In this dynamic environment where shareholder opinions matter more than ever, investors are letting their views be known. Passive observers seem like a footnote in the governance history books – can anyone remember the days when they’d show up at an annual meeting simply to approve the board’s recommendations? Instead, shareholders are increasingly demanding a voice in shaping the direction and performance of the companies they own. This shift is evident in the recent developments at Tesla, where proxy advisors suggest voting against Elon Musk's historic pay package, and Gildan, which has undergone wholesale leadership changes in response to activist pressure. In the energy field, Exxon-Mobil’s shareholders took a run at board leadership (although fell short) while Hess shareholders have approved the $53 billion merger with Chevron. And after a long string of disappointing results, Marathon Oil’s shareholders are asked to approve a $17 billion acquisition by oil giant ConocoPhillips. Stakeholder voice matters more than ever, and for good reason, boards of directors are recognizing the value of engaging early and often, fostering a culture of accountability.
In other news: Tips on surviving uncertainty, WeWork will not have an Adam Neumann re-dux, top board priorities in 2024 (spoiler alert: cyber and AI strike again), is having a CISO on the board the be-all, end-all?, and could AI replace your CEO?
In the Spotlight
Tesla Shareholders Advised to Vote Against Elon Musk’s Pay Package
Proxy-advisor Glass Lewis says the proposed compensation would dilute shareholders’ holdings
“Proxy-advisory firm Glass Lewis has advised Tesla shareholders to vote against Elon Musk’s multibillion-dollar pay package at the company’s meeting next month. In a 71-page report, Glass Lewis told shareholders that Musk’s proposed compensation—recently valued at $46 billion—could dilute their existing holdings in Tesla. The package would concentrate his ownership, making him the largest shareholder ‘by a healthy margin.’ Shareholders will vote at the June 13 meeting on Musk’s pay package and other proposals, including moving the company’s incorporation to Texas, which Glass Lewis also advised against.” THE WALL STREET JOURNAL
Activist Investor Win at Gildan
The appointments follow the resignation of Vince Tyra, president and CEO, and the entire board
“Gildan Activewear on Friday said Glenn Chamandy, the company’s former chief executive officer, will return as CEO following the resignation Thursday evening of Vince Tyra, president and CEO, and the entire board of directors. The resignations were a victory for activist investor Browning West, which also saw its eight nominees named to the clothing maker’s board ….Board members decided it was in the best interests of Gildan stakeholders for them to resign, to allow a new board to be seated, Gildan said. Gildan also said discussions regarding a previously announced sale process have ceased. Michael Kneeland, one of the Browning West nominees, was named as chair of the board.” THE WALL STREET JOURNAL
All Exxon Directors Re-Elected Despite Activist Opposition
Four activist shareholder proposals were also overwhelmingly rejected
“ExxonMobil Chairman and CEO Darren Woods and lead independent board member Joseph Hooley sailed to easy re-elections to the Board of Directors Wednesday at the company’s annual shareholder meeting …both had been targeted by ESG-focused investors in recent weeks, with state fund managers in California (CalPERS) and New York pledging to oppose most or all the rest of the Board as well. Hooley was also targeted by proxy advisory firm Glass Lewis, which advised clients to oppose him in response to what it calls Exxon’s ‘overly aggressive’ response to what it believed were nuisance shareholder initiatives filed by two activist shareholders, Arjuna and Follow This. All those efforts failed by overwhelming margins. ExxonMobil said in a release that all 12 Board members were re-elected, receiving support from an average of 95% of voting shareholders.” FORBES
Hess Shareholders Approve Merger with Chevron
Hess Corp approved the company's $53 billion merger with the No. 2 U.S. oil company Chevron
“The merger required a majority vote to approve the deal by a majority of Hess' 308 million shares outstanding to pass ....Chevron offered to acquire Hess last October in a move to gain a foothold in oil-rich Guyana's lucrative offshore fields. The deal has been stalled by an ongoing review by the U.S. Federal Trade Commission and clouded by an arbitration claim filed by Hess' partner in Guyana, Exxon Mobil. The result is a win for Hess CEO John Hess and puts to rest claims by some shareholders who wanted additional compensation for the delay in closing the sale. Exxon's arbitration could push the deal's closing into 2025.” REUTERS
ConocoPhillips to Acquire Marathon Oil in $17.1 Billion All-Stock Deal
Transaction marks the latest major consolidation in the energy sector
“ConocoPhillips has agreed to acquire Marathon Oil in an all-stock deal valued at $17.1 billion that would combine two of America’s most recognizable energy companies. The transaction comes after five consecutive quarters of falling profits at Marathon Oil and marks the latest major consolidation in an energy sector that has seen a flurry of merger and acquisition activity this year ….The transaction is expected to close in the fourth quarter, subject to approval from regulators and Marathon Oil stockholders. The deal has an enterprise value of $22.5 billion that includes $5.4 billion of debt. ConocoPhillips is looking for the tie-up to be immediately accretive to its earnings, cash flows and return of capital ….ConocoPhillips said the deal adds complementary acreage to its existing U.S. onshore portfolio.” THE WALL STREET JOURNAL
From Boardspan this Week:
Preparing the Board for Activist Investors: A Proactive Defense Affords the Best Chance of Success
The board’s best chances for success reside in careful planning, preparation, and execution
"Regardless of a company’s success or confidence in its strategy, management, and board, there are few situations public companies face that are more daunting than an unsolicited approach by an activist investor. And with activist activity continuing to rise—we have seen a record number of companies targeted by activists, a record number of activist campaigns launched, a record number of board seats won, and a rising bench of first-time activists—all companies need to be prepared. The increasingly sophisticated and complex manner in which activists target companies requires dedicated focus and a cohesive strategy by a company’s management and its board long before an activist comes knocking.” K2 INTELLIGENCE via BOARDSPAN LIBRARY |
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