Director's Domain August 22, 2022
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Gender matters. New research from Europe, where board gender quotas were implemented a decade ago in several countries, shows the widespread impact of diversity at the top. European private equity firms have been slow to join diversity efforts, but are getting on board. Meanwhile, activist investors are making their presence felt across industries, with Dan Loeb taking on Disney, hedge fund Equinox targeting mining company boards, Elliot Management urging changes at Cardinal Health and London’s Bluebell Capital Partners demanding board changes at French luxury goods holding company Richemont. Shareholders are also vocal these days and the latest tally shows a record 924 ESG-related proposals during this year’s proxy season. It’s not a bad time to read the article below that illustrates six ways board members can stay engaged and have a positive impact on the companies they serve.
BOARDS ADD VALUE: At Boardspan, we spend a lot of time talking to board members about the ways they add value and the many challenges they’re facing. Check out this?two-minute video?that highlights what we’ve learned.
In the Spotlight
Downstream Effects: Board Diversity Quotas Help Women Across Workforce…
“A new paper by academics Ana Catalano Weeks of the University of Bath and Audrey Latura of Harvard finds that requirements to increase women’s representation at the top of the corporate hierarchy can have ‘downstream effects,’ improving outcomes for women at all levels of the workforce. The researchers studied more than 900 annual reports and sustainability reports from almost 100 companies in Italy and Greece; while the two countries have similar economies, Italy adopted a quota for public company boards in 2011 and Greece had no such law at the time. Their study found a 50% increase in overall attention to issues related to gender equality in Italian companies’ annual reports after the quota law, and no change in the same time frame for Greek businesses. Italian companies, required to represent women at their highest levels, began discussing issues like paid leave, childcare, and the gender pay gap more frequently.”?FORTUNE
...European PE Firms Join in Diversity Efforts
“Diversity has become a key focus for every industry in recent years, and private equity, like many other parts of the financial sector, still has significant progress to make in terms of diversity and inclusion. Private equity lags behind others in the financial services industry across a range of diversity metrics…Amid a drive to boost diversity across the industry, PE funds are becoming more diversity focused in Europe, as investors and regulators demand change and sponsors seek a competitive advantage through diversity strategies…EU regulation is placing greater emphasis on DEI, demonstrating growing appetite for change. For example, the EU’s Sustainable Finance Disclosure Regulation (SFDR) regime…requires consideration of metrics on board gender diversity and unadjusted gender pay gap in certain circumstances, including where investments are intended to meet the definition of ‘sustainable investments’.”?HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
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Across the Board
Drug Store Chains Fined for Role In Opioid Epidemic
"Pharmacy operators CVS, Walmart and Walgreens must pay a combined $650.6 million to two Ohio counties to address the damage done by the opioid epidemic, a federal judge ruled Wednesday. The order by U.S. District Judge Dan Polster in Cleveland marks the first time pharmacy chains have been ordered to pay money in an opioid lawsuit. It comes after a jury last November concluded that the companies helped create a public nuisance in Lake and Trumbull counties by over-supplying addictive pain pills, many of which found their way onto the black market... Representatives of Walgreens and CVS both said Wednesday's decision was not supported by the law and that they planned to appeal it…The U.S. opioid epidemic has caused more than 500,000 overdose deaths over two decades, according to government data. More than 3,300 lawsuits have been filed, mostly by local governments, accusing drugmakers, distributors and pharmacy chains of fueling the crisis.”?REUTERS?
