2019 Review of Shareholder Activism - Lazard.com
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CONFIDENTIAL JANUARY 2020
LAZARD'S SHAREHOLDER ADVISORY GROUP
2019 Review of Shareholder Activism
Lazard has prepared the information herein based upon publicly available
information and for general informational purposes only. The information is not
intended to be, and should not be construed as, financial, legal or other advice,
and Lazard shall have no duties or obligations to you in respect of the information.2019 REVIEW OF SHAREHOLDER ACTIVISM
Key Observations on the Activist Environment in 2019
Activist Activity 187 companies targeted by activists, down 17% from 2018’s record but in line with multi-year average levels
Returns to Aggregate capital deployed by activists (~$42bn) reflected a similar dip relative to the ~$60bn+ level of 2017/2018
1 Multi-Year Trend A record 147 investors launched new campaigns in 2019, including 43 “first timers” with no prior activism history
After Record 2018 Elliott and Starboard remained the leading activists, accounting for more than 10% of global campaign activity
Activism against non-U.S. targets accounted for ~40% of 2019 activity, up from ~30% in 2015
Multi-year shift driven both by a decline in U.S. targets and an uptick in activity in Japan and Europe
Activism’s For the first time, Japan was the most-targeted non-U.S. jurisdiction, with 19 campaigns and $4.5bn in capital deployed in 2019
2 Continued Influence (both local records)
Outside the U.S. Overall European activity decreased in 2019 (48 campaigns, down from a record 57 in 2018), driven primarily by 10 fewer
campaigns in the U.K.
Expanded activity in continental Europe – particularly France, Germany and Switzerland – partially offset this decline
A record 99 campaigns with an M&A-related thesis (accounting for ~47% of all 2019 activity, up from ~35% in prior years) were
launched in 2019
Record Number of As in prior years, there were numerous prominent examples of activists pushing a sale (HP, Caesars) or break-up (Marathon,
3 M&A-Related Sony) or opposing an announced transaction (Occidental, Bristol-Myers Squibb)
Campaigns
The $24.1bn of capital deployed in M&A-related campaigns in 2019 represented ~60% of total capital deployed
The technology sector alone saw $7.0bn put to use in M&A related campaigns
122 Board seats were won by activists in 2019, in line with the multi-year average1
Consistent with recent trends, the majority of Board seats were secured via negotiated settlements (~85% of Board seats)
Activist Influence on
4 Boards Continues 20% of activist Board seats went to female directors, compared to a rate of 46% for all new S&P 500 director appointees2
Activists nominated a record 20 “long slates” seeking to replace a majority of directors in 2019, securing seats in two-thirds (67%)
of the situations that have been resolved
Outflow Pressure on Actively managed funds saw ~$176bn in net outflows through Q3 2019, compared to ~$105bn in 2018 over the same period
5 Active Managers The “Big 3” index funds (BlackRock, Vanguard and State Street) continue to be the primary beneficiaries of passive inflows,
Intensifies collectively owning ~19% of the S&P 500 – up from ~16% in 2014
ESG focus continues to grow: over the past two years, the AUM represented by signatories to the UN’s Principles for Responsible
Investment increased ~26% to ~$86tn, and the number of assets in ESG-related ETFs increased ~300%
Other Noteworthy
6 The Business Roundtable’s “Statement on the Purpose of the Corporation” emphasized the importance of companies
Observations
incorporating the interests of all stakeholders, not just shareholders, into their decision-making processes
The SEC’s guidance on proxy advisors sought to increase accountability and oversight standards in their company evaluations
Source: FactSet, ETFLogic, UN PRI, Simfund, press reports and public filings as of 12/31/2019.
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement. 1
1 Represents Board seats won by activists in the respective year, regardless of the year in which the campaign was initiated.
2 According to Spencer Stuart’s 2019 Board Index.2019 REVIEW OF SHAREHOLDER ACTIVISM
1 Campaign Activity and Capital Deployment
($ in billions)
Annual Campaign Activity Companies Targeted Annually by Region
1
# of Companies Targeted1 # of Campaigns Initiated # of Companies Targeted1 226
248 Campaigns in line
205 212 209 with historical 5 20
188 6 188 187
187 226 activity but below 168 6 30 8
188 187 2018’s record pace 12 23
Mean: 193 188 27
39 15 54 U.S. targets account
168 36 49 44 for ~60% of companies
targeted, compared to
~70% in 2015
131 122
111 111 108
2015 2016 2017 2018 2019
2015 2016 2017 2018 2019 Rest of World APAC Europe U.S.
