5/16/24 – Issue 8.67 – Your weekly news on all things board. 

It's proxy season! That means board changes are abundant, some according to well-hewn plans, others coming together on short notice, and more than a few as a result of intense activist campaigns. In a significant victory for Ancora Holdings, a hedge fund that has been pushing for change at Norfolk Southern, shareholders have elected three dissident directors. The outcome is a result of the fund’s principals advocating for greater oversight and accountability at the railroad giant. Ancora was not successful, however, in their push to oust the railroad’s CEO, Alan Shaw. Crown Castle, in its own ongoing fending-off of activists, received a split-decision from the two most visible proxy advisors. Boards that are preparing or reviewing their own activist contingency plans might want to follow these and other evolving stories closely for some valuable lessons.

In other news: Nasdaq’s board diversity rules challenged in court (again), Tesla’s board campaign to reinstate Musk’s pay, how directors are managing today’s top risks, talking about Gen-Z stakeholders, and Glass Lewis continues to dissect the SVB collapse from a year ago. 

In the Spotlight

Norfolk Southern Investors Elect Three Ancora Directors

Activist investor Ancora won three Norfolk Southern board seats but failed to oust the chief executive

“The fight was one of the year's most closely watched votes because Ancora was pushing for so many seats at such a sizable company at a time railroad safety has been in the headlines following several derailments…The hedge fund argued new blood was needed to improve financial and operational metrics and said on Thursday that it will continue to hold the company accountable for any future railway accidents or underperformance. Ancora had proposed investors push Alan Shaw off the board and elect Jim Barber, a former chief operating officer at UPS, so that he could eventually replace Shaw as CEO. Ancora also proposed Jamie Boychuk, who had worked with legendary railroad executive Hunter Harrison at CSX, to become Norfolk Southern's chief operating officer. Three prominent proxy advisory firms last week recommended that investors elect at least five of Ancora's seven candidates, arguing that change is needed at the railway which is valued at $52 billion.” REUTERS

Norfolk Southern Chief Survives Activist’s Push to Oust Him

Shareholder-advisory firms supported changes to the company’s board but were split on management

“Norfolk Southern’s embattled chief can keep his job. The freight railroad’s shareholders on Thursday voted against an activist investor’s proposal to unseat Alan Shaw as CEO…Ancora has criticized Norfolk’s operational and financial performance as well as its handling of the train derailment last year that resulted in the release of toxic chemicals in a small Ohio town. Ancora was pushing for seven seats on the board and demanding the replacement of both Shaw and Norfolk’s chief operating officer. Norfolk COO John Orr will also remain in his role.” THE WALL STREET JOURNAL

Dissident Candidates Fighting with Crown Castle Board Get Mixed Support from Proxy Firms

Since late 2023, Crown Castle has refreshed its board and hired a new chief executive 

“Proxy advisory firm Glass Lewis on Tuesday recommended Crown Castle investors elect two activist director candidates, including the wireless tower owner's co-founder and former chief executive officer, Ted Miller, to the board. Miller, who ran Crown Castle between 1996 and 2002 and now heads investment firm Boots Capital, is pushing for four seats only months after the company, valued at $43 billion, reached an agreement with Elliott Investment Management and added new board members…Glass Lewis' bigger rival, Institutional Shareholder Services, backed all company directors and none of Boots Capital's candidates, arguing there is no need for more change now after the company reacted quickly to criticisms in 2023. Miller launched the boardroom fight earlier this year after Crown Castle reached an agreement with Elliott in December.” REUTERS

From Boardspan this Week:

Agitators and Reformers: How to Respond to Activist Investors

Plans should be put in place before the activist calls 

"Arguably, the single best way to ruin a CEO’s day is to report that an activist is on the phone and has just taken a position in the CEO’s company. More and more CEOs are getting this call, as activist investing has exploded in recent years. We examined more than 400 activist engagements and found that the targets are getting larger and the industries more diverse. We also found that the activists’ attention is not limited to so-called laggards; it includes a number of high-performing companies as well. In short, few, if any, management teams are immune to an activist challenge.” BAIN & COMPANY via BOARDSPAN LIBRARY

Across the Board

Nasdaq’s Board-Diversity Rules Look Like They’re In Trouble

The two groups suing over the rules lost the first round of their legal challenge last year

“Judges on a Republican-dominated federal appeals court questioned whether Nasdaq should be allowed to impose rules aimed at fostering racial and gender diversity on company boards. The New Orleans-based Fifth U.S. The Circuit Court of Appeals heard arguments on Tuesday in a legal challenge brought by two conservative groups who say that the Nasdaq listing rules are discriminatory. Many of the toughest questions at the hearing were aimed at the Securities and Exchange Commission, which approved Nasdaq’s board-diversity rules in 2021. The two conservative groups sued the agency shortly afterward, saying its approval violated civil-rights laws and the U.S. constitution. ‘What does a person’s sexual orientation have to do with the prevention of speculation or manipulation of securities markets?’ Judge Kurt Engelhardt asked during the hearing. Tracey Hardin, a lawyer for the SEC, responded: ‘There is a rational supported belief in the market that a diversity of voices in the boardroom lead to better corporate decision-making.’” THE WALL STREET JOURNAL

Tesla Board’s Campaign To Reinstate Elon Musk’s Pay Package Raises Many Questions
The outcome of the vote will be watched closely by boards and governance experts

