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April 27, 2015 5:50 pm
Investor advisory group backs Peltz for
DuPont board
Stephen Foley in New York
Nelson
Peltz, the activist investor, won the backing of an influential shareholder
advisory group in his
battle for a seat on the board of US chemicals company
DuPont.
Mr
Peltz’s presence on the board may be “not simply desirable but necessary”,
the proxy adviser ISS said, in a scathing critique of DuPont’s
communications with shareholders.
The
existing board and management at DuPont are “more inclined to obfuscation
than accountability” and used “sleight of hand” to flatter the company’s
competitive strength, it said in a report sent to clients on Monday.
The
proxy adviser’s intervention has the ability to sway scores of institutional
investor votes, in what is shaping up to be the most
contentious fight of this year’s season of annual shareholder meetings
in the US.
Mr
Peltz’s investment company Trian Partners has built a 2.7 per cent stake in
DuPont and is arguing that the company has fallen behind its peers in terms
of revenue growth and margins. Its prescription for change includes big head
office cost cuts and consideration of whether the company should break
itself up.
DuPont’s
management, led by chief executive
Ellen Kullman, says Mr Peltz’s presence on the board would be
disruptive, and Trian’s plan would slash vital research and development
spending.
ISS
endorsed Mr Peltz and one of the three other director nominees being put
forward by Trian.
“This is
not a broken company, but there is compelling evidence that the dissidents
are on to something in their critique,” ISS analyst Chris Cernich wrote.
“Operating efficiency is not what it should be, yet instead of addressing
the core issues, the board and management, at least in their communications
with shareholders, are more inclined to obfuscation than accountability.”
ISS and
other proxy advisers can swing more than
a quarter of the votes at some shareholder meetings, although 30 per
cent of DuPont’s shares are held by retail investors who do not receive
their recommendations. DuPont has already been seeking to limit ISS’s
influence by arguing the adviser is too close to activist hedge funds such
as Trian.
DuPont
said ISS had ignored “the success of our transformative strategy and the
value-destructive nature of Trian’s break up agenda ... the addition of
Trian’s nominees would remove critical experience from DuPont’s board.”
Trian
did not immediately respond to ISS’s conclusions.
With
pressure from Trian mounting, DuPont in January said it was accelerating its
own
cost-cutting plans, which had been aimed at delivering a reduction of
$1bn per year by 2019, but are now intended to save that much this year.
Trian
nominated four directors to the board in January. ISS supported Mr Peltz and
John Myers, a former chief executive of GE Asset Management, but not Arthur
Winkleblack, a former Heinz executive, or Robert Zatta, who runs speciality
chemicals group Rockwood Holdings.
The
DuPont annual meeting is on May 13.
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© The Financial Times Ltd 2015 |
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