'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)
? ? ? ? ?Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)?
? ? ? ? ? ? ? (i)?**Glass Lewis releases its 2025 proxy voting guidelines for the U.S, (adding a section on board oversight of artificial intelligence): Last Thursday, Glass Lewis?released its "2025 Benchmark Policy Guidelines for the U.S." (but not yet for Canada). The "Summary of Changes for 2025" and "Clarifying Amendments" are set out at pp.7-8, summarized in the?related Glass Lewis?press release?as follows:
? ? ? ? ? ? ? ? ? ? ?"Below are the key 2025 policy updates. U,S.:
? ? ? ? ? ? ? ? ? ? ? ? ? ? -- The guidelines for the U.S. include added or updated sections on board oversight of artificial intelligence, board responsiveness to shareholder proposals, and change-in-control provisions for executive compensation.
? ? ? ? ? ? ? ? ? ? ? ? ? ? — Glass Lewis has also clarified its policy approach on reincorporation proposals and executive pay programs."
? ? ? ? ? ? ? ? ? ? Below is the added section,?"Board Oversight of Artificial Intelligence" (at p.29):
? ? ? ? ? ? ? ? ? ?"In recent years, companies have rapidly begun to develop and adopt uses for artificial intelligence (AI) technologies throughout various aspects of their operations. Deployed and overseen effectively, AI technologies?have the potential to make companies’ operations and?systems more efficient and productive. However, as the use of these technologies has grown, so have the potential?risks associated with companies’ development and?use of AI. Given these potential risks, we believe that boards should be cognizant of, and take steps to mitigate exposure to, any material risks that could arise from their use or development of AI.
? ? ? ? ? ? ? ? ? ? "Companies that use or develop AI technologies should consider adopting strong internal frameworks that include ethical considerations and ensure they have provided a sufficient level of oversight of AI. As such, boards may seek to ensure effective oversight and address skills gaps by engaging in continued board education and/or appointing directors with AI expertise. With that view,?we believe that all companies that develop or employ the use of AI in their operations should provide clear disclosure concerning the role of the board in overseeing issues related to AI, including how companies are ensuring directors are fully versed on this rapidly evolving and dynamic issue. We believe such disclosure can help shareholders understand the seriousness with which companies take this issue.
? ? ? ? ? ? ? ? ? ? "While we believe that it is important that these issues are overseen at the board level and that shareholders are afforded meaningful disclosure of these oversight responsibilities, we believe that companies should determine the best structure for this oversight. In our view, this oversight can be effectively conducted by specific directors, the entire board, a separate committee, or combined with the responsibilities of a key committee.
? ? ? ? ? ? ? ? ? ? ? "In the absence of material incidents?related to a company’s use or management of AI-related issues, we will?generally not make voting recommendations on the basis of a company’s oversight?of, or disclosure concerning, AI-related issues. However,?in instances where there is evidence that insufficient oversight and/or management?of AI technologies has resulted in material harm to shareholders, Glass Lewis will review a company’s overall?governance practices and identify which directors or board-level committees have been charged with oversight of AI-related risks. We will also closely evaluate the?board’s?response to, and management of, this issue as well as any associated disclosures and?may recommend against appropriate directors should we find the board’s?oversight, response or disclosure concerning AI-related issues to be insufficient."
? ? ? ? ? ? ? (ii) activist roundup: Norfolk Southern settlement with activist investor; press release and precedent of the day (cooperation agreement with activist investor)/ prominent activist hedge fund Elliott Investment Management calls on Honeywell's board to separate its two principle businesses, and Honeywell's response/head of Morgan Stanley’s activist defense practice (and others) on expected activism in 2025/Bloomberg feature on activist hedge fund Elliott investment Management and its founder Paul Singer:?
