12/8/22 – Issue 7.96 – Your weekly news on all things board. 

Shareholder activism. It can take many shapes, but activist investors have one overarching motive: Create more value for shareholders, faster.  Maybe activists want to diversify board composition; maybe they want more (or less) focus on climate change; or perhaps they feel that selling a piece of the business is the fast track to more value. Regardless of the strategy and the end game, one thing is certain: All public companies are potential targets. Disney is the latest company to see shareholder activists circling–more on that below. And the era of universal proxy is sure to open the door to more attempted activism. A definitive guide to shareholder activism contains some valuable information and guidance for boards that want to be prepared. Our advice? If an activist is on your doorstep, listen carefully for good ideas and points of alignment. After all, value creation is a common goal and emphasizing that shared prize may make agreeing on a strategy easier than you think.

In other news this week, Salesforce sees more turnover, Prada keeps succession planning in the family, and directors weigh in on the fine line between sitting on multiple boards and going overboard. 

In the Spotlight

Want to Be Prepared for Shareholder Activism? Start Here. 

We think this guide to shareholder activism from the Harvard Law School Forum on Corporate Governance is as good an overview as we’ve seen of the facets of shareholder activism in the age of universal proxy. (For more information on universal proxy itself, you can read their piece here.)

"The nature of shareholder activism, the key players, their preferred methods, and their typical targets all tend to shift along with investment and business trends. They are influenced by market pressures, stores of capital, and hot topics in governance. But during bull and bear markets, during recessions and times of growth, activists continue to look for opportunity, and companies continue to find themselves in the crosshairs… Directors can help ensure the company anticipates which activists might target the company, and which issues they might raise. By being familiar with activism trends, they can encourage management to proactively address common issues that are attracting attention … Going forward, in a contested director election, parties must issue one universal proxy card listing all available candidates. The rule change would allow investors to easily pick and choose which combination of candidates to vote for, rather than choosing between the company’s and the dissenting shareholder’s proxy cards.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Does Disney Have the Board It Needs? Activists Likely to Seek Changes
The tenure of the current Disney board–and its lack of media experience–are causing concern that the company may not be able to ward off activists.

“Last month [Bob Iger] returned to lead Walt Disney with a primary task: find a replacement. Keeping him on point is going to require a stronger board. … The worry is that Iger will drag his feet again, and no one is around to hurry him along. Eight out of 11 directors – excluding Iger – were appointed during Iger’s first term as the company’s leader…Activists are circling. Third Point’s Dan Loeb struck a standstill agreement in September after Meta Platforms executive Carolyn Everson was named director. Nelson Peltz also has a stake… They could agitate for further changes including nominating directors with media expertise. Only Everson and Iger have that qualification…Some fresh talent is coming off Twitter’s board, and potential CEO candidates like Salesforce (CRM.N) ex-boss Bret Taylor are kicking around. A refresh gives Disney its best shot at finally finding the next big cheese to take over the House of Mouse.” REUTERS

Across the Board

Prada Models Long-term Succession Planning

Prada models thoughtful succession planning by tapping an LVMH exec as its next CEO and publicly tasking him with training Miuccia Prada’s son to eventually take over, helping ensure that the brand stays strong and in the family.
 
“Prada is tapping former Moët Hennessy Louis Vuitton SE executive Andrea Guerra as its next chief executive, setting in motion a long-awaited succession that scales back the role of Miuccia Prada and her husband, Patrizio Bertelli, in running the Milan-based fashion house. Mr. Guerra’s nomination as chief executive officer will be voted on at the next board meeting … Ms. Prada and Mr. Bertelli said Mr. Guerra is expected to help groom the couple’s son, Lorenzo Bertelli, to one day take the reins of the brand… Succession is a challenging step for fashion houses that are closely linked to namesake designers. Many have ended up selling their business to giant luxury conglomerates such as LVMH and Kering after struggling to develop a new generation of leaders and investors to helm their houses.” THE WALL STREET JOURNAL

More High-Profile Exits at Salesforce as Slack’s CEO Resigns

Mark Benioff becomes the company’s sole CEO and remains as board chairman. 

