Confidence Game

I had a chance to read Christine Richard's book Confidence Game last week while on vacation.  The book details Bill Ackman/Pershing Square's short position at MBIA Inc. and the drama that unfolds over the course of a few years while Ackman speaks to anyone who will listen about the company's unstable business model. It's really very good.  If you're interested in activist investing I recommend reading this book. - Damien

In the meantime, here's an April 2010 CNBC video where Ackman and legendary short-seller Jim Chanos share their thoughts on short selling.

After the Storm: A Special Report Presentation on Shareholder Activism

This presentation was given by Damien Park from Hedge Fund Solutions at Kaplan Fox's June 3-4 conference on Recovery Risk & Returns: A Summit on Corporate Governance for Institutional Investors.

Special Report on Shareholder Activism: Presentation at Kaplan Fox Conference on "Recovery Risk & Returns"

The Future of the Board of Directors

On June 23 Marty Lipton from Wachtell, Lipton, Rosen & Katz gave a keynote speech at the Chairman & CEO Peer Forum at the New York Stock Exchange.  The title of the speech is The Future of the Board of Directors (transcript available here).

Here are a few highlights from the speech:

"In an effort to think about the board of directors of the future, we need to start with what we expect the board to do today and the rules we have set governing how directors are selected, how they function and how they relate to shareholders - not only the legal rules but also the aspirational "best practices" that we have allowed to influence corporate and director behavior.  We also need to look at how corporate management and boards are perceived by the media, the public and elected officials in the post-financial crisis era.

We expect boards to:

• Choose the CEO, monitor his or her performance and have a detailed succession plan in case the CEO becomes unavailable or fails to meet performance expectations.
• Provide business and strategic advice to management and approve the company’s long term strategy.
• Determine the company’s risk appetite (financial, safety, reputation, etc.) and monitor the management of those risks.
• Monitor the performance of the corporation and evaluate it against the economy as a whole and the performance of peer companies.
• Monitor the corporation’s compliance with legal and regulatory requirements and respond appropriately to “red flags.”
• Take center stage whenever there is a proposed transaction that creates a seeming conflict between the best interests of stockholders and those of management, and sometimes even when the conflict is more imagined than real, including takeovers.
• Set the standards of social responsibility of the company, including human rights, and monitor performance and compliance with those standards.
• Oversee government and community relations.
• Determine executive compensation.
• Interface with shareholders.
• Plan for and deal with crises.
• Approve the company’s ethical standards and programs and take responsibility for “tone at the top.”
• Monitor and evaluate the board’s own performance and seek continuous improvement."

Lipton went on to provide some foresight into how boards may operate in the future: 

1. The trend to smaller boards will be reversed in order to have a sufficient number of independent directors for the audit, nominating and compensation committees and to add directors who have special expertise and are not necessarily independent.
2. A separate risk committee will likely become common at companies where risk plays a significant role.
3. Time demands of board service will result in more use of modern conferencing and communication technology; companies will have very frequent special meetings and resort widely to outside experts.
4. In a few years the seperation of the Chairman and CEO role will be more widespread.
5. The lives of CEOs and board of directors will become more challenging.

Click here to download the entire speech.

The Shareholder Activism Report & Resource Portal

View Various Sections of the Report

NEW REPORT & WEBSITE!

Special Proxy Season Promotion

 $1,495

May & June Only!

Includes a copy of the 400+ page report and access to the online portal for one year

INVESTORS + PUBLIC COMPANIES + ADVISERS

ARE YOU PREPARED?

The current political and regulatory environment is encouraging activism;

Activists are attracting fresh capital and searching for new investments;

 A more robust M&A market will prompt the next wave of activist demands;

 All types of investors are submitting shareholder proposals on compensation, succession planning, risk management and sustainability. 

THE SHAREHOLDER ACTIVISM REPORT FEATURES 400+ PAGES ON...