? ? ? ? ? ? ? ? ? ? ? ? ?(a) In Feb./24, an investor group led by?Ancora?Holdings?announced that it had taken a big stake in Norfolk Southern Corporation, and that it was nominating eight candidates to stand for election to the company's board at its 2024 AGM (see item (ii)(b) from Feb. 27/24); but at the 2024 AGM held in May, only three Ancora nominees were elected to the Norfolk Southern board. Last Thursday, Norfolk Southern?announced in this press release?that it had?entered?into a Cooperation Agreement with Ancora?pursuant to which it would, inter alia, add an independent director to its board, as follows:
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? "Norfolk Southern Corporation today announced that ithas entered into a cooperation agreement with Ancora Holdings Group, LLC?after constructive engagement.?Under the terms of the agreement, Norfolk Southern and Ancora will work together to identify an independent director to join the Company's Board of Directors. The addition of the new director, who is expected to enhance the Board's gender diversity and executive leadership experience, will expand Norfolk Southern's Board to 14 members, including 13 independent members.....
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? "Pursuant to the cooperation agreement, Ancora has agreed to withdraw its nomination of four director candidates for election at the Norfolk Southern 2025 Annual Meeting of Shareholders. Ancora has also agreed to vote in accordance with the Board's recommendations in connection with any vote of Norfolk Southern shareholders, including at the 2025 Annual Meeting, and to a standstill provision......."
? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?This is the Cooperation Agreement?entered into between the company and Ancora,?as summarized in the related Current Report?filed with the SEC.
? ? ? ? ? ? ? ? ? ? ? ?(b) As reported in this WSJ article last Tuesday, "Elliott Calls for Breakup of Honeywell—One of the Last Conglomerates", prominent activist hedge fund Elliott Investment Management announced past Tuesday in this press release??that it had amassed a?$5 billion stake in Honeywell International Inc., and that it had sent a letter to the Honeywell board (reproduced in the press release)?calling on the company to separate its aerospace and automation businesses into two separate publicly-traded companies. Honeywell responded through a spokesperson as follows, as reported in this Bloomberg ?article, "Elliott Amasses $5 Billion-Plus Stake in Honeywell":
? ? ? ? ? ? ? ? ? ? ? ? ? ? "A spokesperson for Honeywell said in a statement that the company welcomes investor feedback as its continues to execute a disciplined strategy of sustainable growth, portfolio optimization and capital deployment. “Although Elliott had not made us aware of their views prior to today, we look forward to engaging with the firm to obtain their input,” the spokesperson said."
? ? ? ? ? ? ? ? ? ? ? (c) At last week's?Berkeley Law Fall Forum on Corporate Governance, one of the topics was hedge fund activism. David Rosewater, head of Morgan Stanley’s shareholder activist defense practice, along with others spoke on this topic,?as reported in this Corporate Counsel blog post last Friday, "Shareholder Activists Poised to Pounce in 2025. Is Your Board Ready?". Below are excerpts:
? ? ? ? ? ? ? ? ? ? ? ? ? "....Boardroom battles were one of the big topics at this week's Berkeley Law Fall Forum on Corporate Governance.....Shareholder activists took their campaigns to new heights in 2024, with notable battles against Disney, News Corp., Norfolk Southern and Southwest Airlines. David Rosewater, head of Morgan Stanley’s shareholder activist defense practice, said public campaigns by activists shot up 40% from 2023, and he expects next year to be just as busy. “A lot of activity is going to continue,”?he said,?driven by the vast sums of uninvested capital held by private equity firms, a change in the presidential administration and what likely will be a more robust M&A market. “There is a tremendous amount of activity kind of under the surface that I expect to sort of ramp up more significantly into next proxy season."
? ? ? ? ? ? ? ? ? ? ? ? "Steve Lipin, CEO of the strategic communications and investor relations firm?Gladstone Place Partners, said it’s not a coincidence that activist fund?Elliott Management made public its $5 billion stake in Honeywell this week.?“A lot of these positions are going to be made public in coming days, and so we'll all be scrubbing the filings,” Lipin said. “Metaphorically, we have an activist in the White House and the perception is that, yes, all his friends happen to be activists and raiders. But the feeling is that there's a bit of euphoria from the activist side of the house.”?