Capital Deployment in New Campaigns Capital Deployment by Sector in 2019
Aggregate Value of New Activist Positions2 Aggregate Value of New Activist Positions2
$66.4 Lower capital
$63.8 deployed following
$57.7 heightened activity in 23%
7.8 22%
13.5
2017 and 2018
11.4
8.7 16%
18.7 $42.2
6.1 12% 11%
17.6 $30.5 19.0
11.5
6.0 20.9 3% 3%
4% 3%
13.2 3% $1.1 $1.1
12.8 13.0 $9.9 $9.3 $6.7 $5.1 $4.8 $1.7 $1.5 $1.1
25.3
15.4 6.0 16.5
Technology
Institutions
Media
Retail
Real Estate
Industrials
Telecom
Consumer
Healthcare
11.7 Energy & Infra.
Financial
5.7
Power,
2015 2016 2017 2018 2019
Q1 Q2 Q3 Q4
Above/Below
2015-18 Avg.3
Source: FactSet, press reports and public filings as of 12/31/2019. 2
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Companies spun off as part of campaign process counted separately.
2 Calculated as of campaign announcement date. Does not include derivative positions.
3 4-year average based on aggregate value of activist positions.2019 REVIEW OF SHAREHOLDER ACTIVISM
1 Notable 2019 Public Campaign Launches and Developments—U.S.
($ in billions)
Launch Company / Launch Company /
Date Market Cap Activist Highlights Date Market Cap Activist Highlights
Icahn disclosed a stake in HP and urged the
Company to merge with Xerox, citing cost In October, Aramark announced a settlement
synergies with Mantle Ridge, appointing six new
11/19 $29.8 5/19 Directors, including a new CEO, while also
HP rejected the takeover proposal, criticizing agreeing to lower its threshold to call a special
$8.6
Xerox’s “hostile” actions, but noted it saw meeting
potential in a deal
$8.4
D.E. Shaw released a white paper criticizing
Emerson’s cost structure and organization, In August, Occidental completed its acquisition
urging an independent strategic review of Anadarko
9/19 Emerson reached an informal settlement with 5/19 In November, Icahn signaled its intent to
D.E. Shaw in November, appointing an nominate a slate of 14 Directors to replace
$39.5 $44.0 Occidental’s Board
independent Director and agreeing to review its
compensation program
Following Elliott’s demand for Marathon to
Starboard and Wellington separately came out
break itself up, the Company announced that it
against the Company’s planned $74bn
would spin off its Speedway unit
acquisition of Celgene, citing pipeline risks,
9/19 In December, Marathon announced a 2/19 with Starboard also nominating Directors
$39.6 settlement with Elliott, agreeing to replace an $81.4 Starboard withdrew its campaign after ISS and
outgoing Director with one approved by Elliott;
Glass Lewis recommended in favor of the deal
Marathon also agreed to declassify its Board
Following Elliott’s initial letter, AT&T sold off Elliott and Starboard separately pushed eBay
several assets in pre-planned transactions to divest non-core assets like StubHub and its
In late October, AT&T announced long-term Classifieds business, with each settling
9/19 financial targets, the addition of new 1/19 separately for Board representation
$268.8 independent Directors and a delay in its CEO $31.7 The Company’s CEO resigned in September
succession, which Elliott issued a press after disagreements with the Board, and eBay
release in support of later sold StubHub for ~$4bn
Starboard sent a letter to AECOM in June In December, ValueAct and Citi extended their
2019, urging it to launch a full strategic review information sharing agreement through 2021,
and sell its Construction Services business with ValueAct complimenting Citi’s leadership
6/19 In November, Starboard and AECOM settled, 5/18 ValueAct and Citi had first entered into an
with AECOM adding three new independent information sharing agreement in January
$5.8 $173.2
Directors, including a Starboard Partner, to its following the disclosure of ValueAct’s position
Board and splitting the Chairman / CEO roles in May 2018
