The passing US proxy season made lots of business headlines as the most turbulent ever (which I’ve found happens every year). But 2015 was still notable for the flood of activist initiatives targeting company boards of directors. Activists sought “no” votes on directors who set executive pay, or said no to stock buyback, dividend, or spinoff plans. They nominated their own candidates for board seats, sometimes even whole board slates. They generally caused a ruckus.
DuPont famously battled Trian Fund’s Nelson Peltz, who wanted to take over DuPont’s board and break up the company. A few months back, Darden battled against Starboard Value, which wanted to toss its entire board. General Motors, a once-humbled, now recovering giant, took a proxy battle over stock buybacks (as has Apple). Walgreens has faced an ongoing battle with the JANA Partners fund over strategy. Fashion firm Perry Ellis is under attack from its own critical outside activist.
The short story on such an activist uprising is symbolized by the results at DuPont. With Nelson Peltz’s directors on the ballot, and DuPont management under fire, it looked like a close proxy vote battle was in store. But, as with the recent British general election, the soothsayers proved wrong, and the vote outcome wasn’t even close. DuPont management won a mandate for the status quo, so the story went, and activists everywhere were disenheartened.
Not really. With investor activism, proxy vote tallies are the 10% of activity we see above the surface, like icebergs. The great majority goes on in quiet (sometimes not so quiet) sub rosa negotiation and dealmaking. Here, we find that the barbarians may not have breeched the castle gate, but are happily shuffling in through the back entrance. Peltz lost the DuPont voting battle, but gained at least one board seat before the vote, and DuPont has boosted its dividend. Apple has maintained that its strategy and governance are just fine… but also spent over $60 billion on fresh stock buybacks and dividends in the last year.
Maybe activist investors lost their boardroom proxy battles this year. But they know how to win the war.
Guest Post: Ralph Ward is author of the books Boardroom Q&A(2011), The New Boardroom Leaders: How Today’s Corporate Boards Are Taking Charge(2008), Saving the Corporate Board: Why Boards Fail and How to Fix Them(2003), Improving Corporate Boards: The Boardroom Insider Guidebook(2000), and 21st Century Corporate Board(1997). Ward’s books, like his Boardroom INSIDER, are full of practical tips for directors. Publisher: I highly recommend them all. The above post originally appeared as Who Says Activist Investors Have Struck Out? in the June edition of Boardroom INSIDER. I added the graphics and those wonderful ads.