How should we evaluate board skills quiz, plus Pfizer and Air Products activists, and Zoom’s happy CFO

PROXY COUNTDOWN SCRIPT

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This is Proxy Countdown. Welcome to the big show for the week of October 7, 2024  alongside my tag team partner Matt Moscardi. I'm Damion Rallis. On today’s countdown:

1. LPL CEO Dan Arnold said something he shouldn’t have

2. Zoom is super stoked about its new CFO

3. A proxy battle at Pfizer is heating up quickly

4. An honorary victory for environmental shareholder proposals at General Mills

5. And on the Big Vote, Matt made a quiz

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Trade Wire - BUY/SELL

Top Stories:

1. LPL Financial Holdings fired its CEO Dan Arnold for violating the company's code of conduct and appointed chief growth officer Rich Steinmeier as the interim CEO.

1. Danny-boy was terminated for “Cause” and is therefore not entitled to receive severance benefits.

2. All we know so far is that Danny-boy, who had been CEO since 2017,  was fired for making statements, not yet known publicly, to employees that violated the company’s code of conduct.

2. We have parity at ITT Inc. Maggie Chu is now a director and we are 50/50: 5W/5M. How sweet it is,

3. CEO Walter W. Bettinger II is stepping down at The Charles Schwab Corporation at the end of the year. Next up is Charles Schwab President Richard A. Wurster. Still lurking on the board are Charles Schwab and daughter Carolyn Schwab-Pomerantz, who control 68% of actual influence.

4. Kinsale Capital Group has added Mary Jane B. Fortin to its Board. This is only the 3rd woman: the other 2 have combined 3% influence: Michael P. Kehoe, the company’s CEO, Chair and largest individual shareowner with 4% of shares, controls 78% of board influence.

5. Zoom Video Communications announced the appointment of Michelle Chang as the Company’s CFO. Her initial grant of restricted stock units is worth $24 million. HELLO!!

6. Two old dudes, Hansel E. Tookes II and Kurt M. Landgraf, are stepping down from the board of Corning Incorporated. Before their retirement, Corning’s board included 6 dudes over the age of 70. Both retiring directors have served since George W. Bush’s delightful administration. 

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PROXY CAGE MATCH

1. The big rumble this week is at Pfizer, where activist investor Starboard Value has accumulated a $1 billion stake to revive flagging profitability at the drugmaker. Reports indicate that Starboard believes Pfizer had been mismanaged as the pandemic receded, notably in spending its $92bn Covid windfall on a costly $70bn acquisition spree. Pfizer’s market value has roughly halved since its pandemic peak.

1. The latest news is that, after initial reports that former Pfizer CEO Ian Read and former CFO Frank D’Amelio would be supporting the activist, the two former Pfizer executives announced late Wednesday night that they won’t support efforts by activist investor Starboard Value to shake up the giant drugmaker.

2. In response, Starboard alleged that Read and D’Amelio were coerced into issuing the statement. People within Pfizer or company representatives “purportedly threatened to commence costly litigation against them, claw back prior compensation, and cancel unvested performance stock units,” Starboard managing member Jeffrey Smith said in a letter to Pfizer’s board.

3. It was also reported that Starboard has met with Lead Director Shantanu Narayen and Suzanne Nora Johnson, the board’s longest-tenured director.

2. Activist investor Mantle Ridge has a $1 billion-plus stake in industrial gas supplier Air Products and Chemicals. The activist investor wants to push the company on succession planning for Seifi Ghasemi, Air Products’ 80-year-old CEO.

1. According to our data, 71% of board influence are tied up in the board’s four oldest directors, all at least 72 years old.

2. Less than a week later, hedge fund D.E. Shaw revealed it had amassed a roughly $1 billion stake in Air Products and Chemicals, and that it plans to nominate three directors to the company’s board after its efforts to engage privately with the company had been largely rebuffed and marked by “an apparent lack of urgency.”

3. Scott Sutton, the former CEO of Olin, is one of D.E. Shaw’s nominees and is seen as a potential CEO candidate.

3. In other news, U.S.-based Farallon Capital Management has acquired 7% of Japanese elevator maker Fujitec's shares, with the asset management firm disclosing that the purpose includes possibly making major proposals.

4. Lastly, Gerresheimer's shares are up after a regulatory filing showed activist investor Ricky Chad Sandler had bought a 5% stake in the German medical packaging maker.

1. Gerresheimer’s board is led by its former CEO, Axel Herberg. According to the data at freefloatanalytics.com, he controls 29% of board influence.

