As discussed in this December 2016 Cooley Alert, this proxy season, the policies of ISS and Glass Lewis provide that they will recommend voting against the re-election of directors of “newly public” companies that, prior to or in connection with their IPOs, adopted bylaw or charter provisions that these proxy advisory firms consider adverse to stockholder rights, such as supermajority vote requirements to amend the company’s charter or bylaws, classified board structures or multi-class capital structures.
Nevertheless, these protective measures were adopted for a reason: to protect the company from unsolicited takeover attempts, to deter other forms of activism and to support the company’s general “defensive health.” For an excellent analysis of factors that companies — faced with negative recommendations for director as a result of these policies — should consider before making any changes, see “New Pubcos Should Consider Defensive Health in Light of ISS/GL Recommendations,” just posted on Cooley M&A.
by Cydney Posner
You probably recall that, on November 9, 2016, GAMCO Asset Management Inc. (entity affiliated with activist investor Mario Gabelli) and certain affiliates used the proxy access bylaws recently adopted at National Fuel Gas Company, an NYSE-listed diversified natural gas company, to nominate a candidate for election to the company’s board at its 2017 annual meeting. It was the first known use of proxy access bylaws to make a nomination. (See this PubCo post.) Well, that drama is now over — and without so much as a skirmish. In this Schedule 13D/A, filed this morning, GAMCO reported that its nominee had “informed GAMCO this morning that he has decided to withdraw [his] name as a candidate for Director of National Fuel Gas Company. GAMCO will not pursue Proxy Access.” So much for that foray. Continue reading
by Cydney Posner
There’s been a lot of sturm und drang about proxy access, but no one has ever used it to nominate a board candidate…. that is, until now. CorpGov.net reports that, on November 9, 2016, GAMCO Asset Management Inc. (entity affiliated with activist investor Mario Gabelli) and certain affiliates used the proxy access bylaws recently adopted at National Fuel Gas Company, an NYSE-listed diversified natural gas company, to nominate an “independent highly-qualified nominee” for election to the company’s board at its 2017 annual meeting. In connection with the nomination, the proponent amended its Schedule 13D to reflect submission of the nomination. The 13D indicated that GAMCO believes its nominee’s “skill sets and highly relevant business and financial experience… will be extremely valuable” to the company and that it “is confident that its Nominee will have an immediate positive impact on the Board.” The 13D shows beneficial ownership of 7.81% of the company’s shares. It’s particularly ironic that the first use of proxy access would be by an activist investor — although Gabelli may reject that label — given that the conventional (although not uniform) wisdom has been that activists were unlikely to use proxy access and would opt instead for more traditional election contests. (Update: Here is a link to the related Schedule 14N.) Continue reading
by Cydney Posner
In its annual survey released Tuesday of more than 800 corporate directors, PwC identified ten key findings, including critical views on other board members, split views on board diversity and skeptical views on the benefits of shareholder engagement.
- Of the directors surveyed, in 2016, 35% thought that at least one of their board colleagues should be replaced, compared with 31% in 2012. The reasons most frequently cited were lack of preparation for meetings (2016: 25%/2012: 11%), lack of the right expertise (17%/13%), aging (12%/15%) and overstepping of boundaries of the board’s oversight role (12%/10%). Not surprisingly, directors with briefer tenures tended to be more critical: 39% of those serving for two years of less thought a director should be replaced, compared with 29% for directors that had served for more than ten years. Surprisingly, however, only 8% of directors surveyed indicated that, following a board self-evaluation, they had decided not to renominate a director as a result. Moreover, only 49% of directors reported that their boards made any changes as a result of the self-evaluation process — and most of those changes related to the composition of committees or adding more expertise. Only 14% took action to diversify their boards.
by Cydney Posner
Today, SEC Chair Mary Jo White spoke at Tulane’s Corporate Law Institute, sharing her observations on the current state of shareholder activism, the shareholder proposal process and fee-shifting bylaws. The common theme: her aversion to gamesmanship and close-minded, reflexive behavior on all sides, which, she believes, can be harmful to companies and shareholders and contribute to unfair results. Continue reading