April 16, 2020 - Issue 6.14 - Your weekly news on all things board.
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Activist investor Starboard Value is challenging the boards of five companies whose share prices have fallen during the coronavirus crisis and observers expect more such activity in the weeks to come. It’s a crucial moment for boards to assess their vulnerabilities and prepare for activists, and a new report can help identify industries and dynamics that put companies at particular risk. Meanwhile, suggestions abound for how boards can prepare for the possibility that a CEO tests positive for Covid-19 or for how they can stay abreast of the most important information in a crisis. On a positive note, State Street’s “Fearless Girl” statue marks her third birthday with the news that 681 all-male boards have added at least one woman since her arrival on Wall Street.

Special Feature: Boardspan's partnership with IHS Markit offers our readers global market analysis and continuously updated insights about coronavirus impact.

Covid-19 Crisis: Which States’ Economies Will Be Hardest Hit?
"There will be a wide variation in state-level performance this year with tourism-dependent states seeing the largest immediate declines.Manufacturing-intensive areas in the Midwest and the generally slower growing and densely populated Northeast will also be among the states with the deepest employment declines this year.… Energy-reliant states: Texas, North Dakota, New Mexico, Oklahoma, and Alaska stand to endure significant economic losses as mining output shrinks over 2020 and 2021"
Which Nations Are Most Vulnerable to Economic, Political and Operational Disruption?
"Among the most vulnerable countries in our index are Mozambique, Nigeria [and] Venezuela.… Ireland ranks high in the vulnerability index because of its high economic vulnerability.... The United Kingdom is also in the top group of vulnerable countries due to its demographics and institutional instability.… While Singapore's response to COVID19 has been very successful to date it ranks in the top group of most vulnerable countries due to its economic openness and its demographics."

In the Spotlight

Starboard Value Exploits Economic Turmoil To Challenge Boards

“Most activist shareholders have refrained from challenging the boards of U.S. companies during this season of annual shareholder meetings, as businesses reel from the economic fallout of the coronavirus outbreak. Not Starboard Value LP. The New York-based hedge fund, which Jeffrey Smith spun out of investment firm Ramius in 2011, is pursuing proxy contests against five U.S. companies, even as rivals remain largely silent, according to a review of regulatory filings. Starboard, which built its reputation as a powerful player by winning more board seats than any other activist, is betting companies will be willing to settle during the crisis, so they can concentrate on their business and the safety of their employees.” REUTERS

Report: How Vulnerable is Your Company to Activist Investors?

“In this Activism Vulnerability Report, FTI has identified the industries that are most susceptible to shareholder activism in the U.S. and Canada…. [It is] intended to assist our public company clients and their outside advisors in determining the extent to which their business and underlying industry are vulnerable to pressure from activist investors. It provides a starting point for identifying and addressing the factors and dynamics that could invite activist investors to seek material changes in the business, management team and/or board of directors. [Media, Telecom and Aerospace are among the most susceptible industries.]” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Across the Board

EBay, Facing Pressure from Starboard, Names Walmart Executive CEO

“EBay Inc on Monday named Walmart executive Jamie Iannone as its top boss, handing over the reins to an outsider as the e-commerce firm deals with pressure from activist investor Starboard Value to shake up its management. The appointment comes nearly a month after Starboard, which owns more than 1% of eBay’s stock, said it plans to install four directors on eBay’s 14-member board and wanted the company to appoint an outsider as its permanent chief executive.” VENTURE BEAT

When the CEO Tests Positive

“At least a dozen CEO’s and CFO’s have tested positive for Covid-19 in the past few weeks. Many have chosen to post or email letters to their employees explaining how they are doing, whether they feel well enough to be running the company and if not, who is in charge … It’s not known how many C-suite executives might have tested positive and decided not to tell their employees and investors. The Securities and Exchange Commission doesn’t require disclosures around the health of a CEO, and so far that includes Covid-19 illness. The spread of the novel coronavirus pandemic is forcing companies into making quick decisions about disclosure.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

The Fundamental Questions Your Board Should Be Asking Right Now

“Some say that corporate boards only have value when companies are in crisis. If that is true, the 2020 global pandemic presents a moment for corporate boards to step up like no other … I’ve put together 10 questions to help guide boards at this time...  What can you do to ensure the health and safety of your workforce? … What is your CEO succession plan? … What is the company’s ability to cover near-term expenses? … What tradeoffs do we have to make around payroll expenses? … Do we need to adjust our supply chains? ...” HARVARD BUSINESS REVIEW

Long-Term Investors Urge Companies to Protect All Stakeholders

“A group of 251 long-term investors representing more than $6.4 trillion in assets under management has urged issuers impacted by Covid-19 to introduce measures that contribute to maintaining economic health and minimizing downside risk as the pandemic continues to spread around the world. In an open letter from the Interfaith Center on Corporate Responsibility (ICCR), the signatories – led by Domini Impact Investments, the New York State Comptroller and ICCR – urge companies to protect their long-term value ‘tied to the welfare of their stakeholders, employees, suppliers, customers and the communities in which they operate.’” CORPORATE SECRETARY

Outback Steakhouse Parent Company In Hedge Fund’s Crosshairs

“Activist hedge fund Jana Partners on Friday disclosed a large new stake in Outback Steakhouse owner Bloomin’ Brands Inc, returning for the second time in nearly two years to push for fresh changes after reaching a settlement in 2018. Jana, one of the industry’s most powerful activist hedge funds, said in a regulatory filing that it owns 9%, or 7.8 million shares, and plans to discuss strategic alternatives with management. These might include a sale of the company, spinning off pieces of the company, changing the way it spends money and who sits on its board.” NEW YORK TIMES

Will Walmart Shareholders Vote Employees Onto the Board?