? ? ? ? ? ? ? ? ? ? ? ? "Activists are also getting less predictable and more willing to go public, Lipin said.?“There's a competition in effect to get out first with a particular name. Now we're seeing that the activists are less willing to sort of stay private because they're worried about other activists going public in the same name. And to be honest, they want all the glory and credit and they also sort of want to drive the initiative as opposed to competing with other activists.”......
? ? ? ? ? ? ? ? ? ? ? ? "Companies should prepare for attacks by addressing obvious vulnerabilities on their own and by taking control of the narrative, in part by developing well-crafted rebuttals in advance.?“The activists are very press-savvy,"?Lipin said.?"They know how to leak to the outlets. They're quite often quite good on CNBC. And CNBC becomes almost like their megaphone." Lipin said companies need to figure out their story and make sure they present it clearly in annual reports......"
? ? ? ? ? ? ? ? ? ? (d) Note this recent feature Bloomberg article on Elliott Investment Managment?and its founder Paul Singer, "Elliott Hunts Bigger Prey, Testing Limits in Barrage of Activism", with reference inter alia to Elliott's most recent (and successful) activist campaign against Southwest Airlines (see item (iv) from Oct. 24/24).
? ? ? ? ? ? ? (iii) (other) press releases/SEC filing/(other) precedent of the day (indemnification agreement with chief operating officer):?
? ? ? ? ? ? ? ? ? (a) TSX/NYSE-listed Manulife Financial Corporation announced this morning in this press release the appointment of a new CEO from inside the company, with the current CEO to serve as an Advisor until his retirement in May/25, as follows:
? ? ? ? ? ? ? ? ? ? ? ? ?"Manulife Financial Corporation's Board today announced that President and Chief Executive Officer?Roy Gori?has informed them of his intention to retire, effective?May 8, 2025, with?Phil Witherington?appointed as his successor and joining the Board of Directors at that time. To support this transition, following Mr. Gori's retirement he has agreed to serve as an Advisor through?August 31, 2025.......Phil Witherington?has been a member of the company's Executive Leadership Team since 2017, serving as Chief Financial Officer for five years until his appointment to his current role as President and CEO, Manulife Asia.....Phil will continue in his current role as he works with Roy on transition planning and will name his successor in the coming months."
? ? ? ? ? ? ? ? ? ? (b) Concurrently with Nasdaq-listed Liberty Media Corporation's announcement last Wednesday in this press release?that it was spinning off most of its assets besides Formula One auto racing into a separate publicly traded company,?called Liberty Live, it announced in this press release?that its?CEO would be stepping down at the end of this year, with its Chairman to assume the role of interim CEO,?as follows:
? ? ? ? ? ? ? ? ? ? ? ? ? ?"Liberty Media Corporation today announced that President and Chief Executive Officer, Greg Maffei, will be stepping down from his role at the end of 2024. Liberty Media’s Chairman, John Malone, will assume the role of interim CEO and will work closely with the Liberty Media executive team and the Board of Directors to ensure a seamless transition. Maffei will step down at the expiration of his contract at year-end and will serve as a Senior Advisor effective January 1st?to support the management transition......"
? ? ? ? ? ? ? ? ? ?(c) Nasdaq-listed, tech real-estate marketplace company Zillow Group, Inc.?announced last Thursday in this Current Report?filed with the SEC the appointment of a new chief operating officer,?and the departure of the company's President, as follows:
? ? ? ? ? ? ? ? ? ? ? ? "On November 14, 2024, Zillow Group, Inc.?announced that the board of directors of Zillow appointed Jun Choo, currently Zillow’s Senior Vice President, Real Estate Software, as Zillow’s Chief Operating Officer, effective as of November 14, 2024. Mr. Choo, 50, has served in various leadership roles at Zillow since joining the Company......On November 14, 2024, Zillow announced that Susan Daimler will depart her role as President of Zillow effective immediately....."
? ? ? ? ? ? ? ? ? ? ? ? As disclosed in the said Current Report, the company and the new COO entered into this ?Indemnification Agreement.?Compensation arrangement with the new COO, as well as terms of a Departure Agreement entered into with the departing President , are also disclosed in the Current Report.
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