• 29 recommendations from The Conference Board's Expert Committee on Shareholder Activism
• Analysis of the economic, political and regulatory environment in the context of shareholder activism
• In-depth review of how to Understand Shareholders, Assess Company Gaps & Exposures, and Manage Response & Defense Strategies
• Benchmark studies on board member and executive compensation
• Comprehensive directory of over 400 activist investors
• Top 50 activist investors profiled (view a sample profile)
• Detailed proxy contest case studies from 2009 (view a case study from the report)

THE SHAREHOLDER ACTIVISM RESOURCE PORTAL FEATURES REGULAR UPDATES ON...

• Every activist investment filed with the SEC
• Updated list of activist investors
• Profiles and current investment positions for the top 50 activist investors (view a sample profile)
• Analysis of every proxy contest in 2009 including activist demands, proxy advisory recommendations (i.e ISS and Glass Lewis), institutional shareholder votes, list of advisors to the company and activist during the campaign
• Over 500 proxy contest documents available to download,  These include: DE220 demand letters; letters to and from management/board/activist; shareholder proposals for director nomination; investor presentations and "fight letters"; settlement agreements, etc... (view a sample proxy contest document)
• Published articles relating to shareholder activism, including updates on regulatory and legal reforms during 2010 (view a recently published paper on shareholder activism)
• Proxy advisory firm voting policies and revisions

To download a brochure, click here

Contact Timothy Concannon at The Conference Board to learn more and to schedule a free webinar showcasing The Shareholder Activism Resource Portal

Timothy.concannon@conference-board.org

+1 212.339.0207

CEO Succession Planning & Shareholder Activism

"The paper is a must read for anyone interested in CEO succession and its implications for corporate governance and corporate performance."

- The Wall Street Transcript

In October 2009 the SEC effectively removed the ordinary business exclusion defense used by companies reluctant to disclose their CEO succession process to shareholders.  The policy change heralds a new wave of corporate governance scrutiny, as regulators and shareholders increasingly focus on CEO succession practices.

 

In its release the SEC reframes CEO succession as a risk management (and policy) issue and places its responsibility firmly in the boardroom. No longer can boards let management run CEO succession planning without tight oversight, including setting more specific standards and requirements, taking responsibility for results, and exercising discernable independence in the process.

 

Hedge Fund Solutions and Egon Zehnder International recently co-authored a report for The Conference Board that examines this issue and its implications in some depth. We invite you to download a complimentary copy and learn how to prepare for the inevitable governance and activist scrutiny ahead. The paper analyzes the practical impact of the new SEC guidance, explain what shareholders need to know and why, and provide a straightforward guide on how to set up and manage CEO succession practices that satisfy stakeholder needs. 

Download a complimentary copy
Examining the Impact of SEC Guidance Changes on CEO Succession Planning

Posted by Edward Ferris, a Partner with Hedge Fund Solutions

Improving Corporate Governance: A Memo to the Board

Jack Brennan, Chairman Emeritus and Senior Advisor, The Vanguard Group, Inc. gave a speech on March 23, 2010 at Drexel University's Center for Corporate Governance Director Dialogue 2010: Outside Stakeholder View on Risk.

(I was also a speaker at this event along with Scott Bauguess, Staff Economist, Securities & Exchange Commission Office of Economic Analysis; Pat McGurn, SVP US Corporate Governance Trends, RiskMetrics; James Dunigan, EVP and Managing Executive, PNC Financial Services Group; Don Chew, Executive Director, Morgan Stanley)

The speech was captured in a May 10 WSJ Opinion piece and is worth reading in it's entirety.

BY JOHN J. BRENNAN

It is corporate proxy season, and one can expect the usual spate of stories about excessive executive compensation, lax directors and the failure of institutional investors to exert their influence over boards and management.

As a participant in the corporate governance process for a large investment manager for more than 25 years, I will take a contrary view. Over the past quarter-century, the performance of corporate boards has improved markedly. Yet there's room to go.

As one of the largest index fund providers in the world, Vanguard is, at a minimum, a 2% owner of just about every public company ...

...a few suggestions to keep corporate board improvement continuing:

1. Know that you are the shareholders' first line of defense.
2. Build value through mutual respect.
3. Communicate.
4. Measure your success
5. Compensate yourselves in equity.
6. Share your metrics.
7. Hold yourselves accountable
8. Establish an "owner's relations committee."

The article is available here. 