Source: FactSet, press reports and public filings as of 12/31/2019. 32019 REVIEW OF SHAREHOLDER ACTIVISM
1 Notable 2019 Public Campaign Launches and Developments—Rest of World
($ in billions)
Launch Company / Launch Company /
Date Market Cap Activist Highlights Date Market Cap Activist Highlights
Following months in which Elliott said that it
Oasis sent a letter to Seven & i in September
would not tender its shares in Capgemini’s
and demanded the divestment of non-core
11/19 $34.1 7/19 $4.2 buyout of Altran, Elliott released a presentation
units, improved governance and greater capital
in November detailing its opposition to the deal
return
and urged Capgemini to increase its offer price
In October, Prosus announced a separate bid
for Just Eat beyond Takeaway.com’s existing
offer, which had received opposition from In September, Ferguson announced that it
Eminence but support from Cat Rock would spin off its U.K. operations in order to
9/19 6/19
$6.2 Just Eat rejected Prosus’ offer, saying it $16.5 create two separately listed companies,
undervalued its business following pressure from Trian
Post-12/31 update: Just Eat’s offer was
successful
Following reports that Third Point had built a • In October, Sony announced record Q2
stake, the activist disclosed in its Q3 investor operating profit, citing the performance of its
$63.7 letter that it had met with Company executives image sensors business, which Third Point
8/19 4/19 $54.8
and urged it to improve governance and had requested the Company divest
accelerate the integration of Essilor and • Sony had earlier dismissed Third Point’s
Luxottica request for divestitures
Elliott disclosed a stake in SAP in April,
Following calls from Elliott to divest its supporting a recently announced
AutoScout24 business, Scout24 announced comprehensive review
8/19 $6.2 the sale of the unit to Hellman & Friedman in 4/19 $157.7 In October, SAP’s CEO retired; the Company
December later announced a share buyback plan and
Elliott cuts its stake in Scout24 shortly after additional details of its strategic plan at a
Special Capital Markets Day
In October, following Unizo’s rejection of initial
offers from Fortress and Blackstone, Elliott Elliott nominated Directors to Hyundai’s Board
and made several governance-related
issued a public letter asking the Company to
8/19 $1.1 4/18 $30.9 proposals at Hyundai’s 2019 AGM
explain its reasons for rejecting the offers
All Elliott proposals and Director nominees
As of the end of 2019, there were several were defeated at the March AGM
competing tender offers outstanding
Source: FactSet, press reports and public filings as of 12/31/2019. 42019 REVIEW OF SHAREHOLDER ACTIVISM
1 Largest Activist Targets in 2019—U.S. and Rest of World
($ in billions)
U.S. Rest of World
Company Activist Position Market Cap Company Country Activist Position Market Cap
1.2%3 $268.8 0.8%3 $157.7
/
2
1
-- 99.6 1.2%3 / -- 63.7
0.4% 81.4 2.7%3 54.8
4.0% 44.0 -- 53.82019 REVIEW OF SHAREHOLDER ACTIVISM
1 The Broadening Activist Landscape in 2019
($ in billions)
While Elliott and Starboard remain the most active players, the record number of investors launching campaigns demonstrates activism’s broad
adoption
Activist Activity by Campaigns Launched, 20191 Activist Activity by Capital Deployed, 2019
14
13 $8.4 80% of Elliott’s 2019 capital deployed
Elliott and Starboard alone account for more
than 10% of global campaign activity was concentrated in four campaigns
(AT&T, SAP, eBay and Marathon)
6 $3.8
5
4 4 4 $2.4 $2.3
3 3 3 $1.7
$1.2 $1.1 $1.0 $0.7 $0.7
Elliott Mgmt.
Cevian Capital
Associates
Third Point
Starboard
Trian Partners
Eminence
International
Southeastern
Mantle Ridge
Asset Mgmt.
D.E. Shaw
Elliott Mgmt.
Starboard
CIAM
Head Capital
Associates
Third Point
Corvex
Praesidium
Partners
Silchester
Capital
Inv. Mgmt.
Investors
Mgmt.
