CEO succession risk, plus Mangless vs. Zevra lessons, and UnitedHealth’s investor confidence

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PROXY COUNTDOWN

Free Float Media, Inc.

60 episodes

3 weeks ago

The silent female retreat The not-so-secret power of the lead independent director An aggressive activist atmosphere is heating up A college professor in a bow tie gets voted out And on the Big Vote, Matt talks Surveys Trade Wire - BUY/SELL Top Stories: proxy countdown_trade wire_2025 - Google Sheets Tracking Noteworthy 8-Ks since September 24th: DIrector comings and goings: Men added: 22 Men subtracted: 7 Women added: 6 Women subtracted: 5 Down to 2F: Fannie Mae: Karin Kimbrough resigned Down to 1F: F&M BANK: Daphyne S. Thomas retired Rocket Companies, Inc. (RKT): Jennifer Gilbert resigned; appointing Mr. Jay Bray to serve as a Class II director and Mr. Tagar Olson to serve as a Class I director Pitney Bowes: Milena Alberti-Perez resigned (Julie Schoenfeld resigned in July) Stupidities/Oddities: IDEXX LABORATORIES INC /DE (IDXX) elected Karen Peacock Ms. Peacock will stand for election by stockholders as a Class I Director at the Company’s 2027 IonQ, Inc. (IONQ, IONQ-WT) appointed John W. Raymond General Raymond was appointed as a Class I director whose term will expire at the Company’s 2028 Annual Meeting of Stockholders Rocket Companies, Inc. (RKT) appointing Mr. Jay Bray to serve as a Class II director until 2028 Mr. Tagar Olson to serve as a Class I director until 2027 F&M BANK CORP: Daphyne S. Thomas: Upon reaching the mandatory retirement age, Ms. Thomas became an honorary director and will continue to function as such until she tenders her resignation to the board or until the board requests that she tender her resignation. Under Section 2.11 of the Bylaws, an honorary director may attend board meetings but is not entitled to vote. NEOs Disney: Sonia L. Coleman, the Company’s Senior Executive Vice President and Chief Human Resources Officer, changed title was to Senior Executive Vice President and Chief People Officer increased Ms. Coleman’s annual base salary to $1,000,000; increased her target annual bonus opportunity to 175% of her base salary; and increased her target long-term equity incentive annual award value to 375% of her base salary CEOs COMCAST CORP: Michael J. Cavanagh will be appointed Co-CEO along with current CEO and Chair Brian Roberts, the son of Comcast founder Ralph Roberts VERIZON COMMUNICATIONS: lead director Daniel H. Schulman succeeding Hans E. Vestberg Money Norfolk Southern: One-time cash retention to all NEOs Mark R. George—$4,000,000; Jason A. Zampi—$2,250,000; John F. Orr—$3,000,000; Claude E. Elkins—$2,000,000; and Anil Bhatt—$2,000,000 Pepsi CFO Golden Hello: $9M Strategy Inc: increase to the annual cap for the security program maintained for Michael J. Saylor, Executive Chairman/former CEO/co-founder, under which the Company covers certain security-related costs. Previously, the annual cap for this program was $1,400,000; effective in calendar year 2025, the cap will be increased to $2,000,000 Dell Technologies: one-time performance-based stock option award to COO Jeffrey Clarke valued at $132.4M CSX CORP: appointed Stephen Angel as CEO; $10.1M golden hello PROXY CAGE MATCH Activist investors launched a record number of new campaigns in Q3, with 61 new campaigns, up sharply from 36 a year earlier. Barclays’ new data show that activism is accelerating globally, with a 90% quarter-on-quarter increase in the U.S. Year-to-date figures indicate nearly 191 campaigns targeting 178 companies, with activists securing 98 board seats and driving approximately 25 CEO departures thus far Japanese game company GungHo Online Entertainment, has rejected a proposal from activist investors to dismiss its longtime CEO Kazuki Morishita The proposal was put forward by