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VOTE RESULTS TABLE 

1. The winner of the week is Golden Matrix Group director Anthony Brian Goodman, who is loved by 99.987% shareholders.

2. Two directors failed to receive majority votes at Expion360: 80% of shareholders said a big fat NO to George Lefevre and Tien Nguyen. There is no clear reason for the vote other than the fact that George chairs the board’s nominating committee and there are zero female directors.

3. At large cap companies:

1. nothing much going on at Lamb Weston

2. Avangrid shareholders approved the proposed merger with Iberdrola

3. Two shareholder proposals fared relatively well at General Mills:

1. SHP – Disclosure of Regenerative Agriculture Practices Within Supply Chain 28% YES

2. A proposal submitted by Green Century Capital Management requesting a report assessing how the Company can increase the scale, pace, and rigor of its sustainable packaging efforts including by reducing the use of plastic packaging received the support of 39% of shareholders. Pretty damn good considering do-nothing Vanguard controls 11% of voting power while BlackRock and State Street combine for another 16%. Without the Big 3, 61% of shareholders said YES.

3. A proposal submitted by As You Sow requesting that General MillS disclose the reduction of pesticides achieved through adoption of its regenerative agriculture practices received 28% support.

4. And finally at Trimble, a shockingly high amount of shareholders rejected the reappointment of auditor Ernst & Young. 20% said NO. Audit Committee Chair Mark Peek also received 21% against his reelection.

1. Trimble was forced to reschedule its originally scheduled annual meeting from August to September while waiting for Ernst & Young to complete its audit procedures.

2. Total fees also rose 44% from $8.1 million in 2022 to $11.6 million in 2023. 

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THE BIG VOTE

Matt Quiz

Easy warmup - where would you put a college dropout with a background in computer science and limited to no moral compass?

1. Put this person on a board: a woman with a background in engineering, medicine, physics, psychology, and therapy.  What kind of company should they be on?

1. Amy Wendell

2. Knowledge base: Engineering, Medicine, Physics, Psychology, Therapy

3. 63 years old

4. Female

5. Average influence 15%

6. 2 boards

1. Hologic - Healthcare

2. Axogen - Healthcare

2. Put this person on a board: A 53 year old woman with strong influence everywhere she's been with a knowledge background in biology, economics, fine arts, and history who already sits on two boards

1. Shar Dubey

1. Match Group - Interactive Media

2. Fortive - Industrials

3. Guess the industry of this company: 75% of directors are lawyers, 50% have knowledge of public safety, 42% have MBAs or finance backgrounds, 33% have math, building experience

1. Huntington Ingalls, Aerospace & Defense company!

2. The non-lawyers:

1. Victoria Harker

1. ex-CEO of digital media company, prior CFO

2. Leo Denault

1. ex-Entergy CEO, accountant

3. Stephanie O’Sullivan

1. Title is “business consultant”, civil engineering degree, ex CIA

4. Put this person on a board: A 30 year old white male with two internships, both at media companies.

1. NEPO Quentin Dolan

2. Knowledge base: two internships at media companies

3. 30 years old

4. Male\

5. 3 boards

1. MSG x2, Sphere

5. Guess the industry of this company:  30% of the board is named John, all of the Johns have the exact same knowledge background (Administration, Econ/Finance, Math), John influence is 27% (no insiders), all Johns have more than 15 years of tenure (two have 23 years)

1. Arch Capital, Insurance!

2. John Pasquesi (Otter Capital with a website last updated in 2001, invested in Arch in 2001 but “independent”), John Bunce (investment orgs, including Greyhawk Capital with a website last updated in 1998), John Vollaro (ex Arch, “independent” since 2009)

6. Your company is facing some significant pushback from investors, with lawsuits from product failures and corruption charges… but you need to add a new board member.  What kind of person do you look for?

1. If you’re Bayer facing cleanup of billions in liabilities tied to Monsanto, an IUD that perforates the uterus, and PCB contamination, you add Jeff Ubben of ValueAct

1. Ubben is on the board of Exxon, who sued its own shareholder

2. Ubben was on the boards of Sara Lee when it went bankrupt, the board of Omnicare when they paid $9.8m in penalties for kickbacks, and the board of Acxiom which had a data breach of 1.3bn customer records

3. Last 7 years, controversies performance of 0.462, TSR of 0.328, earnings of 0.225, with 11 active controversies under his tenures (ranks in the top 1% for most controversies by count)

DAMION:

That’s the Proxy Countdown for the week of October 7, 2024. Join us next week when we jump back into the Alternative Democracy pool... forever on the lookout for shareholder sharks, floating bandaids, and wayward directors.

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