“How hard should a corporate board fight to rationalize high compensation for its CEO? That’s a question most corporate boards will face at some point in time, and how the board deals with this issue could have lasting repercussions – for the company and the directors involved. The Tesla Inc. board has gone on a public campaign to reinstate CEO Elon Musk’s unprecedented $56 billion compensation package that was revoked by a Delaware court after a shareholder lawsuit claimed the pay was excessive. Some governance observers and Tesla shareholders are asking ‘why is the board doing this?’ Why is it so important to pay Elon Musk this specific compensation plan – a plan that the country’s legal system found unfair? As this situation unfolds, there is a lot at stake for the Tesla board and its shareholders.” CORPORATE BOARD MEMBER

How Are Corporate Directors and Officers Managing Today’s Top Risks?
Covering the seven top risks across more than 50 countries

“New research reveals the top business risks reported by corporate directors and officers globally for 2024. Health and safety moved to the number one spot from number five last year. Effective leaders adopt an enterprise-wide approach to analyzing emerging risks and creating optimal risk financing programs. And they ask key questions during their analysis…In addition to health and safety emerging as the top risk, new entrants on the list include systems and controls, and breach of sanctions, reflecting heightened geopolitical tensions and the increasing complexity of corporate governance. Rankings vary by region. For example, climate change remains a top seven risk in Asia, Australasia and the Middle East, but not in other regions.” WTW

Corporate Governance, Board Oversight & The 2023 Banking Crisis
FDIC found that SVB’s growth far outpaced the abilities of its board of directors

“In the spring of 2023, the United States witnessed the country’s three largest bank failures since the 2008 financial crisis. Market-wide developments such as high interest rates and regulation rollbacks, along with company-specific factors including overly concentrated clientele and reliance on uninsured deposits, affected leadership’s ability to effectively manage interest rate and liquidity risks, leading to mass deposit flight and ultimately the collapse of Silicon Valley Bank (SVB), followed by Signature Bank (Signature) and First Republic Bank (First Republic). The impact of macro-economic and strategic issues has been widely discussed. However, the banks’ inability to appropriately align strategy with the macro environment indicates that insufficient risk oversight was also a significant factor. This, in turn, suggests that stronger corporate governance structures could potentially have assuaged or prevented the outcomes of these events.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Talking About That Generation

Gen-Z is entering a career world transformed by decentralization of white-collar work post-Covid

“Everybody thinks they know what Generation Z is about: They want purpose and meaning in their work. They distrust institutions, but they really love brands. They’re consumed by social media. They’re financially insecure and don’t mind living with their parents. They’re exceedingly concerned about their mental health. They’re much less interested in entire categories of goods than their predecessors, including alcohol and spectator sports. But that doesn’t mean CEOs and their companies know what to do about employees and consumers who were born as far back as 1997. How do they confront the generational peculiarities of a group of people who are rapidly moving into the pivotal position in the workplace, the U.S. economy and American society?” CORPORATE BOARD MEMBER

Building Your First Board: Lessons for Founders
The three P’s of board effectiveness

“Sooner or later, every successful entrepreneur confronts the challenge of establishing a board of directors. Yet many founders approach this task too casually, relying on intuition rather than learning from empirical research or other entrepreneurs’ experience. Such founders tend to become disillusioned with the board they assembled, losing faith in its capacity to empower management to create shareholder value and foster sustainable organizations…In a nutshell, three factors define the success of a board of directors. We refer to them as the three P’s of board effectiveness: purpose, people and process.” INSEAD

Seat at the Table

• Pinterest appoints to its board Chip Bergh, former CEO of Levi Strauss & Co.

• Carsharing marketplace Getaround elects to its board Nikul Patel, Founder and CEO of LoanGlide; Neil Savage, former President and COO of LendingTree; and Qais Sharif, SVP and General Manager of the Americas and Energy Storage Solutions at automotive manufacturer Visteon Corporation

• ProPetro welcomes to its board Alex Volkov, Transition Executive of Pioneer Natural Resources Company for ExxonMobil

• Boston Scientific adds to its board Dr. Cheryl Pegus, Managing Director of JP Morgan Chase & Co.’s Morgan Health Ventures

• Food distributor Hormel appoints to its board Colleen Batcheler, former General Counsel and Secretary of Hertz Global Holdings

• Fannie Mae welcomes to its board Dr. Diane Lye, former Chief Information Officer at Rivian Automotive

• Nanotechnology firm NVE Corporation elects to its board Dr. Kelly Wei, VP of Corporate Strategy at Medtronic

• PRA Group nominates to its board Dame Jayne-Anne Gadhia, former CEO at financial services firm Virgin Money

• Healthcare investment firm PACS Group welcomes to its board Evelyn Dilsaver, former President and CEO of Charles Schwab Investment Management

• Blockchain and tokenization firm Paxos elects to its board Christopher Giancarlo, former Chairman of the United States Commodity Futures Trading Commission

• MDU Resources Group appoints to its board Douglas Jaeger, President and CEO of engineering firm Ulteig

• Digital solutions provider Zebra Technologies elects to its board Ken Miller, EVP and CFO of AI firm Juniper Networks

• Spyre Therapeutics welcomes to its board Dr. Sandra Milligan, President of Aspira Women's Health

• Intensity Therapeutics adds to its board Thomas Dubin, former Chief Legal Officer at Alexion Pharmaceuticals

• Construction materials firm Knife River Corporation appoints to its board Thomas Hill, Founder and former President and CEO of Summit Materials

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.