Strategic Capital, a Tokyo-based investment fund which controls over 11% of GungHo’s voting rights. During an extraordinary shareholders’ meeting held at its request on September 24, the activist pushed for: 1) the requirements for ousting an executive to be relaxed 2) for Morishita to be fired from his position as CEO. While the first proposal was accepted, the attempt to remove Morishita failed, not gaining enough votes from majority shareholders. Irenic Capital Management, which owns about 2% of Workiva, wants board and governance changes: Specifically, the hedge fund is urging the company to collapse its dual-class share structure, make all board members stand for election every year and add two newcomers, including Irenic executive Krishna Korupolu, to the board. The hedge fund also expressed considerable concern about the company's governance, noting that five of its seven directors have served on the board since 2014. Acadia Healthcare has appointed Todd Young as CFO, amid growing pressure from activist investors Khrom Capital and Engine Capital — which together own more than 8% of the company VOTE RESULTS TABLE Freedom Holding Corp. (FRHC) 0 SHP classified; Philippe Vogeleer 99.2% FEDEX CORP (FDX) 1 SHP: independent board chairman 43% yes 97% yes; Smith 10% NO 37% NO pay PAUL S. WALSH (CHAIR) 94% Silvia Davila 97% Susan Patricia Griffith 98% Amy B. Lane 99.5% Susan C. Schwab 96% GENERAL MILLS INC (GIS) 2 SHP Regenerative Agriculture Practices Within Supply Chain 27% YES Separate the Board Chair and CEO Roles 36% YES avg 97% YES RPM INTERNATIONAL (RPM) 0 SHP 99.7% YES Craig Morford; 9/12 up for election as company in process of declassification CARPENTER TECHNOLOGY CORP (CRS) 0 SHP Classified at John Wiley & Sons: 54% said NO to Governance Committee Chair Brian Hemphill The Board, upon recommendation of the Governance Committee, determined not to accept Mr. Hemphill’s resignation: “The Board concluded that the voting outcome reflected proxy advisory firm recommendations unrelated to Mr. Hemphill's individual performance or contributions. The Board determined that Mr. Hemphill's continued service is in the best interests of the Company and its shareholders” THE BIG VOTE PICKS DAMION Upcoming Meetings September 29- AGM Date Company SHPs # Notes 10/13 MillerKnoll Inc 0 Classified: 3 dirs 10/14 Procter & Gamble 1 As You Sow: Plastic Packaging 23% 10/16 Medtronic 0 Irish 10/16 CACI International 0 no Say on Pay; 3 directors Matt SURVEY SEASON Executives PwC Board Effectiveness Survey - August 2025 All NEOs, ~500 of them Biggest representation in tech/media (23%) Mostly mid (35%) and large (26%) companies Directors PwC Annual Corporate Directors Survey - October 2025 More than 600 directors surveyed Mostly mid cap (33%) and large cap (37%) Mostly men (65%) - and no question about race/ethnicity Mostly longer tenured (6+ years, 56%) Asset Owners Morningstar’s Voice of the Asset Owner Survey 2025 - October 2025 500 asset owners, 19tn in assets Mostly EU and APAC, 20% US Mostly 1-100bn in assets SURVEYS SAY… How important is voting out a director? Executives: 93% of executives say at least one director should be replaced, 78% say 2 or more Directors: 55% think AT LEAST ONE should be replaced, and 7% of directors - nearly 1 in 10 - think MORE THAN TWO directors Investors: 35% said they voted - IN EITHER DIRECTION - at all To put that in perspective, investor voter turnout is roughly equivalent to voter turnout in Syria (37%) Are boards any good? Executives: 35% of executives rate their boards as “excellent” or “good” IT executives think their boards are the WORST - only 21% think they’re effective at all, and 40% think they’re straight up “Poor” Directors: 68% of board Boards think they have an effective assessment process Investors: only 35% of investors said board composition was material AT ALL, much