Proxy Contests - Mark Foletta Summit Conference

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  • 1. Proxy Contests - A Reflection After 18 Months
    Mark G. Foletta
    Sr. VP & Chief Financial Officer
    Amylin Pharmaceuticals, Inc.
  • 2. Key Observations
    4-5 month process for us – a HUGE time sink that can cost several million dollars
    Establish a qualified team of advisors and internal people
    Focus the leadership team on running the business
    Establish the best Corporate Governance policies well before you have an activist in your stock
    Remember…this is an election
  • 3. Overview of Presentation
    Investor Considerations
    Internal and External Team
    Key Learnings
  • 4. Investor Considerations
    Road Show Meetings and Presentation
    Challenges Facing Investors
    Record Date Issues
    Index Funds
  • 5. Road Show Meetings and Presentation
    Different than a typical investor interaction
    Corporate Governance issues
    Respond to dissident arguments
    From investors, legal/proxy attendees as well as PM and analyst
    From Company, Board attendees to show strength, experience and commitment
    Presentation needs to be clear, concise and impactful
    Many investors will just review on the web
  • 6. Challenges Facing Investors
    Difficult for some investors to vote against proxy governance services (Risk Metrics, Glass Lewis, etc.)
    Internal policies make it time consuming
    Decision sometimes made by other than PM
    Understand leverage points and decision maker within the institution (proxy solicitor can help)
    Busy time – they have hundreds of proxies to vote!
  • 7. Record Date Issues
    The investors who held your stock on the record date matter (even if they subsequently sold)
    If investor is out of stock after record date, they may be unwilling to take a meeting, and may not be sympathetic to your cause
    Stock surveillance service is critical to help determine who held at the record date
  • 8. Index Funds
    Don’t forget them!
    They will meet with you and they will engage around the issues and make a decision
  • 9. Internal & External Team
    Investor Relations
    Public Relations
    Proxy Solicitor
    Finance/Investment Banker
  • 10. Investor Relations
    First line contact with investor community
    Provide insights to investor perceptions
    Prepare the road show presentation
    This will tax your IR team
    Use stock surveillance service to assist
    Analytics around ownership and scenarios around voting
  • 11. Public Relations
    Very important
    Media often takes an interest in proxy contests – especially if a serial activist is involved
    Manage multiple “news events” as there are many public filings (DEF 14A) that may result in a media inquiry…and you can’t always predict when they will occur
    Drive to respond with company statement(s) in same news cycle as activist(s)
    Results in accelerating pace best managed by specialist PR agency
  • 12. Legal
    Manage preparation of proxy statement and other filings
    Manage external advisors and Board
    Manage potential litigation
  • 13. Finance/Investments Bankers
    Many Banks have specialists that focus on activists and proxy fights
    They have relationships with Proxy Solicitors and Stock Governance Services
    Financial analysis around possible business proposals proposed by dissident
    Peer financial comparison
    Reduce expenses
    Sell off divisions
    An external advisor can enable your internal Finance team to remain focused on the business
  • 14. Proxy Solicitor
    Critical function
    Intelligence around how funds vote and funds that tend to follow activists
    Information useful in setting road show schedule
  • 15. Process Issues
    Fight Letters
    DEF 14A’s
    Stock Governance Services (ISS, etc)
  • 16. Fight Letters
    Necessary, but not a value add
    Targeted more to retail investors and the media than institutional holders
    They take a lot of time!
  • 17. DEF 14A’s (Technical Term for SEC Proxy Filings)
    Everything you mail or present to investors requires a filing
    Typical proxy season has 1-2 filings
    Proxy contest requires many more
    In our fight, there were 73 filings! (including Company and Dissidents)
    They are all public and subject to investor/media scrutiny
  • 18. Stock Governance Services(Risk Metrics, Glass Lewis, etc.)
    They have a lot of influence
    They don’t spend a lot of time
    Mostly focused on stock performance
    Less focused on drivers of stock performance
    Generally supportive of investors having board representation in proportion to their ownership
    Often take a “split the baby” approach
  • 19. Key Learnings
    Good corporate governance matters
    Don’t wait until you have an activist in your stock
    Determine what you can accept and consider settling before proxy materials are printed
    If you engage in a contest, be prepared to go all the way and to spend several million dollars
    Get good advisors – but be careful of advice from those that don’t have to live with the consequences!
    Focus your leadership team on running the business