Posted by Damien Park, Hedge Fund Solutions

The Institutional Investor Summit - June 3-4

(Invitation-Only; Limited Seating Available)  
Contact Chris Skroupa and reference Hedge Fund Solutions for complimentary access.

Recovery Risks & Returns: A Summit on Corporate Governance for Institutional Investors 
June 3-4, 2010 
The Intercontinental Barclay
111 East 48th St
New York, NY 10017
(212) 755-5900 

Click Here For More Information 

About The Summit: Recovery Risks & Returns:
A Summit on Corporate Governance for Institutional Investors is designed for pension funds, hedge fund activists and select fund managers seeking to address risk and enhance long term value through governance based solutions.

From 2007 forward, investors have experienced unprecedented losses and have begun to ask the important questions on how to best approach risk and its role in creating long term shareholder value.

As Wall Street emerges from the Great Recession, how will institutional investors create value through corporate governance?

Confirmed Speakers: 

Richard Mourdock, Treasurer
State of Indiana 

Jim Hood, Attorney General
State of Mississippi 

Richard Cordray, Attorney General
State of Ohio 

Kelly L. Schmidt, Treasurer
State of North Dakota 

Greg Zoeller, Attorney General
State of Indiana 

Mario Gabelli, Chairman & CEO
Gabelli Asset Management Company 

Bill Ackman, Founder & Managing Partner 
Pershing Square Capital Management, LP 

Inga van Eysden, Chief of the Pensions Division
New York City Department of Law 

Gregory P. Taxin, Co-founder & Managing Director
Spotlight Advisors 

George W. Neville, Special Assistant Attorney General  
State of Mississippi 

Vineeta Anand, Chief Research Analyst
AFL-CIO 

Tord Carnlof, Co-founder & Senior Advisor
Ethix SRI Advisors 

Hans-Christoph Hirt, Director
Hermes Equity Ownership Services Limited 

Michael Garland, Director of Value Strategy
CTW Investment Group 

Dennis Johnson, (formerly with Shamrock Activist Value Fund)

Jody Olson, Chairman
State of Idaho Retirement Board 

Stephen L. Brown, Director & Associate General Counsel, Corporate Governance
TIAA-CREF 

Damien Park, Managing Partner
Hedge Fund Solutions, Inc. 

William J. Kelley, Jr., General Counsel
Retirement Systems of Alabama 

Pat McGurn, Special Counsel, Corporate Governance
Riskmetrics 

Kil Huh, Director of Research
Pew Center on the States 

Douglas A. Love, Chairman Investment Policy Committee
New Jersey Investment Council 

William Fornia, Senior Vice President
Aon Consulting 

Cas Sydorowitz, CEO, Corporate Advisory
Georgeson 

Ruth Ryerson, Executive Director/CIO
Fort Worth Employees' Retirement Fund 

Greg Kinczewski, Vice President/General Counsel
Marco Consulting 

Timothy Schoolmaster, President & Trustee
Evanston Police Pension Fund 

Carol Nolan Drake, J.D., Chief External Affairs Officer
Ohio Public Employees Retirement System 

Andrew Shapiro, President
Lawndale Capital Management LLC 

Michael D. Underhill, Chief Investment Officer
Capital Innovations, LLC 

Tom Gray, General Counsel
Teachers’ Retirement System of the State of Illinois 

Lisa Lindsley, Director
Capital Strategies AFSCME 

Timothy E. Brog, Managing Director
Locksmith Capital Management 

Jaeson Dubrovay CPA, CAIA, Partner
Advisory Aksia LLC 

Scott Zdrazil, Director of Corporate Governance
Amalgamated Bank, Long View Funds 

Tracey C. Rembert, Sustainability Analyst and Governance Advocate
Pax World Management LLC 

Ossian Ekdahl, Head of Communication and ESG
First Swedish National Pension Fund (AP1) 

Thomas Kirchner, President & Portfolio Manager
Pennsylvania Avenue Funds 

Ric Marshall, Chief Analyst
The Corporate Library 

Jared L. Landaw, COO & General Counsel
Barington Capital Group 

Brian L. Schorr, Chief Legal Officer
Trian Fund Management 

Peter Skjødt, Executive Director, Economic Affairs
Danish Insurance Association