less worrying about how effective those boards were Are we culling directors that suck? Executives: 50% of executives feel confident a board will remove an underperformer Directors: 34% of directors think the chair/lead director is “very effective” in dealing with underperforming directors - the lowest of the options Investors: Only 35% even VOTE, and the average vote for a director is 96% in favor - 0.2% of directors annually are voted out Why aren’t we cutting directors exactly?? Executives: 57% said “Board leadership is unwilling to have difficult conversations with underperforming directors”, while 48% say “Individual director assessments are not performed” This checks out - only 27% of directors said as part of the assessment process, they did individual assessments ACTION ITEM: USE DATA TO DO INDIVIDUAL ASSESSMENTS Directors: The main reason why they haven’t been replaced is “personal relationships with board members” Investors: Only 35% even VOTE, but 52% do vote on shareholder resolutions - maybe if there was a shareholder resolution that said “do a report on individual director assessments, focusing on old, long tenured, underperforming directors”, they might actually approve a report on it since they won’t vote against a human? What makes a sucky director? Executives: advanced age, overboarding, long tenure, and unprepared for meetings When asked what a coaching a board chair should give underperforming directors: 36% say “not actively participating in discussions”, and 33% say dominating discussions Directors: “does not meaningfully contribute to discussions” and “long tenure” Investors: only 14% of asset owners find it “very useful” to do stewardship, which includes voting proxies, and 16% said they “don’t know” if it’s useful - the only time we see votes against consistently is for attendance and overboarding (like SUPER overboarding) What’s the most important issue? Executives: Executives are asking boards to spend more time… on ESG? 50%, the highest overall ask. What keeps them up at night is talent management (18%) Directors: 34% said they plan on adding “industry expertise” - which suggests 1 in 3 boardrooms might have none? Investors: Business ethics remains number 1, and is the TOP RANKED material issue of every issue they asked - 68% of asset owners agreed What do boards need? Executives: 37% said more education Directors: 45% said more education Investors: Not asked because they don’t care Other fun survey tidbits… Only 15% of executives think the board has sufficient gender/racial/ethnic diversity, while… 25% of directors thought they could improve the board by seeking “more diverse viewpoints” Boards think - at a 94% plus rate - their interactions with management were very or somewhat effective, including “developing relationship with management outside of the boardroom” So what do you do with this, investors? Executives WANT YOU TO VOTE OUT DIRECTORS Directors ALSO WANT YOU TO VOTE THEM OUT ACTION: VOTE OUT DIRECTORS - find underperformers, long-tenured or over-aged directors and swap them - only directors care about “collegiality”, executives don’t care because they need diverse viewpoints ACTION: Stop obsessing over shareholder proposals - they don’t matter nearly as much as you think they do investors Directors themselves seem like they don’t have enough expertise on the industry where they’re a director, and investors are worried directors are in it for themselves (ethics) while executives need them to think about exogenous risk (ESG) ACTION: It’s time to marry skills of directors to companies, looking for the exogenous long term risks facing an industry - use data to find them! ACTION: Don’t ask about AI skills on the board, they have to manage ALL exogenous risks over the long term, AI among them - when you myopically focus on just one, you miss the next wave of risk

