Across the Board
Norfolk Southern Seeks to Thwart Activist with New Board Picks
The embattled railroad introduces two new candidates to slate
“The company on Monday revealed a slate of 13 board nominees, including two new candidates—Richard Anderson, the former chief executive of Amtrak and
Delta Air Lines, and Mary Kathryn “Heidi” Heitkamp, a former U.S. senator. Last week, Ancora revealed its slate of eight director candidates that included former Ohio Gov. John Kasich. It proposed a new management team, including former United Parcel Service Chief Operating Officer Jim Barber Jr. as CEO, and former CSX executive Jamie Boychuk as COO…Norfolk Southern believes Ancora’s strategy is shortsighted and could threaten recent progress following a toxic train derailment last year. A spokesperson for the Ancora-led investor group said it believes Shaw and the Norfolk board “have no credible plan and no viable record to run on.” It also said Anderson presided over numerous safety incidents at Amtrak and “has no place on the board.” THE WALL STREET JOURNAL
Insights from the Bid to Oust Norfolk Southern’s CEO and Board
Vulnerabilities Ancora points out are common to many boards
“Ancora seems to be sending the message that a crisis that can damage the company’s reputation and its ability to increase its customer base must be dealt with quickly and efficiently…Norfolk Southern’s board has been portrayed as having allowed a crisis to remain unresolved for one year without detailing potential solutions to the problem. Now they will have to work hard to change that characterization while they also work on mitigating potential damage from lawsuits, regulatory scrutiny, and negative press…Agreeing that performance can be improved and engaging in discussions with shareholders to explore how to improve outcomes can help the board and management team build investor confidence. Ideally such discussions should happen BEFORE shareholders ask for the removal of board members and the CEO. It appears that Norfolk Southern leadership wasn’t clear on what Ancora felt was acceptable performance.” CORPORATE BOARD MEMBER
2024 Proxy Season Preview
Technology innovations predicted to further democratize corporate governance
“Technology innovations and the SEC’s new rules for Universal Proxy will further democratize corporate governance in the 2024 proxy season, adding ways to inform and engage investors. Electronic voting platforms and processing for Universal Proxy contests are up and running, making it easier and clearer for shareholders to pick and choose directors from competing slates. Pass-through voting “pilots'' are going mainstream as the largest asset managers provide investors with a voice on how shares of portfolio companies are voted. Based on recent data over the past 8 months and the first 6 weeks of 2024, the trend of increasing numbers of environmental and social proposals, along with declining shareholder support for them, could continue this proxy season.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Reddit files for IPO, Hopes to Reserve Shares for its Users
Deal would be the first social media company IPO since Pinterest in 2019
“In an offering prospectus, Reddit disclosed its financial performance in preparation for selling shares to investors. The San Francisco-based company reported that its revenue rose more than 20 percent as its losses narrowed last year. It added that it had 73 million daily users and more than 100,000 active communities…Reddit’s bankers are seeking a valuation of at least $5 billion in its I.P.O., according to two people familiar with the matter. That is roughly half of the $10 billion valuation the company fetched in a 2021 private financing round. The talks are continuing, and the price could still rise or fall in the weeks ahead…Mr. Huffman added that the company wanted “this sense of ownership to be reflected in real ownership — for our users to be our owners” and that “becoming a public company makes this possible.” Reddit said it would reserve a chunk of its shares at the I.P.O. price for 75,000 of the company’s most prolific users if they wished to purchase them.” THE NEW YORK TIMES
How to Ask Tough Questions in the Boardroom: 9 Tips for Directors
Directors need information that sometimes requires challenging stakeholders
“Public company directors are under more pressure than ever to oversee enterprise risk, even risk from day-to-day operations, which is normally addressed by management. Egregious failures of upper management to react to red flags have put boards on the hot seat and generated bad press that has jeopardized corporate reputations…Directors can only exercise their fiduciary duties if they have adequate information. But directors are removed from the action. Their job is to oversee management from the lofty perch of the boardroom with a 50,000-foot view, not stand in the trenches. Critical to the role of the director, then, is the ability to face and question management. An effective question-and-answer process in the boardroom is an art form, and actions that a director takes outside the boardroom may be just as important as how he asks the question.” JD SUPRA
