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How to Prepare for Shareholder Activist Campaigns | 2021 Proxy Season | J.P. Morgan - YouTube
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[Music]
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so the 2021 proxy season stacked up by
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having twice roughly twice the number of
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campaigns of the 2020 season and that is
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explained by the fact that you know 2020
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was somewhat affected by the pandemic
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and that makes sense because there's a
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renormalization of markets it's very
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important to note that activists have
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shown that they're willing to attack any
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sector whatsoever with the campaign
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of all sectors though it is information
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technology and the consumer
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discretionary sectors that have received
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the most campaigns over the years in
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fact 70 to 80 percent of the time they
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put up what's called a short slate which
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is a minority of the board of directors
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if they were to win they do that because
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it's a lot easier to gain support from
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other institutional investors who may
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just say well what's the harm in adding
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one or two board members we again saw
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that 50 percent of the proxy contests
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were settled
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where the
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dissident took board seats and the
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company was willing to grant the
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dissident those board seats to avoid
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actually going to a shareholder vote
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companies realize that they have to
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balance is it worth fighting versus the
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quality of the board members that are in
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front of them we have seen a significant
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increase of compensation and governance
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related campaigns broadly across the
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sector and that was followed also by an
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increased number of operational type
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campaigns then
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an increase in m a related campaigns
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which is somewhat of a function of
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activists enjoying or really targeting
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situations where they can achieve a
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significant return within a short time
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frame the proposals regarding the
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environment actually were more frequent
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and they developed a much larger support
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vote so you were seeing about 33 percent
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of proposals regarding the environment
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actually passed this year which was up
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significantly from previous years
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2021 also saw the first proxy fight
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where the primary issue was climate
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change we saw engine number one nominate
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candidates the exxon mobil board and
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they were able to win three seats on the
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board
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as we go into 2022 i think that the
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environmental themes that we saw and the
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social themes are becoming a bigger
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trend the say on pay vote is interesting
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because it's an early indication of
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shareholder unrest
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and the trend that we saw in 2021 should
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trouble some companies and in 2021
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you saw more proposals fail than in any
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other year with upwards of 35 to 40
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percent of the proposals failing at the
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largest companies in america as we think
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of the role of proxy advisors in the
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context of proxy fights there has been a
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shift where many investors are viewing
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the input from iss and glass lewis the
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two main proxy advisors as an input into
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their decision process on how to vote on
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a number of items iss has recommended in
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favor of dissident candidates two thirds
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of the time whereas glass lewis has done
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that one-third of the time and that is
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somewhat consistent with past practice
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preparing for an activist campaign is
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like the old adage an ounce of
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prevention is worth a pound of cure
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making sure that you have reviewed your
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strategy and know how well you're
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communicating with your shareholders and
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being in touch with that is a very
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important element to being aware whether
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you are vulnerable and knowing how
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quickly you can act assembling a team of
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advisors that you know and trust and are
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ready to move into action quickly
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is a key part of being prepared
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[Applause]
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[Laughter]
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you
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