Value
Legion
Icahn
Value
Sachem
Icahn
Investors Launching Campaigns Instances of Activism/Vocalism by Traditional Long-Only Investors
Date Shareholder Company Action
“First Timers”
The number of investors engaging in Criticized proposed merger with Banco
activism continues to grow 8/19
Sabadell, suggested new deal
147 Issued press release stating voting support
7/19
131 for dissident Rice Group slate
103 109 Withheld vote for Company Board in
100 4/19
response to Anadarko acquisition
104 Group nominated Directors to Company
91 4/19
Board; incumbents re-elected
77 73 86
Nominated Directors and publicly criticized
4/19
Company; later settled
30 40 43 Nominated Directors following capex
23 23 3/19
disagreement
2015 2016 2017 2018 2019 Filed first 13D in opposition of Celgene
% of 2/19
acquisition; deal later approved
Campaigns by
23% 29% 21% 31% 29%
“First Timers” 1/19
Reached Board refreshment settlement
with Company amid activist campaign
Source: FactSet, press reports and public filings as of 12/31/2019. 6
Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Ranked secondarily on capital deployed in the event of a tie on campaigns launched.2019 REVIEW OF SHAREHOLDER ACTIVISM
2 Activism is a Global Phenomenon
As in prior years, international activity accounted for ~40% of both campaigns and capital deployed
Capital Deployed1 Campaigns
Rest of the World Rest of the World2019 REVIEW OF SHAREHOLDER ACTIVISM
2 2019 International Shareholder Activism
($ in billions)
Activism Against European Companies Activism Against APAC Companies
57
52
Although there was record activity in
48 Q3, 2019 was down from 2018 peak
levels; the 16% decrease was in line
with the decline in global activity
42
40
30
28
26
16
12
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019
% of Global % of Global
Campaigns 20% 21% 25% 23% 23% Campaigns 6% 9% 12% 12% 13%
Launched Launched
Source: FactSet, press reports and public filings as of 12/31/2019. 8
Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement. APAC includes all of Asia and
Australia and New Zealand.2019 REVIEW OF SHAREHOLDER ACTIVISM
2 European Pullback: U.K. Activity and U.S. Agitators Driving Slowdown
European Activism Decrease Driven by U.K. Activity Decline U.S. Activists Slowing New Campaign Activity
2%
1
57 47% 51%
2018 57
27 29
48 ~30%
reduction
26 16
58% 42%
2019 48
28 20
European Activists Others U.S. Activists
Most Prolific European Activists
31 32 2018 2019
Activists # Campaigns Activists # Campaigns
3 6
3 2
2 2
2018 2019
Europe excluding U.K. U.K. 2 2
U.K. continues to be the #1 target in Europe but has declined from 46% of
Despite the success of many U.S. activists, Europe has continued to attract
European campaigns in 2018 to 33% in 2019
more local agitators
Given the number of non-U.K. campaigns remained stable year-over-year,
Several players became more vocal and visible in the European landscape,
the decrease in U.K. activity had a significant impact on overall European
competing with global players
activity
Source: FactSet, press reports and public filings as of 12/31/2019. 9
Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement.2019 REVIEW OF SHAREHOLDER ACTIVISM
2 European Target Diversification Anticipated to Continue
2019 saw a move away from the traditional focus on activism in the U.K., with increased activity in France, Germany and Switzerland. There is
potential for activists to target other high-performing jurisdictions in the coming year
Activism in Europe has now broadened across the European landscape and activists are targeting all countries in their search to
unlock value and to capture alpha – leaving no stone unturned
Country Market Size – Companies >$500m (in $bn)1 # of Activist Campaigns
3,258 16
Top European Equity Markets
2,719 7
Campaigns in large continental
equity markets increased 56%
2,222 8 over 2017-18 levels as activists
sought deep markets to deploy
significant capital
1,790 6
868 1
727 2
402 3
287 1
249 1
94 2
44 1 # Campaigns 2019 Av. # Campaigns 2017-18
Source: FactSet, press reports and public filings as of 12/31/2019. 10
Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Market size is aggregate market capitalization represented by companies with above $500m market capitalization in each country.2019 REVIEW OF SHAREHOLDER ACTIVISM
2 Sharp Focus on Ongoing M&A and Mid-Cap Sweet Spot in Europe
Activism Value Creation Objectives 2019 Campaigns by Market Cap and Target Performance vs. Index1
29% 28% 28% 28%
6
19% $20.0bn
16%
12%
13%
12% 17
10%
9%
7%
$1.5bn
12
M&A - Scuttle / Sweeten M&A - Other Operations Capital Structure
2017 2018 2019 (50%) (40%) (30%) (20%) (10%) 0% 10% 20%
2
LTM TSR
# Number of campaigns
After difficult activist fund returns in 2018, in 2019 activists shifted to 2019 activism demonstrated a clear divergence in strategy by target size
less risky campaigns with a shorter timeframe Targeting of the $1.5-20bn “sweet spot” represented ~49% of 2019
Scuttle/Sweeten campaigns with limited downside and clearer timeline campaigns, excluding campaigns to scuttle/sweeten announced transactions
were the most common Activists targeted high performing larger companies to accelerate
Objectives requiring a longer runway to execution such as operational existing plans, and smaller companies with weaker performance where
changes were more limited options to “fix” or redefine strategy are more effective
Source: FactSet, press reports and public filings as of 12/31/2019. 11
Note: All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Excludes campaigns with scuttle/sweeten deal focus.
