
- CII made the bold decision of inviting Securities and Exchange Commission (SEC) Commissioner Hester Peirce to address the gathering – bold, because Peirce may be the least supportive member of the regulatory body when it comes to CII’s agenda for expanding shareholder rights. “I got a lot of problems with you people, and now you’re gonna hear about it,” she said, quoting a Seinfeld episode, before proceeding to rubbish mandatory disclosure on diversity, involving the SEC in efforts to abolish bylaws preventing class action lawsuits, and shareholder proposals that “promote a tiny group of shareholders’ personal political and social preferences.” None of these views, which are Peirce’s own, are especially new, but they are timely. In any case, credit to CII for inviting disagreement.
- Gabrielle Sulzberger, the chair of the Whole Foods Market during an activist campaign by Jana Partners, said the role was a full-time job for the five months until Amazon bought the business in June 2016. Karina Litvack, a board member at Italian energy company ENI, said bringing about change on ESG issues required systemic efforts – so different from how CEOs have historically operated.
- Compensation was on the minds of dedicated activists and engagement facilitators, like Hermes EOS’ Timothy Youmans. Despite concern over the overall level of CEO pay, stock-based compensation continues to be a differentiator.
- Without any of the fanfare that accompanied Gamco Investor’s effort to use proxy access in 2016, the second nomination is creeping up on the governance world. Glenhill Capital Management is seeking a board seat at the next annual meeting of The Joint Corp, likely in June. A sometime activist that hasn’t run a proxy contest, Glenhill may be on the cusp of what a company is willing to accept as a valid proponent.
March continues to be a make or break month for activists weighing whether to launch a proxy contest. This week, SQN Investors decided it was satisfied with the amount of change at Yelp, giving the internet review service “one more opportunity” but hinting that a sale could still be the best route for shareholders. Kimmeridge Energy Management is all-in at PDC Energy and John Schnatter isn’t going to seek a board seat at Papa John's, ruling out a founder-led campaign of the kind we’ve previously covered in an in-depth story. One situation where management has a certain amount of luxury is Victoria’s Secret owner L Brands. Barington Capital Group called for board change this week, but regulatory filings indicate that it sold its stake in the fourth quarter before buying back in after the nomination deadline had passed.
Quote of the week comes from BlueMountain Capital Mangement’s announcement last Friday of its slate of luminaries for a proxy contest at Pacific Gas & Electric (PG&E), which includes ValueAct Capital Partners’ Jeff Ubben, former California State Treasurer Phil Angelides, and three former CEOs. The strength of its slate is in itself an optimistic indicator, given the contest will be fought with PG&E in bankruptcy.
"There was strong interest in serving on the board,” BlueMountain wrote. “In consultation with professional advisors, we evaluated more than 170 candidates and interviewed more than 60. The result is a diverse group of exceptional nominees with the skills, experience, and commitment that the company needs."