Across the Board
Lessons From the 2024 Proxy Season
Another Proxy Season demonstrates the complex and dynamic environment boards face
“Companies garnered strong support on key voting items this proxy season, but opposition to the reelection of some board and committee leaders, along with increasing support for governance-focused shareholder proposals, show that investors are willing to hold directors to account and seek the tools to do so. Companies also faced more challenges this year related to a changing activism environment and emerging topics of focus like artificial intelligence. Sustainability shareholder proposals drew selective support amid more robust corporate sustainability reporting.” CORPORATE COMPLIANCE INSIGHTS
Southwest Airlines Readies for Board Battle with Activist Investor
Longtime executives at the carrier rally support to block Elliott Investment Management's attempt to force wholesale changes
“Southwest Airlines is girding itself for a fight with Elliott Investment Management, rallying support from investors and employees to face down an activist investor looking for wholesale changes to company leadership… the hedge fund has cited the underperformance of Southwest’s stock and the Dallas-based airline's ‘rigid commitment to a decades-old approach’ as reasons to revamp the board and executive suite…. Elliott has made no secret of its goals. It wants to oust both Jordan and Southwest's board chair Gary Kelly, blaming them for the airline's financial results, to replace two-thirds of the board's 15 directors and to change the way the company has been running its business in order to make it compete better in the modern airline industry.” REUTERS
Harley-Davidson Changes DEI Policy Following Activist Pressure
The motorcycle maker said it would no longer participate in a scoring system related to LGBTQ+ inclusion
“Harley-Davidson is the latest major company to make changes to its diversity policy after online pressure started by conservative activist Robby Starbuck. The motorcycle maker said Monday that it will no longer participate in a scoring system by the Human Rights Campaign, an advocacy group that gives companies scores based on LGBTQ+ inclusion in their workplace. Harley-Davidson said it would review all its sponsorships, saying that it will focus on retaining its ‘loyal riding community.’ And it will no longer have spending goals to buy from suppliers owned by minorities or women… Starbuck launched similar campaigns against farm supplies seller Tractor Supply and tractor maker Deere. Both companies changed their DEI policies.” WALL STREET JOURNAL
Engaged Capital Seeks Changes at Portillo’s
Engaged Capital has built a 10% stake in struggling Chicago food chain Portillo’s and is pushing management to make changes to how the business grows and runs
“Activist investor Engaged Capital has built a nearly 10% stake in Portillo’s, the struggling Chicago-based hot-dog chain, and is engaging with management on improving operations, margins and branding as the company pushes to expand nationally, according to people familiar with the matter. It’s the first activist campaign Glenn Welling’s Engaged has mounted in the fast-casual sector since a successful push at Shake Shack...” CNBC
CEOs Face the Same Threat of Being Fired as Their Rank-And-File Workers
Boards are increasingly aware of the need for ethical leadership and strong performance, especially in the face of public scrutiny and shareholder expectations
“In the first quarter alone of 2024, outplacement and career transitioning firm Challenger, Gray & Christmas reported that 622 chief executives announced their resignations. This represents a 50% increase compared to the first quarter of 2023, which was already a record year for CEO exits…. It's important to note that CEO departures don't always indicate misconduct or poor performance. Sometimes they reflect strategic shifts or mutual decisions between the board and the executive. However, when CEOs are held accountable for ethical violations or poor performance, it can send a powerful message about corporate governance and responsibility.” FORBES
Starbucks’s New Boss Gets an Unusual Perk: Remote Work
Brian Niccol can stay in his Southern California home and commute via a corporate jet to Seattle
“To woo its new chief executive, Starbucks offered a $10 million cash signing bonus and millions more in stock-based compensation. The coffee giant also didn’t insist that he move to the company headquarters in Seattle. Brian Niccol, the outgoing CEO of Chipotle, instead will be able to live in his home in Southern California and can commute to Starbucks’s head office on a corporate jet. The arrangement thrusts Niccol into the relatively rare position in the U.S. of a supercommuting CEO, and it shows how determined Starbucks was to pursue him. Most companies still prefer that their executives maintain a primary residence near a headquarters, corporate advisers say, though there have been some notable cases where a top leader lived and worked elsewhere.” WALL STREET JOURNAL
Disney's CEO Search Intensifies
Board member James Gorman to chair Succession Planning Committee as search to replace Bob Iger heats up
“As expected, Disney’s board has named director James P. Gorman to chair its Succession Planning Committee as the search for an executive to follow Bob Iger as CEO starts to heat up. Gorman joined the Disney Board earlier this year after having overseen a recent succession process at Morgan Stanley, where he serves as executive chairman following several years as the financial giant’s chairman and CEO. Given that background, it was pretty clear that he would be tapped at Disney to do the same.” DEADLINE
Estee Lauder CEO to Depart
The board looks internally and externally for a replacement as the luxury giant forecasts bleak annual results
“Estee Lauder… said CEO Fabrizio Freda was retiring after nearly 16 years at the helm. Freda, 66, who is retiring in June, was named the CEO in 2009 and was responsible for expanding the company's skincare portfolio with the addition of brands such as Dr. Jart and The Ordinary owner Deciem. He also steered the company through pandemic-induced supply chain snags when Estee was forced to raise prices to offset rising costs and laid out a turnaround plan last year that included job cuts. Freda's plans to retire come just a month after Chief Financial Officer Tracey Travis said she would step down after a 12-year stint. On Monday, Estee said the board was considering internal and external candidates as part of its CEO succession planning…” REUTERS
The Business Roundtable’s Stakeholder Pledge, Five Years Later
In the past five years, stakeholderism has gained wider acceptance and helped many corporate leaders see the value of taking the interests of their stakeholders seriously
“In the past five years, stakeholderism has gained wider acceptance and helped many corporate leaders see the value of taking the interests of their stakeholders seriously when planning, developing strategy, making decisions, assessing risks, allocating resources, and so on. But that is a far cry from replacing shareholder capitalism as the central organizing principle for U.S. companies. For that to happen, much more is required. Proponents will need to define more clearly what stakeholder capitalism is, strengthen its theoretical foundations, and develop a playbook for implementing it, including metrics for measuring performance and guidelines for making tradeoffs.” HARVARD BUSINESS REVIEW
Navigating the Nuances of Board Diversity in NASDAQ-Listed Companies
While diversity can bring valuable benefits, its pursuit must be balanced with respect for individual privacy, need for specialized skills, and operational realities of the industry
“In recent years, a push for diversity on corporate boards gained momentum, culminating in NASDAQ’s new listing rules that require companies to disclose the composition of their boards in terms of certain forms of diversity—gender, race and sexual orientation—and disclose whether they have one or more such directors or explain why not. In line with other social trends, boards have been diversifying and most have had no trouble checking the NASDAQ rule’s box. The interesting cases are the small number that have instead opted to explain why they do not meet NASDAQ’s diversity matrix.... the process of achieving diversity is not always obvious or easy, as evidenced by the statements from these companies…” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
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