2 TSR adjusted for the performance of the local index during the LTM before the announcement of the campaign.2019 REVIEW OF SHAREHOLDER ACTIVISM
2 Shareholder Activism in Japan
($ in billions)
For the first time, Japan was the busiest non-U.S. jurisdiction with record highs in both capital deployed and campaigns launched
Non-U.S. Activism, 2019 Campaigns Against Japanese Companies
By Number of Campaigns 19
16
Japan
23%
Rest of World 11
32%
United
Kingdom
19% 4 4
France
8%
Canada Germany
8% 10%
2015 2016 2017 2018 2019
By Capital Deployed
Capital Deployed in Japanese Campaigns
$4.5
Rest of World Japan Capital deployed increased
20% 27% ~$2bn y-o-y, owing largely to
Third Point’s campaign at Sony
France
5% $2.5
Canada
$1.7
9% Germany
20% $1.2
United
Kingdom
19% $0.3
2015 2016 2017 2018 2019
Source: FactSet, press reports and public filings as of 12/31/2019. 122019 REVIEW OF SHAREHOLDER ACTIVISM
3 The Activist Role in M&A in 2019
Scuttle or Sweeten
Sell the Company Break-Up / Divestiture
Existing Deals
Agitate for sale of target or encourage Agitation for a divestiture of a non-core Entry into a live M&A situation to improve deal terms
industry consolidation business line or company breakup or block an ill-perceived deal from proceeding
35% 33% 32%
Target / Activist M&A Thesis Target / Activist M&A Thesis Target / Activist M&A Thesis
Icahn pushed for HP to After months of saying it
accept a takeover offer from Following Elliott’s call to break would not tender its shares in
Xerox due to potential cost the Company up, Marathon Capgemini’s offer for Altran,
11/19 savings of $2bn; after HP 9/19 announced it would spin off its 7/19 Elliott launched a public
rejected the offer, Icahn sent Speedway unit and launched critique of the deal but said it
a letter to shareholders a comprehensive review might sell its stake if
pushing for their support Capgemini sweetened its offer
Mantle Ridge reportedly After Elliott urged divestitures,
AT&T announced a new, CIAM came out against the
pushed for a sale of Aramark,
long-term strategic plan, proposed merger between
also considering forming its
5/19 9/19 including divestitures, but did Renault and Fiat Chrysler,
own consortium to make a 6/19
not commit to divesting saying that the deal would
takeover bid; Mantle Ridge
DirecTV as Elliott had initially benefit Fiat Chrysler more
later settled for Board
requested than Renault
representation
Icahn criticized the Anadarko
Icahn pushed for a strategic
Following AbbVie’s acquisition deal and the financing
review, eventually settling with
of Allergan, it was reported Occidental arranged so it
Caesars for three Board
1/19 6/19 that Elliott had privately 5/19 could avoid a shareholder
seats; Eldorado Resorts later
pushed for the break-up of vote; Icahn planned to
purchased Caesars for
Allergan nominate a slate to replace
$17.3bn
Occidental’s Board
Elliott disclosed a stake in In a letter to shareholders,
Starboard and Wellington
QEP and submitted a Sony said its Board had
separately came out against
takeover offer; in August, the rejected Third Point’s call to
the Company’s planned
1/19 two parties settled, with QEP 4/19 divest its imaging sensors 2/19
$74bn acquisition of Celgene;
adding two Directors and business, defending its
Starboard withdrew after ISS
forming a new operations conglomerate structure after
and GL backed the deal
committee Third Point’s white paper
Source: FactSet, press reports and public filings as of 12/31/2019. 13
Note: All data is for campaigns conducted globally at companies with market capitalizations greater than $500 million at time of campaign announcement.2019 REVIEW OF SHAREHOLDER ACTIVISM
3 Sustained Prominence of M&A-Related Campaigns
47% of campaigns launched in 2019 were M&A-driven, demonstrating the persistence of M&A as a campaign theme
M&A Campaigns M&A Campaign Objective Prevalence
M&A Campaigns (% of All Campaigns) Surpasses 2018’s record Scuttle or Sweeten Exisiting Deal Break-Up / Divestiture Sell the Company
number of M&A campaigns
Number of M&A
Campaigns 79 59 76 82 99
47%
39%
36%
32% 33% 30%
Mean: 35% 33% 35%
40% 41%
2015 2016 2017 2018 2019 22%
38%
23% 33%
Capital Deployed in M&A Campaigns by Sector
29%
$9.9
$9.3 Capital Deployed in M&A Campaigns
Aggregate $24.1bn of capital
$6.7 deployed in M&A-related
$5.1 campaigns represents ~60% of all
$4.8
capital deployed 45%
37%
32% 30% 32%
$1.7 $1.5 $1.1 $1.1 $1.1
$4.2 $7.0 $3.8 $3.8 $2.6 $0.5 $0.3 $0.8 $0.1 $1.0
Technology
Institutions
Industrials
Energy &
Consumer
Telecom
Healthcare
Retail
Real Estate
Media
Financial
Power,
Infra.
