Pershing Square Capital Management is behind a push to replace five directors at Target.
Run by William Ackman, Pershing previously tried to seat three directors on the board, after losing more than half of its investment value in the discount retailer. Target’s board rebuffed Pershing’s effort, so Pershing is raising the stakes.
For more, click here.
The Wall Street Journal has an interesting article today detailing boards who are reducing their own pay.
In addition to helping their companies save money and preserve liquidity, directors serving at companies at which the stock price has recently suffered may be more interested in surviving the upcoming round of shareholder lawsuits and proxy fights.
For more, click here.
Ever wonder what your competitor is thinking?
Fortunately, Chief Executive lays it out for shareholder rights activists. In the magazine’s November/December issue, true feelings are uncovered, with boards categorized as meddling, uninformed, self-indulgent… perhaps we should let you read this fine excerpt for yourself:
“Boards are not the rubber stamps they once were. They are your new boss. While some boards have their act together and make a huge contribution, in many cases this boss is not yet well organized to carry out its new required accountability and is intrusive. It is going through teething problems of how to work cohesively and yet independently. In many situations boards are taking up an undue amount of the CEO’s time and are focused on non-value-creating items. Some directors delve deep into operational details largely to demonstrate their own expertise. Their micromanaging drains energy. One or two directors can make the life of the board miserable and distract the CEO, for instance, by requesting studies on tangential issues. In other cases, this new boss misses the point and does not permit the CEO to make bold moves, even when the fast pace of change in the external landscape demands making timely strategic bets. Some boards themselves are under attack by the activists and thus get distracted from the meaningful work they need to do.”
And if that doesn’t fully illuminate the magazine’s mindset, the writer continues:
“Now CEOs have to deal with their boards as they face the coming downturn. Most boards have not faced such a storm, especially when the liquidity flow is frozen. It remains to be seen how well they will set targets and how they will award CEOs in a tougher environment where earnings and margins are likely to be revised downward.”
Oh, those poor CEOs. They may not receive proper awards when their businesses fail. Can you imagine anything worse!?
There is already a lot of speculation concerning executive pay legislation on Capitol Hill for 2009.
Further adding to high expectations, Patrick McGurn of Riskmetrics went on record in December’s issue of CFO Magazine:
“We’re fully expecting some form of shareholder bill of rights to come out within the first 100 days of Obama’s Administration.”
Great article published online today from Fortune Magazine covering the ins and outs of “say on pay” and the prospects under a Barack Obama administration.
Normally, articles on executive compensation are written by cheerleaders, openly campaigning for an obvious angle. This article treads even ground and attempts to tackle a few sticky issues:
“There are a few nagging questions raised by all this. For starters, is CEO pay really the hot issue right now, or is this another step down what Obama’s harshest critics see as his “Marxist” path?”
Governance guru Charles Elson provides an interesting take, regarding whether or not “say on pay” is toothless:
“Say on pay is in and of itself but a baby step. Ultimately the issue is replacing the directors who approve the bad pay.”
Really? This might surprise the numerous advocates of executive compensation control.
The more appropriate question not being raised right now… is “say on pay” hurting the prospects for proxy access?
I strongly believe that pushing for the shareholder ability to control business affairs of a corporation is ultimately harming proxy access efforts. Voting for directors is scary enough for corporations. Any impression by boards that they will lose control to an “uninformed electorate” or “meddling parties” should be avoided, and this is precisely the impression that “say on pay” is providing.
And the “advisory vote” qualification isn’t fooling anyone. The corporate community is convinced that shareholder rights groups firmly want the ability to control executive pay, and the advisory vote is just the first step toward greater power.
Proponents for proxy access should encourage the “say on pay” advocates to pipe down. The message to boards should be simple: govern as you please, but allow us to kick you out swiftly when we want to.
John Schnatter, founder and chairman of Papa John’s International, penned a mighty article in Saturday’s edition of The Wall Street Journal, calling out the boards of investment banks and home equity lenders.
“Behind the CEO of every Freddie Mac, Bear Stearns or Lehman Brothers who led their company down a path toward financial ruin, there was a board of directors that sat by silently and let it happen.”
Somewhat surprisingly for a active board member, Schnatter calls for more federal oversight.
“But politicians in Washington would be wise to adjust their focus upward — where the true power lies — and set greater levels of accountability for boards, requiring more stringent oversight by those who are empowered to set the ground rules for American companies.”