Your Organization Isn’t Designed to Work with Generative AI
If companies only see it through an automation lens, they need to reframe
“Organizations are plowing millions of dollars into generative AI as they race to apply it in innovative ways ahead of the competition. Yet many are hitting roadblocks, not due to the known shortcomings of the technology, which is still in its infancy, but because of a fundamental flaw in their approach: They think of GenAI as a traditional form of automation rather than as an assistive agent that gets smarter — and makes humans smarter — over time…To effectively integrate GenAI, we propose a new paradigm: Designing for Dialogue. Unlike traditional, technology-driven process redesign principles that focus on taking capabilities “out” of the human and putting them “into” the machine, Designing for Dialogue is rooted in the idea that technology and humans can share responsibilities dynamically. Each takes the lead at different points throughout a process based on context and competence. It essentially treats GenAI more like a coworker than a static technology. Make no mistake: We aren’t suggesting that GenAI is human or sentient — only that it should be treated differently than other technologies because it behaves more like a colleague than previous software.” HARVARD BUSINESS REVIEW
SEC Investigating Whether OpenAI Shareholders Were Misled
Regulator examining internal communications and records from Altman and board
The Securities and Exchange Commission is scrutinizing internal communications by OpenAI Chief Executive Sam Altman as part of an investigation into whether the company’s investors were misled. The regulator, whose probe hasn’t previously been reported, has been seeking internal records from current and former OpenAI officials and directors, and sent a subpoena to OpenAI in December, according to people familiar with the matter. That followed the OpenAI board’s decision in November to fire Altman as CEO and oust him from the board. At the time, directors said Altman hadn’t been “consistently candid in his communications,” but didn’t elaborate…Some of the people familiar with the investigation described it as a predictable response to the former OpenAI board’s claim in its November statement. One of the people said that the SEC hasn’t pointed to any specific statement or communication by Altman that it has deemed misleading.” THE WALL STREET JOURNAL
Abu Dhabi Firm Adds an AI-Powered Observer to Board
Roles will include risk assessment and compliance monitoring
“Abu Dhabi’s International Holding Co. is adding an AI-powered observer to its board, a move that the $238 billion firm said will help human board members make better strategic decisions. The virtual entity — Aiden Insight — will take an observer seat on the board of IHC, which is the largest listed firm in the United Arab Emirates. Aiden will be able to ‘continuously process and instantly analyze decades of business data, financial information, market trends, and global economic indicators,’ IHC said in a statement…The unusual initiative, backed by Emirati AI company G42 and Microsoft Corp., deepens Abu Dhabi’s push into AI. The UAE wants to to become a global leader in testing and regulating AI technology, a minister told Bloomberg this month, echoing remarks from OpenAI Chief Executive Officer Sam Altman…IHC is not the first company to turn to AI. Hong Kong’s Deep Knowledge Ventures used an algorithm called VITAL that a managing partner said helped the board make more ‘logical decisions.’” BLOOMBERG
WW International: Oprah Winfrey Stepping Down from Board
Winfrey also selling her shares in the company to donate funds
“WeightWatchers is losing its most famous board member and shareholder: Oprah Winfrey. WW International on Wednesday said that Winfrey plans to step down from its board in May. The media mogul also plans to donate all her shares, as well as proceeds from any future exercises of her WW stock options, to the National Museum of African American History and Culture…Winfrey’s exit also follows deep subscriber losses in recent months at WW, which is contending with a major shift in the weight-loss industry due to the introduction of anti-obesity drugs such as Ozempic and Wegovy.” THE WALL STREET JOURNAL
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