2015 2016 2017 2018 2019
Source: FactSet, press reports and public filings as of 12/31/2019. 142019 REVIEW OF SHAREHOLDER ACTIVISM
4 Board Seats Won
Board Seats Won1 Non-Activist Employees vs. Activist Employees Appointed as Directors
Board Seats Won1 Non-Activist Fund Employees Appointed
Board Seats Won1 # of Companies Targeted for Board Seats
Activist Fund Employees Appointed
Board seat activity in line 161
with long-term trends 145
79 133
68 67 65 122
837 seats have 103
53 changed hands
145 161 since 2013 125
Mean: 136 133 94 106
122 94
75
103
39 39 28 36 28
2015 2016 2017 2018 2019
Activist
Employees 29% 27% 27% 22% 23%
2015 2016 2017 2018 2019
as % of Total
Settlements vs. Proxy Contests Proxy Stage of Board Seat Wins, 2019
Board Seats Won1 Board Seats Won through Settlements Board Seats Won1
Board Seats Won through Proxy Fights 20
161
17
145
133
122 18
103
126 122
112 127
102
89
67
35
21 18 14 20
2015 2016 2017 2018 2019
Won through Outside Proxy Proxy Process After Proxy Final Vote Total Seats
Proxy Contest 16% 12% 14% 22% 16% Process Initiated Filing Won
as % of Total
Source: FactSet, press reports and public filings as of 12/31/2019. 15
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
1 Represents Board seats won by activists in respective year, regardless of the year in which the campaign was initiated.2019 REVIEW OF SHAREHOLDER ACTIVISM
4 Profile of 2019 Activist Director Appointments
Activists consistently enlist experienced individuals with senior public company experience for their Director nominees; however, the gender
diversity of these nominees continues to fall short relative to newly appointed Directors in the S&P 500
Public Company CEO or CFO Experience Public Company Director Experience
161 No Public Company CEO/CFO Experience
161 No Public Company Director Experience
Public Company CEO/CFO Experience Public Company Director Experience
122 31% 122
73% 22%
In line with incidence
72% of public company
director experience
69% among new 2019 S&P
77% 500 directors
27% 28%
2018 2019 2018 2019
Activist Fund Affiliation of Activist-Sponsored Directors Gender Diversity of Activist-Sponsored Directors
161 Other Male
Activist Employee 161
Female
122 122
78%
83% According to Spencer
77% Stuart, women comprised
80%
46% of all new
independent Directors
appointed to S&P 500
22% 23% companies in 2019
17% 20%
2018 2019 2018 2019
Source: FactSet, BoardEx, Spencer Stuart’s 2019 Board Index, press reports and public filings as of 12/31/2019. 16
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement..2019 REVIEW OF SHAREHOLDER ACTIVISM
4 Long Slate Nominations and Proxy Fights
Contested Proxy Votes, 2015-2019 Long Slate Nominations, 2017-2019
Board Seats A record 20 long slates were nominated in
21 18 14 35 20 Board Seats Initially Demanded 2019, though total Board seats won in long
Won Via Proxy
slate fights was lower than in 2018
Vote Ongoing 1
U.S. Proxy Votes Non-U.S. Proxy Votes 144
Board Seats Won
23
102
European proxy votes eclipsed U.S.
proxy votes for the first time in 2019, 6
continuing the long-term trend 39
12 45 34
16 11
2017 2018 2019
14 14 Total Long
2 13 20
Slates
Long Slate Results, 2019
10 7
12
17 Result:
5 7
13 Settled2
7 Proxy Win The seven settlements
accounted for 18 Board seats,
Proxy Loss while the three proxy wins
Withdrawn accounted for 16
7 2
Other3
4 Ongoing
3 2
1 3
1
2015 2016 2017 2018 2019
Source: FactSet, press reports and public filings as of 12/31/2019.