Hat tip to you, Papa John. Click here for the article.
When the initial results from Yahoo’s shareholder votes were released last Friday, much of the coverage was positive for CEO Jerry Yang and other board members… “Criticism Is Sparse” read one headline in The Wall Street Journal.
The article continued:
Shareholders overwhelmingly endorsed the board, with Yahoo Chairman Roy Bostock receiving a 79.5% favorable vote, up from roughly two-thirds last year. Some 85.4% of votes were cast in support of Chief Executive Jerry Yang, down from more than 90% last year but still a strong endorsement for a leader who has faced calls for his resignation.
Very glowing.
Now, after vote counting errors were discovered and corrected, we know the truth. Shareholders voiced strong concern about the board, with Chairman Roy Bostock having lost support, instead of gaining. Jerry Yang saw his approval plummet from 90% last year to 66% this year… hardly “a strong endorsement.”
A quick scan of today’s headlines reads much more harshly:
Shareholders Disgusted With Yahoo! Board (Forbes)
Yahoo! admits true scale of shareholder rebellion against Yang (Guardian)
Another Way to Measure Discontent Among Yahoo Shareholders (NY Times)Hit the Breaks on the Yahoo! Lovefest (Motley Fool)
Capital Research Global Investors, which owns 7% of Yahoo, publicly questioned on Monday the validity of the announced results from Yahoo’s shareholder vote. And they were right to be skeptical.
Capital Reseach and the Capital World Investors control a combined 17% of Yahoo’s shares and recommended to its fund managers that they withhold votes for Yahoo CEO Jerry Yang.
However, initial results purported that 85% of shares were voted in favor of Yang last Friday.
I’m all for giving 110%, but something here doesn’t add up (read the AP story from Tuesday morning here).
By mid-day Tuesday, the proxy vote processing firm Broadridge Financial Solutions announced that 100 million votes had been inaccurately counted, but gave limited details (read the AP update here).
And by Tuesday evening, Broadridge had announced that a stunning 200 million votes had been processed incorrectly (read the latest from the AP here).
CEO Jerry Yang saw his support plummet from 85% down to 66%. Chairman Roy Bostock similarly fell from 80% down to 60%.
Other directors also saw support fall: Ron Burkle (81% down to 62%) and Arthur Kern (78% down to 68%). Burkle and Kern, along with Bostock, sit on Yahoo’s compensation committee which approved large severance packages in February after Microsoft’s unsolicited bid, creating a de facto poison pill.
The fallout here could be worse than simply had the vote tallies been announced correctly, with shock toward the magnitude of the miscalculations and the implication (improper, of course) that Yahoo somehow manipulated the vote.
Having reached a “settlement” with Carl Icahn and having received overwhelming support (in the initial result) from Yahoo shareholders, Yang looked to be on an upward streak.
Now, expect on barrage of calls and demands for Yang to step down.
Tremendous editorial on splitting Chairman/CEO roles appears today in The Wall Street Journal written by Gary Wilson.
In addtion to laying out several well-founded points supporting split roles, Wilson reveals a stunning statistic of which even we were unaware: 65% of S&P 500 companies have the same person employed as both Chairman and CEO.
Wilson’s opinions carry added weight… he is currently the Chairman of Northwest Airlines, a director of Yahoo, a former director of Disney, and a shareholder-nominated candidate for the board of CSX.
To read the editorial, click here.
Shareholder activists have won the revolution… so says today’s The Wall Street Journal.
But let’s not all fly off to Sardinia for that Kozlowski-like party yet.
A superficial article on the front cover of Section C includes some statistics about more board seats won, more resolutions adopted, etc. But nowhere does the author stop to ask, “If, since 2006, 218 companies have awarded board seats to activists, isn’t it possible that 2,000 more companies are still in need of turnover in their boardrooms as well?”
Certainly some dynamics in shareholder activism have changed for the better. But many boards still act as if they work for the CEO, and not the other way around.
Executive compensation continues to skyrocket toward unprecendented levels. Boards at poorly-run companies are rejecting 62% premium offers because of emotional attachments. The country is facing a massive credit crisis because directors at investment banks, commercial banks, housing lenders, and other enterprises all failed to understand business fundamentals.
In other words, we still have a long way to go.
To read The Wall Street Journal’s article, click here.
