DuPont’s Swing Voter: The Small Investor
outcome may depend on individual shareholders
May 6, 2015 7:25 p.m. ET
The proxy battle between
and Trian Fund Management LP pits the industrial giant
against one of Wall Street’s
most successful activist investors, and it involves financial
institutions that manage billions of dollars. But the outcome could
come down to such individual investors as retired electrical-utility
manager Roger Rinehart.
The 68-year-old resident of Dayton, Ohio, has about 100 DuPont shares
in his personal portfolio, and he has been inundated with pitches from
both sides—so much so that he asked DuPont to stop calling him after
about their third try. He said he hasn’t yet voted his shares for
either side’s board nominees, though he’s leaning toward Trian’s. “I
have no quibble with the stock price,” he said, but the company’s
performance “seems stagnant.”
Individual investors like Mr. Rinehart are typically wallflowers in
big corporate-governance debates. But at DuPont they account for a
third of total shares,�more than is usual at big companies. And with
the May 13 vote to pick directors expected to be close, they have
become a wildcard in one of the
biggest proxy contests in history.
Trian has nominated four candidates for DuPont’s 12-member board,
including Trian Chief Executive Nelson Peltz. It wants DuPont to slash
expenses and consider breaking up the company. DuPont responds that a
breakup is a bad idea that needlessly distracts from its plan to
refocus on more-profitable products, which executives say is
succeeding. Neither side has shown signs of backing down, though a
settlement is always possible.
Shareholders can vote using a proxy card from one side or the other.
Trian’s card counts as votes for the eight DuPont directors Trian is
supporting, in addition to Trian’s four nominees, unless a shareholder
explicitly withholds votes from any of the names. The new board will
be composed of the 12 nominees who win the most votes.
While both sides are traveling the country to court professional money
managers, they have also carpet-bombed mom-and-pop shareholders with
emails, phone calls, and advertisements in the News Journal, the
hometown newspaper in Wilmington, Del., where DuPont is based. A
Google search for “DuPont Trian” brings up jousting websites created
for the proxy contest: dupontdelivers.com belongs to management, and
dupontcanbegreat.com is Trian’s.
“As a DuPont shareholder, you have a powerful voice in this matter,”
DuPont Chief Executive
Ellen Kullman said in a letter Tuesday, one of seven the company
has sent to shareholders. “Your Board and management are determined to
prevent the negative and far-reaching effects on our shareholders,
customers, employees and the communities in which we operate,” the
letter said of Trian’s campaign.
“It is time for change at DuPont,” Trian executives countered
Wednesday in the latest of their five letters. “Your vote is
important, no matter how many or how few shares you own.”
Robert Sacino, a retired professor, said he’s pleased with DuPont,
shares of which have nearly tripled during Ms. Kullman’s tenure. “I’m
not opposed to activism,” said Mr. Sacino, 63 years old, who lives in
New Rochelle, N.Y. “But I don’t think the target is right for Trian.”
Greg Poore believes Trian’s Mr. Peltz will help tighten DuPont’s focus
on meaningful innovation and streamline the 212-year-old company’s
operations. “DuPont’s one of those classic corporate cases of the
‘ivory tower’ corporate directors who have lost touch,” said Mr. Poore,
a Fountain Hills, Ariz., based investor who voted his shares for
DuPont shareholder, you have a powerful voice in this matter,’
DuPont Chief Executive Ellen Kullman said in a letter sent to
shareholders. Photo: Associated Press
Parties in proxy fights often reach out to individual investors, but
they tend not to focus on them because such investors rarely turn out
in big numbers, whereas mutual-fund firms have fiduciary duties to
vote their shares, say corporate governance experts.
DuPont, with a market capitalization of about $66 billion, has
estimated it has about 600,000 individual investors, holding about 33%
of its equity.
That compares with about 28% at typical large-cap companies, according
to Broadridge Financial Solutions Inc., which manages companies’
communications with investors.
U.S. retail shareholders last year voted about 29% of their shares in
corporate governance matters, down from about 40% to 45% roughly a
decade earlier, according to Broadridge.
The boardroom battle has been costly. Trian estimates it will spend $8
million on it. DuPont puts its tally at $15.4 million. DuPont’s proxy
solicitor, which canvasses shareholders to gather votes, has about 200
employees working on the fight, while Trian’s has about 175, according
to regulatory filings. Other recent proxy campaigns typically had
closer to 50 solicitors working on each side.
‘When they do vote, retail investors tend to side with company
management more than institutions.’
—Alicia Davis, a law professor at the University of Michigan
Some mutual-fund managers back DuPont’s management while others say
that Mr. Peltz’s track record of helping to revamp companies should
earn him a DuPont seat. Since late April, three proxy advisory firms,
which advise financial institutions on corporate governance matters,
have endorsed Mr. Peltz’s candidacy. A fourth has backed all of
Many fund managers have to own shares of companies like DuPont that
are part of key stock indexes. But individual investors who are
dissatisfied with a firm’s performance can just sell, so those that do
hold shares tend to view sitting executive teams somewhat more
favorably, according to academics.
“When they do vote, retail investors tend to side with company
management more than institutions,” said Alicia Davis, a law professor
at the University of Michigan who studies shareholder behavior. “This
makes individual investors key players in close votes accompanying
battles for corporate control.”
Some shareholders say their holdings are about more than share
performance and dividends. An estimated 2% of DuPont shares are owned
by investors based in or around Wilmington, including many current and
former DuPont employees or their relatives.
Alan Behringer, a Wilmington-based lawyer, inherited DuPont shares
from his father, who worked for the company for 41 years. Mr.
Behringer says he fears Trian could drastically alter DuPont’s
research and development, potentially hamstringing long-term
competitiveness. He acknowledges a “built-in bias in favor of existing
“I owe a lot to the fact that the DuPont company was able to provide
[my father] with a good job for 40 years,” said Mr. Behringer, 69, who
voted his 180 shares for DuPont’s directors. “That’s the way a lot of
us in Delaware feel.”
—David Benoit contributed to this article.
Jacob Bunge at