Note:
1
Long slates defined as instances where an activist nominated Directors to replace 50%-plus of the incumbent Board.
Reflects Board seats “in play” at the end of Q4 2019.
17
2 Includes the appointment of David Martin, an original nominee on Coast Capital’s long slate, as Chairman of FirstGroup in August 2019 following the defeat of Coast’s slate.
3 Includes: Velan Capital’s successful withhold campaign against two Progenics Pharmaceutical Directors following the declaration of its long slate nomination as invalid, and the acquisition of
Cincinnati Bell by Brookfield Infrastructure Partners.2019 REVIEW OF SHAREHOLDER ACTIVISM
5 The Growing Influence of Passive Managers
($ in billions)
Cumulative Flows and Net Share Issuance1 S&P 500 Top 10 Shareholders
# Shareholder Ownership Stake and Cumulative Holdings
1,800 Fund Flows $1,683
1 Vanguard 8.2%
1,600 Style Since 2007 20192
1,400 ETF +$1,068 +$56 2 BlackRock 6.6% 14.8%
Index +$615 +$38
1,200
Active ($1,782) ($176) 3 State Street 4.4% 19.2%
1,000
800 4 Capital Group 3.1% 22.3%
600 5 Fidelity 2.2% Top 5 24.4%
400
6 T. Rowe Price 1.8% 26.3%
200
0 7 Geode Holdings 1.4% 27.6%
(200)
8 Northern Trust 1.2% 28.9%
(400)
(600) 9 Wellington Management 1.1% 30.0%
(800) 10 BNY Mellon 1.0% Top 10 31.0%
(1,000)
Q3 2019 S&P 500 Top 10 Shareholder Concentration by Sector6
(1,200)
S&P 500 Average (48%)
(1,400) 56%
51% 49%
(1,600) 48% 48% 47% 46% 46% 46% 46% 44%
(1,800) ($1,782)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
3
Index Domestic Equity ETFs
4
Index Domestic Equity Mutual Funds
5
Actively Managed Domestic Equity Mutual Funds
Real Telecom Consumer Energy Industrials Health Materials IT Financials Consumer Utilities
Source: FactSet, P&I and Simfund. Estate Services Disc. Care Staples
1 Equity mutual fund flows include net new cash flow and reinvested dividends. Data excludes mutual funds that invest primarily in other mutual funds.
2
3
Through Q3 2019.
ETF distribution channel.
18
4 All mutual index funds (excludes ETFs).
5 All mutual funds that are not index funds.
6 Includes institutional and insider ownership.2019 REVIEW OF SHAREHOLDER ACTIVISM
6 Rapid Growth in ESG Investing
Asset managers continue to commit to incorporating ESG principles into their investment processes, and asset classes related to ESG are
seeing strong growth; however, the trend is attracting growing scrutiny over the use of the ESG label and whether the label could be
misleading investors
Investors Increasing Commitment to ESG Growing Scrutiny of the ESG Label
AUM of PRI Signatories $86
The UN Principles for Responsible ($ in trillions) $82 The Securities and Exchange Commission has sent
Investment (PRI) $68 examination letters to firms as record amounts of
$59 $62 money flow into ESG funds. These funds broadly market
themselves as trying to invest in companies that pursue
Established in 2006, the UN PRI is $45 strategies to address environmental, social or governance
a pledge from investors to $32 $34 challenges, such as climate change and corporate diversity.
incorporate ESG considerations $21 $24 ...
into the investment process “This is a relatively new area,” said Betty Moy Huber, co-
head of law firm Davis Polk & Wardwell LLP’s
environmental, social and corporate governance group.
In the past two years, ~660
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
“Now the SEC is saying, ‘Wait, how do you know these
additional asset managers have are ESG products and that you don’t have a fossil fuel
signed the PRI, bringing the total company with known, poor ESG performance in
ESG ETF Asset Growth there?’”
number of signatories to nearly ($ in billions)
2,400, representing ~$86tn in AUM - Wall Street Journal, “ESG Funds Draw SEC Scrutiny,”
$16 December 2019 (emphasis added)
14
Assets in ESG ETFs
12
“Thus we arrive at the next problem with using ESG factors:
Further indication of growing ESG 10
there are no clear standards. . . . In many instances, ESG
interest can be seen in the growth 8 reporting has been presented as though it were
comparable to financial reporting, but it is not. While
of related ETF assets; while still a 6 financial reporting benefits from uniform standards
small part of the asset management 4 developed over centuries, many ESG factors rely on
industry, assets in ESG-related research that is far from settled.”
