This year has already seen record numbers of shareholder-led proposals on social and environmental issues. This week alone, Carl Icahn’s battle with Illumina comes to a head, Amazon faced a record 18 shareholder proposals, and Shell’s annual meeting was disrupted by climate protests for over an hour. Illumina’s vote is still to come, but Amazon’s and Shell’s proposals were voted down as investors backed the board. Quality discourse over ESG issues is critical, and activist pressure isn’t going away. But do these proposals move the needle? Or do they simply create more noise?
In other news, Morgan Stanley’s CEO succession plan draws questions on diversity in leadership; Panera Bread shakes up their leadership and board influence as the company announces its renewed plans to go public; and check out these recommendations your board can use for navigating ESG pressures.
In the Spotlight
Icahn’s Battle with Illumina Comes to a Head
Shareholders decide today whether to bring on activist candidates.
“A board fight involving one of Wall Street’s top activist investors is significant in its own right. But there’s more at play here, including a takeover that has tested antitrust regulators on both sides of the Atlantic and new proxy rules that could reshape American corporate governance…Influential shareholder advisory firms have offered the campaign some support. Institutional Shareholder Services backed an Icahn candidate, Andrew Teno, over Mr. Thompson, arguing that a more independent chair would have offered a better counterbalance ‘as the company navigated certain controversial decisions by management.’ And Glass Lewis backed two Icahn nominees over Mr. Thompson and Mr. DeSouza.” THE NEW YORK TIMES
Shareholder Activists Turning Up the Heat on Companies
Social and Environmental proposals in 2023 have already more than doubled over last year.
“More advocacy groups are using these resolutions to try to inject their voices into the corporate agenda, questioning companies’ adoption of policies that some view as being overly political. One group, for example, put forward a resolution requesting that Eli Lilly report on the risks of supporting abortion. Last year, the drugmaker expressed its opposition to Indiana’s near-comprehensive abortion ban…Many boards try to avoid alienating customers and shareholders and thus tend not to take sides, advising that every proposal be voted down. In some cases, they negotiate with shareholders to withdraw proposals before a vote happens. But studying these proposals eats up board time and exposes the companies to potentially unwelcome media attention.” WALL STREET JOURNAL
Shell AGM Shareholder Meeting Disrupted by Climate Activists
Despite the protests, shareholders back the board and reject climate measures.
“The protests came with Shell facing a vote to increase its climate ambitions following a year of record profit. The measure from activist shareholder group Follow This got support from small but notable investors including the Church of England Pension Board, with an initial tally of just over 20% of investors backing it… In remarks at Tuesday’s meeting, (CEO Wael Sawan) warned that quickly reducing oil and gas by companies like Shell would only create price volatility and spur production of higher-polluting energy. The company’s current strategy is to deliver decarbonization by enabling its customers to cut emissions, he said. ‘We alone will not be able to make the transition happen, but we can be a great catalyst for the transition,’ Sawan said." BLOOMBERG
Amazon Investors Reject All Shareholder-Led Proposals at Annual Meeting
Record 18 proposals included those targeting working conditions and climate policies.
“The total exceeded Amazon's 2022 record of 15 as environmental, social and governance (ESG)-focused investors pushed for changes ranging from warehouse workers rights, union rights, gender and racial pay and animal welfare standards…” REUTERS
Activist Investor Asks Yelp to Consider Sale
TCS Capital Management is one of Yelp’s largest shareholders with a 4 percent stake.
“TCS Capital believes that Yelp could be sold to another technology or media company or private-equity buyer, for at least $70 a share—or more than double the current stock price, according to a letter the fund’s founder and president, Eric Semler, plans to deliver to Yelp’s board Tuesday…Semler also plans to tell Yelp’s board that his investment firm is prepared to make its own bid to acquire Yelp, with a group that includes an executive who has served as chief executive officer of a public company in the same business, the letter says, without naming the executive…Alternatively, Yelp could explore a tax-free merger with online-services company Angi, formerly known as Angie’s List, Semler plans to say in the letter.” THE WALL STREET JOURNAL
From Boardspan this Week:
New Tactics and ESG Themes Take Shareholder Activism in New Directions
The best defense is a solid relationship with and understanding of your shareholders, coupled with a plan for dealing with activists if they emerge.
"Today, even well-performing companies may find themselves targets of activist campaigns on environmental and social issues, as new funds have been formed to specialize in these areas. Moreover, established activists have established new types of investment vehicles that could strengthen their hands. Preparing for the possibility of an activist campaign should therefore be on the board agenda at most public companies. Historically, many activist campaigns have focused on M&A and returns of capital. The economic uncertainty and liquidity issues companies faced in 2020 reduced M&A activity and made it harder for activists to advocate transformative deals, such as the sale of a company, a breakup or major divestiture, or a large dividend payout.” SKADDEN via BOARDSPAN