“Walmart shareholders will vote on a measure looking to add employee representation to the company’s board at a time when such ideas are gaining some political traction in Washington, DC. Cynthia Murray, a Walmart associate, has filed the proposal to be voted on at the company’s annual meeting on June 3. It aims to ramp up the representation of employee perspectives on the board by including hourly associates in the initial list of candidates from which new director nominees are picked.” CORPORATE SECRETARY

State Street Celebrates Progress in Bringing Women On Boards

“Fearless Girl is proving to be much more than an eye-catching statue in front of the New York Stock Exchange. Three years after State Street Global Advisors installed her to launch a gender diversity campaign as part of International Women's Day, the firm has engaged with companies around the world and has seen 681 of them adding female directors to previously all-male boards. To mark that number, Fearless Girl now has a living wall, a vertical garden with the 681 figure behind her, symbolizing the need to grow more senior leadership positions for women.” PENSIONS & INVESTMENTS

Virtual Shareholder Meetings Become Order of the Day

“Stay-at-home rules to stop the march of the novel coronavirus are forcing companies to either postpone their annual general meetings or turn them into virtual events—a first for many executives at a time of heightened concern over the resilience of corporate America. ‘Every board is currently discussing, shall we postpone it or shall we hold it virtually?’ said Betsy Atkins, a director on several boards, including Wynn Resorts Ltd. and Volvo Car AB." WALL STREET JOURNAL

Glass Lewis Revisits Guidance In Light of Covid-19

"Like ISS, proxy advisor Glass Lewis has also revisited the application of its policies to take into account the impact of COVID-19—having conducted, in its words, 'scenario planning in order to consider how this will impact governance and broader ESG issues in the present and future.' ,,, Glass Lewis does not appear to be particularly susceptible to “crocodile tears for maintaining or even increasing executive compensation levels”; rather, there is 'a heavy burden of proof for boards and executives to justify their compensation levels in a drastically different market for talent.' ...While ISS seemed to suggest that normal board diversity concerns might be overlooked this year if necessary, Glass Lewis sees diversity as a more acute issue—and even a “systematic risk to portfolios” —given the increased COVID-19 health risk associated with the dominant cohort (men over 65)." JD SUPRA

Non-Profit Boards: How to Fundraise During a Crisis

“During this time of dislocation, fear, and trauma, nonprofits are struggling mightily. The pandemic and economic collapse constitute an existential threat. There’s no guarantee that the public will receive our services, now or in the future, or that staff members—the face and heart of every organization—will retain their jobs. Everything is uncertain. Everyone is on edge. Much will depend on money. In the weeks and months ahead, nonprofits will need a major infusion of cash to keep staff on the payroll, to pay rent and utilities, to provide a semblance of services during this period of social isolation, and, simply, to survive…. Nonprofits are quietly hoping their donors will ride to the rescue. But here’s the challenge: Yes, every charitable organization wants to receive contributions right now. But very few have the temerity to ask their donors for a gift.”  HARVARD BUSINESS REVIEW

From the Boardspan Library

Preparing The Board For Activist Investors

“Regardless of a company’s success or confidence in its strategy, management, and board, there are few situations public companies face that are more daunting than an unsolicited approach by an activist investor.... And, while every situation is different, and each response to an unsolicited advance unique, experience shows that preparedness well before an opening salvo can result in a better outcome for all constituents. Advance planning, solid research, and a proactive stance are key both to a successful outcome and to preemptively identifying and addressing shareholder rumblings before a formal fight.” K2 INTELLIGENCE via BOARDSPAN

Seat at the Table

  • Walt Disney Co CEO Bob Chapek is elected to the company’s board
  • Suzanne L. Bruhn, Ph.D., president and CEO of biotechnology company Tiaki Therapeutics, joins the board of biopharmaceutical company Retrophin
  • Fashion firm Tapestry (parent company of Coach, Kate Spade, and others) appoints to its board John P. (J.P.) Bilbrey, former president and CEO of candy manufacturer The Hershey Company
  • Google chief privacy officer Keith Enright joins the board of data compilation company Zoominfo
  • Publix Super Markets elects to its board Joe DiBenedetto, former SVP of the company’s Atlanta division
  • Clarivate Analytics elects to its board Jane Okun Bomba, former EVP of IHS Markit; and Richard W. Roedel, former chair and CEO of accounting firm BDO Seidman LLP
  • Fresh Del Monte Produce appoints to its board Charles Beard, COO of consulting firm Guidehouse
  • Cheryl L. Cohen, former chief commercial officer at pharmaceutical company Medivation, joins the board of pharmaceutical company MEI Pharma
  • Pharmaceutical company Mersana appoints to its board Dr. Martin Huber, former VP of oncology clinical research at Merck Research Labs
  • Gender diversity consultant Diane Flynn joins the board of investment company Avidbank Holdings
  • Biotechnology company TCR Therapeutics Inc. appoints to its board Axel Hoos, M.D., Ph.D., SVP  for oncology at GlaxoSmithKline Pharmaceuticals
  • Mary Ricciardello, former chief accounting officer of Reliant Energy, is appointed to the board of building materials manufacturer Eagle Materials
  • Construction management software company Procore Technologies welcomes two new directors: Nanci Caldwell, former CMO of financial management company PeopleSoft; and Elisa Steele, former CEO of human resources software company Namely
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