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CEO succession risk, plus Mangless vs. Zevra lessons, and UnitedHealth’s investor confidence

PROXY COUNTDOWN

51 minutes 6 seconds

5 months ago

CEO succession risk, plus Mangless vs. Zevra lessons, and UnitedHealth’s investor confidence

Trade Wire - BUY/SELL Top Stories: Let’s start with the golden hellos: Zscaler’s new CFO, Kevin Rubin, starts with a golden hello equity award of $23M, consisting of restricted stock, performance stock, and options. Not bad for a guy who lasted only 11 months at his last role as CFO at BetterUp New FactSet Research Systems CEO Sanoke Viswanathan enters with a golden hello package consisting of a $22M option award to be granted in the fall of 2025 and an immediate make-whole award in the form of a $13M cash and $36M equity. The Compensation Committee at UnitedHealth Group cancelled the performance-based restricted stock units granted to former CEO Andrew Witty, a shrewd financial move considering the committee just gave boomerang CEO Steve Hemsley $60M in options to help clean up a mess that he was instrumental in creating and cultivating. After only two years on the job, Equifax EVP Todd Horvath steps away with a lump-sum cash severance payment of $2.9 million, representing approximately two years of his annual cash compensation and a prorated portion of his annual incentive award for 2025. While his unvested equity awards were forfeited upon his separation from the Company, he will still receive $3.2M cash as part of his new hire “make whole” equity award which was intended to compensate him for foregoing unvested equity at his prior employer. You literally can’t lose I guess if you’re an executive at a publicly-traded company in the US. 22 days after the company’s annual meeting where shareholders vote on the election of directors, Uber Technologies appointed Nikesh Arora to the Board and then immediately appointed him to serve on the Nominating and Compensation Committees alongside board chair Ron Sugar. And finally, let’s end with some practice vs. theory: Here’s a best practice that should be universally adopted: Quantum Corporation CEO James Lerner stepped down and Under the terms of his offer letter, he is required to resign as a director of the Company when he is no longer serving as the Company’s CEO. Norfolk Southern Claude Mongeau resigned from the Board for personal reasons. The Board will appoint a successor Board Chair at its next scheduled meeting later this month. Notice that “the board will appoint” rather than “the shareholders will elect.” Why don’t we have a separate vote for board chair in the US? And lastly, proving that long-tenured directors should not be considered independent of the companies at which they serve, Skyworks Solutions appointed Robert Schriesheim, director since 2006, as interim CFO. PROXY CAGE MATCH Activist investor Daniel Mangless failed in his bid to add two additional contested directors to the board of Zevra Therapeutics. Despite owning just 3% of the Company and having already had three nominees elected to the Board in 2023, Daniel wanted to form a board majority with his nominees Arthur Regan and former Zevra CEO and co-founder Travis Mickle. (we last saw travis Mickle in The Tai Driver so it looks like he turned his career around.) Proving once again that the performance of directors DOES matter (although it takes an activist investor campaign for the company to admit as much), here’s what Zevra had to say: “Mr. Mangless’ nominees … have track records of destroying stockholder value in public company leadership roles. During Regan’s tenure as a director at US Wats, US Wats’ stock price fell 63.9%. While Dr. Mickle was CEO of Zevra, its stock price plummeted 97.4%.” They also assert in a filing that the primary reason to be against Regan is that he has “no life sciences industry experience or knowledge.” Which nearly makes the case to re-assess thousands of US directors who similarly lack industry experience at their respective board seats. All three leading proxy advisories supported the company’s nominees: ISS added, “...the board’s concerns about having a former CEO on the board and potential disruption are valid.” Which nearly makes the case that the majority of former CEOs on boards may be disruptive Glass Lewis highlighted, “Mr. Regan has limited, dated, and unrelated public board service,” Ironic considering Regan serves as CEO and founder of Regan & Associates, proxy solicitation/shareholder services firm Glass Lewis also said that “publication of certain social media activity by Mr. Regan appears to suggest something of a blithe approach to compliance...” while the company criticized Regan for his “erratic nature, as seen in his online posts [which] could cause serious risk to Zevra’s reputation, performance, and momentum.” Are they talking about Elon?? The company also added that “as a proxy solicitor, he was unaware of, or simply ignored, SEC solicitation rules clearly requiring him to file his online soliciting posts.” Again, are we making the case against Elon? Egan-Jones also questioned the relevant expertise of Mangless’ nominees, stating, “…we do not believe Mr. Regan’s background in proxy solicitation offers meaningful value in the context of Zevra’s boardroom.” Again, opening the door to examine “the relevant expertise of all board nominees.” In the end, the contested nominees got about 25% support while the Zevra directors got about 74%. Not sure why you’d want to piss off Travis Bickle. VOTE RESULTS TABLE Here are the highlights from 36 large-cap annual meetings over the past week: 25 total SHPs: but from only 9 companies, meaning 27 meetings had zero SHPs 36% (9) of these came from one company: Meta Platforms 19 of 36: zero shareholder proposals and zero shareholder dissent. Only 1 win overall: Say on Pay Warner Bros. Discovery, Inc. (60% NO) A combination of financial underperformance and ludicrously annual increases in CEO pay undid David Zaslav’s $52M pay package (up from $39M just two years ago) 7 “moral” victories (over 30%) mostly in Say on Pay: Say on Pay DigitalBridge Group, Inc. (33% NO) DOCUSIGN, INC. (44% NO) Carlyle Group Inc. (30% NO) AXON ENTERPRISE, INC. (33% NO) Arista Networks, Inc. (38% NO) UNITEDHEALTH GROUP INC (40% NO) Shareholders ability to call a special meeting Booking Holdings Inc. (49% YES) The shareholder disconnects: UNITEDHEALTH GROUP INC (40% NO on Pay): Flynn 13% NO; Noseworthy 14% NO board average 6% NO Hemsley 7% NO Carlyle Group Inc. (30% NO on Pay) but lowest director 94% YES Warner Bros. Discovery, Inc. (60% NO on Pay) but only two directors with low votes: Anthony J. Noto 29% NO; Pay Committee Chair Paul A. Gould 13% NO The shareholder connects? Arista Networks: 38% NO on Pay Yvonne Wassenaar 25% NO; Daniel Scheinman 32% NO; Charles Giancarlo 34% NO Classified, but Scheinman and Giancarlo on Pay Committee At least they blamed somebody AXON ENTERPRISE: 33% NO on Pay & Pay Committee Chair Hadi Partovi 23% NO DOCUSIGN: 44% NO on Pay & Pay Committee Chair Blake Irving 42% NO SoFi Technologies: 24% NO on Pay & Board CHair Tom Hutton 23% NO The directors : 4 over 20%, 3 over 30%; 1 over 40% (about 360 directors: 2% over 20%) Arista Networks, Inc. (Yvonne Wassenaar 25% NO; Daniel Scheinman 32% NO; Charles Giancarlo 34% NO) Warner Bros. Discovery, Inc. (Anthony J. Noto 29% NO) AXON ENTERPRISE, INC. (Hadi Partovi 23% NO) FTAI Infrastructure Inc. (Judith A. Hannaway 36% NO (classified)) DOCUSIGN, INC. (Blake J. Irving 42% NO (classified)) SoFi Technologies, Inc. (Tom Hutton 23% NO) The oddities: The oddities: Meta Platforms: MGMT: 25% NO on equity plan 11% NO on Pay 71% want Say on Pay every 3 years SHP: Dual Class Capital Structure 26% YES Disclosure of Voting Results Based on Class of Shares 21% YES Report on Hate Targeting Marginalized Communities 15% YES Report on Child Safety Impacts and Actual Harm Reduction to Children 13% YES Risks of Deepfakes in Online Child Exploitation 6% YES AI Data Usage Oversight 10% YES Data Collection and Advertising Practices 11% YES Proving Matt’s proponent theory: Merck: tax transparency report 23% YES: Sisters of the Holy Name of Jesus and Mary JUNIPER NETWORKS: list more candidates than the number of directors to be elected 3% YES: Jing Zhao: “One of the core problems of corporate governance is that American corporate boards are not democratically elected” DOLLAR GENERAL: employee access to timely, quality healthcare 8% YES; As You Sow Roblox: reincorporation of the Company from the State of Delaware to the State of Nevada 80% YES 61% of voting power: David Baszucki Auditor dissent?! Booking Holdings Inc. (11% NO; Pay 12% NO) THE BIG VOTE PICKS MATT Proxy pool this week 104 US companies where we have data, 92 are not Totalitarian (single influencers) Caterpillar, TJX, Regeneron are largest Theme of the week: CEO Succession The succession problem: There's a CEO succession crisis brewing. From the article: CEO turnover is up, and it could get harder for some companies to find new leaders At many companies, there has been a "collapse of the leadership pipeline," Poor succession planning, job-hopping, and cuts to middle management could complicate CEO searches Nearly halfway through 2025, the number of CEO changes for S&P 500 companies is on pace to reach 14.8% for the year, according to data from The Conference Board and ESGAUGE Among the companies that make up the broad S&P 1500 index, 44% of new CEOs in 2024 were external hires, according to data from the executive search firm Spencer Stuart. It's the largest share of outsiders since the firm began tracking the data in 2000. Measuring succession risk So succession is at its highest level in years, the pipeline is weak, and companies are increasingly looking to outside hires - meaning the nomination committee and board has an actual role in picking new CEOs From Glass Lewis report earlier this year: Overall, S&P 500 companies that went through a CEO change in 2023 reported total CEO compensation averaging approximately $28.4 million for the year, compared to an average of $17.3 million at S&P 500 companies that did not. That’s $11.1m extra spend for investors to get a new CEO, and it doesn’t exclude golden parachutes on the other end NOM FAILURE IS EXPENSIVE Define the risk How to measure effectiveness of directors on succession? Captured company risk: Totalitarian companies are just pure succession risk For as many that appear to go well (the Buffett 20 year succession process) there are those that go badly (the Howard Schultz and Bob Iger boomerang tours) Director fail rate: Directors that have gone through a succession at least once, did their replacement candidate last less than 3 years? Directors that have gone through succession at least once, did their replacement face one/all of the following controversies in the first three years? Executive turnover Accounting investigations/fails Shareholder dissent / activists What are we up against this week? ACTIVE SUCCESSIONS Fortrea Holdings ($2.7bn) Corsair Gaming ($1.1bn) INEVITABLE SUCCESSIONS? 16 of 92 companies have CEOs with >=10 year tenure and are non-Totalitarian 4 of 92 companies have more than 5x the average number of controversies of sector/size peers, two of which have CEOs >10 year tenures OVERALL… This week’s vote alone has 21 companies where succession is active or inevitable Who’s best positioned? Don’t worry about… FirstCash Holdings, Inc. Generac Holdings Inc. Green Brick Partners, Inc. HCI Group, Inc. Each has at least 1 board member who has gone through succession with zero fails - all successions lasted 3+ years, there were no accounting investigations/flags in the first 3 years, Unknowns… Universal Health Realty Income Trust Shift4 Payments, Inc. Current CEO tenure of 26 years Grand Canyon Education, Inc. Current CEO tenure of 16 years Sabra Health Care REIT, Inc. Plymouth Industrial REIT, Inc. 5 companies have boards who haven’t gone through a CEO succession at all, two of which aren’t REITs Targets… Corpay, Inc. A $20bn company where 36% of the board has been involved in a CEO transition, and all 36% have failed, at a company with a long tenured (24yr) CEO CEO Clarke on board of Dayforce with TWO other Corpay directors, where the CEO Ossip became co-CEO then unbecame co-CEO less than two years later One nom committee member - Rahul Gupta - has a whopping 6 accounting investigations, late filings, or other accounting flags resulting from his last transition Three of the directors at Corpay who have transition failures have connections between each other through other boards Vote NO on Gupta and Hagerty, engage on CEO succession plan given Clarke is 69 years old and unlikely to continue in perpetuity Opendoor Technologies Company has 8x average controversies of companies in its sector at its size Adam Bain on the nom committee has been at one failed transition, failed by virtue of excess executive turnover following the transition Layup engagement target - engage nom committee now even if CEO only in place 2 years how they plan to replace if controversies continue, and how they plan on retaining key execs Williams-Sonoma Laura Alber, the CEO, has more than 50% influence on the board and it’s NOT a controlled company - and she’s the only member of the board with prior CEO transition at a public company, AND she failed at it, losing 5 more executives than expected given the CEO flip flopping at Salesforce (though Salesforce is Totalitarian, to be fair) Such is to say the board at WS has virtually no direct experience with a public CEO transition, and Alber has been sitting in the chair since 2010 Engage - what’s the nom committee plans - with only two directors, Anne Finucane and Scott Dahnke - to replace Alber at some point? Fortrea On the dangers of having your CEO as the only member of the board with CEO succession history - Tom Pike, the now gone CEO, had seen two transitions (one of which failed) at Martin Marietta Materials while on their board Engage: No one on the board has had transition experience - they have an interim CEO and were clearly not prepared for the transition to begin with, they need to retain key executives going forward Global notes Active director with the most transitions: James Hance (8), Jim Kilts (8) Director with the most fails: the Icahn family! Brett Icahn at 4 transitions, ALL failed in one way or another Jeff Stein at Ambac has one transition, but somehow managed to have three separate shareholder dissent flags (activist, engagement, votes against) Finally, Roger Moore at Verisign has done 5 transitions, and 4 of them resulted in the CEO staying 3 years or less before leaving

PROXY COUNTDOWN