Étiquette : Proxy fight

Quatre signaux qui invitent les administrateurs à adopter un profond changement d’attitude


Aujourd’hui, je partage avec vous la perspective de James Woolery, Deputy Chairman de Cadwalader, Wickersham & Taft LLP, sur les nouveaux défis qui attendent les administrateurs de sociétés dans une ère où les pratiques des investisseurs activistes deviennent de plus en plus intense.

Cet article présente une mise en contexte de la montée des actionnaires activistes dont les activités ont considérablement augmentées au cours des cinq dernières années. En effet, les cibles visées par les activistes sont passées de 3,9 milliards en 2011 à 8,2 milliards en 2012.

Les conseils d’administration semblent avoir été pris au dépourvu face aux comportements « agressifs » d’une large frange de leurs actionnaires. On fait le constat d’un sérieux manque de communication entre le C.A. et ses actionnaires.

Vous trouverez, ci-dessous, un extrait de l’article ainsi que quatre suggestions de changement dans la relation administrateurs-actionnaires.

The Challenge for Boards

Public company boards have experienced real turbulence for the better part of five years. Some of this turbulence is the product of internal dynamics—the need to improve liquidity, strengthen balance sheets and cut costs. Some is the product of external factors—volatile capital markets and government action and inaction. So, who can blame directors for being cautious? The answer: shareholders and activists.

In response to this turbulence, boards have chosen to seek steady shareholder returns, return shareholder capital and modestly adjust portfolios over executing large-scale transactions, combinations or investments. As a result of this restraint, the overwhelming strength of U.S. corporations is unmistakable: cash balances are at an all-time high and there is an abundance of cheap financing. Yet corporate investment in the economy remains muted.

Directors remain cautious while shareholders are increasingly moving in favor of more aggressive action. The evolving dynamic between boards and the shareholders they serve presents new challenges that require a different set of tools in the boardroom. New efforts to bridge what may be a growing divide between boards and shareholders should be undertaken directly by U.S. boards and management teams with a view toward increasing shareholder value, advancing investment stability, and maintaining sound governance.

L’auteur identifie quatre signaux qui suggèrent un profond changement d’attitude de la part des administrateurs :

1. In a low growth and low yield environment, a vocal group of investors will embrace catalyzing events to drive public company share prices. These investors will typically clamor for short-term liquidity options. A longer-term growth plan is likely to generate indifference from shareholders, particularly in contests where a large number of “event driven” hedge funds invest behind a catalyzing strategy. Profit taking on the institutional investor side can often create a new shareholder base dynamic that is unique to proxy contests.

2. Relations among boards and shareholders of all types should be rethought with an eye toward identifying differences in perspectives in a timely manner. Personal relationships and dialogue between directors and shareholders should be prioritized. Director involvement can and should be developed without interfering with management’s role in advocating the company’s position—often, shareholders are principally concerned with having their views heard by those in the boardroom. Boards that don’t engage with their investors on a continuing basis risk making themselves vulnerable to activists eager to exploit the lack of communication.

3. The existing corporate mechanics around proxy contests are antiquated and in need of reform. Proxy contests often occur in an atmosphere that is confrontational, and the ad hoc nature of the voting and solicitation process is unlikely to produce good results. Further, in proxy contests, there is a real risk that corporate governance rules will be manipulated to drive a short-term agenda, which carries additional risks for shareholders.

Boards need to have their voices heard in the governance debate and rulemaking process. For example, the SEC is contemplating regulating proxy advisory firms such as ISS and Glass Lewis, which effectively control a large portion of votes in proxy contests. The U.S. Chamber of Commerce, the Business Roundtable and other governance groups are challenging the proxy advisors on issues of transparency and conflict of interest. Directors can and should weigh in on this debate.

4. Corporate strategy and policy should be clearly communicated and understood in the marketplace. Directors who fail to present a dynamic, engaged board addressing the fundamental issues facing the corporation will create opportunities for those whose investing style is aggressive and short-term. Substance alone is insufficient to address a heavily marketed and focused adversary. Today, presentation, advocacy and direct engagement are required regularly—not merely in response to a contest. Clearly, the overriding objective is to avoid a contest at all.

Articles reliés au sujet

Statistiques sur les « Proxy Contests » (jacquesgrisegouvernance.com)

Career Consequences of Proxy Contests (blogs.law.harvard.edu)

Sérieux rapprochement entre les actionnaires activistes et les actionnaires institutionnels (jacquesgrisegouvernance.com)

This Man Has Quietly Transformed Corporate America (businessinsider.com) :

Why the « Maximizing Shareholder Value » Theory of Corporate Governance is Bogus (nakedcapitalism.com)

Insatisfaction des actionnaires envers les administrateurs ?