“Just days after Salesforce co-CEO Bret Taylor announced his resignation, Slack CEO Stewart Butterfield announced that he will be stepping down in January… The company also announced that Lidiane Jones, who has been the executive VP and GM for digital experiences clouds at Salesforce, would be taking over for Butterfield, leaving a succession plan that had apparently been lacking when Taylor surprised everyone by stepping down last week… Butterfield came to Salesforce when the company bought Slack for $27 billion at the end of 2020. This comes on top of the news on Thursday, that Tableau CEO Mark Nelson would also be moving on… Salesforce has always had a deep bench of executives, but that talent pool is more than a bit thinned out after these three announcements in quick succession.” THE WALL STREET JOURNAL

The Danger of Going Overboard 

How many boards is too many? Three, say directors surveyed by PwC. What do you think?

"Experts say overboarding can pose risks, but they see opportunities for experienced directors to make room for a new crop. There’s also evidence that investors reward companies whose sought-after board members hold fewer directorships…So how many board seats is too many? Directors themselves have strong views on that. In PwC’s latest annual Corporate Directors Survey, almost half of the 700-plus respondents agreed that independent directors should sit on no more than three boards. When it comes to CEO directors, nearly 60% of those surveyed said that two is their upper limit. Meanwhile, about one third said that CEOs should serve on no other board… Still, more directors than ever are serving on multiple boards. While mean board size decreased from 1996 to 2016, the average number of directorships per person increased.” FORTUNE

From Boardspan

The Rise of the Nom & Gov Committee

Over the last two decades, Audit and Compensation committees gained increased responsibility and garnered the lion’s share of attention on the board. The role of the Nominating & Governance committee was relatively undervalued by comparison. But as new, complex issues become a priority, it’s the Nom & Gov committee’s time to shine. Not only are there more eyes on Nom & Gov, but its scope is expanding." BOARDSPAN BLOG

Shareholder Activism and ESG: What Comes Next, and How to Prepare

"The recent successes of shareholder activists against Big Oil this proxy season are one of many signs of mounting and effective pressure from investors on public companies to enhance their performance and disclosures on environmental, social, and governance (ESG) criteria. As ESG rises in prominence among investors, activist shareholders have at their fingertips new and potent themes from ESG’s repertoire of concepts and criteria to use in campaigns to change control and strategy at companies… Investors increasingly view corporate attention to ESG criteria as closely linked with business resilience, competitive strength, and financial performance. The world’s largest institutional investors and pension funds have stated their faith in the potential of ESG to unlock shareholder value and to make companies and markets more sustainable. Their support has afforded ESG investing and operating principles added legitimacy and credibility. ” SIDLEY via BOARDSPAN

Seat at the Table 

• ExxonMobil welcomes to its board Lawrence Kellner, former Chairman and CEO of Continental Airlines; and John Harris II, former CEO of defense subsidiary Raytheon International
• Social-media company Pinterest adds to its board Marc Steinberg, Senior Portfolio Manager at investment firm Elliot Management
• Gaming accessory company Turtle Beach appoints to its board Julia Sze, former Chief Investment Officer at Wells Fargo Family Wealth Group
• American Cancer Society adds four members to its board: José Buenaga, CEO of insurance company EIG Group; Karen Etzkorn, Chief Information Officer at information technology company Qurate Retail Group; Michael Pellini, Managing Partner at venture capital fund Section 32; and Kenneth Stoll, former Partner at PricewaterhouseCoopers
• Health insurance platform Oscar Health elects to its board Bill Gassen, President and CEO of Sanford Health: and Laura Lang, Managing Director of strategic advisory firm Narragansett Ventures
• Consumer goods company Newell Brands welcomes to its board Stephanie Stahl, Senior Advisor to Boston Consulting Group
• Utility company American Water adds to its board Laurie Havanec, EVP and Chief People Officer of CVS Health; and Michael Marberry, former President and CEO of chemical manufacturer J.M. Huber Corporation

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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.