Activist Investor Urges Disney To Spin Off ESPN
“Activist investor Dan Loeb acquired a stake in Walt Disney Co. and called for sweeping changes at the world’s largest entertainment company, including a spinoff of the ESPN sports network and new board members…Loeb’s outreach to [Disney CEO Bob] Chapek will likely pressure the company to justify its costs and explain why ESPN should remain part of the entertainment giant. The shares rallied last week after earnings beat estimates, but they have fallen this year as investors fretted about a slowdown in streaming growth. In an emailed statement, Disney didn’t address Loeb’s call for ESPN to be spun off or some of the other changes. The company said it welcomes the views of all investors, and pointed to the upbeat fiscal third-quarter results released last week.”?YAHOO FINANCE
French Luxury Firm Resists Activist Investor’s Moves
“Richemont [owner of some 26 luxury watchmakers and jewelers such as Cartier, Piaget, and Van Cleef & Arpels] is urging against activist investor Bluebell Capital Partners’ suggestion of electing ex-Bulgari CEO Francesco Trapani to its board, arguing that his ties to rival LVMH make him ‘an inappropriate candidate.’ It is the latest in an ongoing corporate governance battle that could shift the internal balance of power away from long-standing Richemont chairman Johann Rupert.”?VOGUE BUSINESS
Hedge Fund Challenges Director Alignment in Mining Industry
“Based on years of active engagement with [mining company] boards, Equinox Partners has decided to adopt a strict policy of voting against directors who have served for two or more years but have invested less than two years of director’s fees into the company’s stock. Equinox Partners estimates that as a result of this policy it will vote against approximately 10% of the board-slate candidates in the 2023 proxy season. By adopting a clear, lower-bound for director share ownership, Equinox Partners said it intends to push back on the growing indifference of boards to non-executive director stock ownership and the decision of some companies to prohibit non-executive directors from owning stock all together.”?MINING?
领英推荐
Elliot Mgt. Flexes Large Position in Cardinal Health
“Activist investor Elliott Management has a large position in Cardinal Health Inc. and is seeking a handful of seats on the medical-products distributor’s board...Elliott nominated five directors to the 11-person board roughly two weeks ago, before Cardinal abruptly replaced its chief executive last week...The Wall Street Journal reported last week that activists have been circling Cardinal this year with an eye toward whether management change could help boost the company’s share price.”?THE WALL STREET JOURNAL
6 Principles for Cultivating an Engaged Board
“Truly effective boards are used as a strategic advantage. The key is knowing how to tap into the members' expertise effectively…The first step is establishing trust. A good board-CEO relationship is cultivated over time with continuous communication. Too often, CEOs and executive teams aren't sure of what information—and how much of it—to share with their boards. Information is often guarded, or held closely, which limits the board’s effectiveness.… There are six dimensions that can help guide the board of directors' performance: i) Composition…, ii) Charge…, iii) Communication…, iv) Consistency…, v) Contribution…, vi) Control…Cultivating a more engaged and effective board of directors is vital. By focusing on the 6 C’s, you and your board can positively influence your company's future.”?FORBES?
2022 Sees Record 924 ESG-focused Shareholder Proposals
“Recently, we have seen an increasing number of environmental and social-related shareholder proposals, such as requests for enhanced disclosure on workforce diversity practices or climate-related risks and opportunities. For the 2022 proxy voting season, shareholders submitted a record 924 ESG-related proposals to US companies…Material ESG factors may have an impact on the long-term, risk-adjusted performance of these companies. During the proxy voting season, asset managers may have an opportunity to convey their views on some of these material concerns through their voting decisions on these ESG-related proposals.”?IR MAGAZINE
Going Public? What Boards Need to Know Post-IPO
“With a robust pipeline for initial public offerings (IPOs), companies need to ensure they are ready not only for listing day, but also for committing to annual governance requirements through the lens of ESG once they enter the public markets…Thorough and high-quality review of feedback from previous annual meetings and preparation for the upcoming proxy season with special care to sustainability is key for company investors to effectively evaluate the performance indicators affecting business risk and valuation. Reporting standards in this area are continuously evolving and can be challenging for corporates to navigate. Well-structured and easily readable reporting on all aspects of ESG is paramount for annual governance assessments by stockholders, stakeholders and proxy advisors.”?NASDAQ
From the Boardspan Library
New Tactics and ESG Themes Take Shareholder Activism in New Directions
"Today, even well-performing companies may find themselves targets of activist campaigns on environmental and social issues, as new funds have been formed to specialize in these areas. Moreover, established activists have established new types of investment vehicles that could strengthen their hands.…. Given the evolution of activism, it is vital for boards to ensure that their companies have strategies to address activist pressure. Shareholder engagement is the best defense. … Assess vulnerabilities and prepare responses. …Develop a defensive plan. …Early board involvement is critical….”?SKADDEN via BOARDSPAN
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Seat at the Table
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