Voici un article très intéressant de R. Christopher Small, Coéditeur du HLS Forum on Corporate Governance and Financial Regulation, qui présente les grandes lignes d’une recherche sur les conséquences encourues par les administrateurs qui font l’objet de contestation de la part des actionnaires.

Comment les carrières des administrateurs sont-elles affectées par un vote de non-confiance des actionnaires ? La recherche indique que les actionnaires n’ont pas beaucoup de pouvoir pour évincer un administrateur qui n’a pas un bon rendement. Cependant, si la contestation est largement diffusée, notamment par une guerre des votes (Proxy Contests), il en résultera un très grand coût pour les directeurs ciblés.

Ci-dessous, un extrait de l’article. Vous pouvez lire le billet paru dans HLS ou consulter le document en détail.

Bonne lecture. Les commentaires sont les bienvenus.

Application des principes de gouvernance pour contester l’insatisfaction des actionnaires envers les administrateurs ? | Career Consequences of Proxy Contests

…The fundamental feature of corporate governance is shareholders’ right to elect directors to represent their interests. This shareholder representation by the board of directors is a central component of corporate governance. For corporate governance to be effective, shareholders who are dissatisfied with a board’s performance must have a mechanism to replace directors. If shareholders’ impact on electing and replacing directors is weak, so is the connection between owners and managers.

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In our paper, Shareholder Democracy in Play: Career Consequences of Proxy Contests, which was recently made publicly available on SSRN, my co-author, Margarita Tsoutsoura, and I investigate whether proxy contests affect the careers of directors whose companies have been targeted. Specifically, the paper aims to shed light on whether shareholders are able impose a career cost on directors when they are dissatisfied with firm performance. This question is particularly important in today’s environment when activist shareholders often demand reforms in corporate governance. For example, the process of shareholders nominating and electing directors was at the heart of the recent (failed) proxy-access reform that was motivated by the Dodd-Frank Act. Proponents of the reform argued its necessity in increasing the power of shareholders to be able to elect or remove directors from the board (Bebchuk, 2007). On the other hand, critics of this view argued that shareholders already have tools to hold directors accountable (Bainbridge, 2006) …

Shareholders have two main tools to remove poorly performing directors. First, shareholders can use uncontested election. Prior literature has shown that attempts to remove directors through uncontested elections have not been effective. In regular elections, shareholders cannot technically vote against a director, but instead can only withhold their authority to vote in favor of a nominee. Most US firms have plurality voting rules in uncontested elections. As a result, removing directors in uncontested elections is almost impossible. Specifically, a director can be re-elected even if just a few shareholders vote for him. The prospect of shareholders having an effective voice in removing directors in uncontested elections seems limited, and directors do not appear to suffer reputational effects from low votes (Cai et al., 2009).

The second mechanism shareholders have is to discipline directors through proxy contests. Dissatisfied shareholders can nominate an alternative slate of directors by initiating a proxy contest and therefore provide all shareholders with a clear alternative to incumbent nominees. Nevertheless, no evidence exists supporting the idea that directors who are targeted in proxy contests suffer any career consequences. Moreover, existing evidence has led to the conclusion that proxy contests are rarely successful (e.g., Pound, 1988; DeAngelo and DeAngelo, 1989; Ikenberry and Lakonishok, 1993) …

… The final part of the analysis investigates whether the effect of proxy contests varies with observed director or proxy contest event characteristics. We find that independent incumbent directors experience more severe loss of other directorships than insider incumbent directors. Overall, the results indicate the proxy-contest mechanism imposes a significant career cost on incumbent directors. Following a proxy contest, incumbent directors are likely to lose directorships in both targeted and non-targeted companies. Therefore, the proxy-contest mechanism is effective in imposing significant career costs on incumbent directors.

The full paper is available for download here.

Articles reliés

The Disciplinary Effects of Proxy Contests (blogs.law.harvard.edu)

Sérieux rapprochement entre les actionnaires activistes et les actionnaires institutionnels (jacquesgrisegouvernance.com)

Proxy Fights ‘Are Antiquated And In Need of Reform’ (blogs.wsj.com)

Proxy battles chart course into less turbulent waters (business.financialpost.com)

The Deal: Universal Proxy Battle Fight Gathers Steam at SEC (thestreet.com)