2
ETFs have quadrupled since the - Hester Peirce, SEC Commissioner, Remarks at the
Jul 2018
Oct 2018
Jul 2019
Jan 2018
Jan 2019
Sep 2019
Dec 2019
Apr 2018
Apr 2019
start of 2018 University of California Fullerton, September 2018
(emphasis added)
Source: ETFLogic, UN PRI, and press reports. 192019 REVIEW OF SHAREHOLDER ACTIVISM
6 New Statements and Regulations Reshaping Stakeholder Power
The Business Roundtable “Statement on the Purpose of a Corporation” and the SEC’s proxy advisor guidance were two high-profile moves
intended to redefine the consideration of various stakeholders in corporate decision-making
“Statement on the Purpose of a Corporation,” August 2019 SEC Proxy Advisor Guidance, November 2019
The Business Roundtable’s statement was the first since 1997 that The SEC’s guidance clarified that proxy advisors are subject to anti-
did not endorse the concept of “shareholder primacy” in corporate fraud rules and should disclose the sources of information they use in
decision-making arriving at their voting recommendations
The statement was signed by 181 CEOs
The guidance also allows for a review and feedback period for
The statement has not been accompanied by any legislative or companies to respond to proxy advisor reports and recommendations
regulatory action that would affect the fiduciary duties of Directors
In November 2019, ISS announced that it was suing the SEC over its
process in arriving at the guidance; ISS claimed that the guidance was
We commit to: issued without the required notice-and-comment period
- Delivering value to our customers. We will further the tradition of
American companies leading the way in meeting or exceeding customer
expectations.
- Investing in our employees. This starts with compensating them fairly
We must recognize that there is a myriad of investor interests and
and providing important benefits. It also includes supporting them
preferences. Many of these interests overlap substantially, such as
through training and education that help develop new skills for a rapidly
the thirst for information material to an investment decision. But
changing world. We foster diversity and inclusion, dignity and respect.
there are many others that do not and may be in direct conflict, such as
- Dealing fairly and ethically with our suppliers. We are dedicated to a desire for a company to sell or buy a particular business or undertake
serving as good partners to the other companies, large and small, that a particular study or course of action. . . . Accordingly, our proxy
help us meet our missions. process, in its components and as a whole, necessarily reflect the
need for a rich exchange of information and the need to balance
- Supporting the communities in which we work. We respect the the interests of proponents of shareholder proposals with the
people in our communities and protect the environment by embracing interests of their fellow shareholders.
sustainable practices across our businesses.
- Jay Clayton, “Statement of Chairman Jay Clayton on Proposals to
- Generating long-term value for shareholders, who provide the Enhance the Accuracy, Transparency and Effectiveness of Our Proxy
capital that allows companies to invest, grow and innovate. We are Voting System” (emphasis added)
committed to transparency and effective engagement with shareholders.
- The Business Roundtable (emphasis added)
Source: Press reports and public filings. 202019 REVIEW OF SHAREHOLDER ACTIVISM
Key Questions for Activism in 2020 and Beyond
Will activity rebound to
Will 2020 see more 2018 levels or remain in line Will the distinction
AT&T-esque with the long-term trend? between private equity
“settlements” without and activism continue
formal agreements? to blur in 2020?
How will activist
fundraising in 2020
impact new campaigns
and aggressive public
tactics?
? How will increasing
investor activism
around M&A shape
2020’s largest deals?
As ESG standards
Will regulators and
proliferate, how will
politicians propose plans
shareholders and
relating to shareholder
companies prioritize which
concentration?
ones to adhere to?
212019 REVIEW OF SHAREHOLDER ACTIVISM
Shareholder Advisory Group—Key Contacts
Managing Director and
Jim Rossman (212) 632-6088 jim.rossman@lazard.com
Head of Shareholder Advisory
Mary Ann Deignan Managing Director (212) 632-6938 maryann.deignan@lazard.com
Andrew T. Whittaker Managing Director (212) 632-6869 andrew.whittaker@lazard.com
Managing Director and
Rich Thomas +33 1 44 13 03 83 richard.thomas@lazard.com
Head of European Shareholder Advisory
Dennis K. Berman Managing Director (212) 632-6624 dennis.berman@lazard.com
Christopher Couvelier Director (212) 632-6177 christopher.couvelier@lazard.com
Kathryn Night Director (212) 632-1385 kathryn.night@lazard.com
Todd Meadow Director (212) 632-2644 todd.meadow@lazard.com
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