Op-ed Syndicated Column
How to Prepare for the Proxy Wars
By Richard Torrenzano and Mark Davis
Procter & Gamble leadership invested a reported $100 million in a campaign to stop activist investor Nelson Peltz of Trian Partners. And what did they get for this spend of shareholder money?
If yesterday’s recount of proxy votes holds, Peltz will be sitting right next to them on P&G’s board. Despite the recent lopsided victory by Automated Data Processing over a challenge, activists will now judge that if they can take on P&G and win, they can aspire to be voted on almost any board.
Peltz was emboldened to take on P&G after losing a 2015 bid to upend the DuPont board by a margin that would have been reversed if he had finished just a little better among retail investors.
Proxy elections are now more intense, often winning or losing by narrow margins as raiders import the political dark arts of targeted, negative media in Facebook ads, podcasts, vlogs and other social platforms. After the DuPont election, Peltz reportedly complained about management “doing a better job scaring people.”
As the ground shifts, business leaders must get ahead of six emerging proxy trends if they are to maintain control:
Individual investors swing votes: Management has long been complacent about ongoing communications to individual investors, though they typically hold about a third of shares.
Historically, retail investors have seen defense of management as a defense of their investment. However, management’s risk of losing increases as activist investors grow more skillful in social media and make direct and inflammatory appeals to shareholders.
Most corporate leaders today are ill-equipped to fight activist investors in highly public, populist contests.
Voting process will be challenged and changed. One close observer of the P&G vote told us that registered shares held by executives, employees and ESOPS arriving at the last minute made a difference in the first count, which Peltz lost.
Such tabulations of registered votes are performed by proxy solicitors working for the company. Independent auditors review solicitor’s count, but only to confirm that the correct number of signed cards have been counted.
“The solicitor counts votes that they are responsible for in a must-win job,” this observer told us. “In perception and reality, that is not a good thing.”
Eventually, some proxy battle will result in a lawsuit that replays the agony of the American 2000 election, only without both parties sitting side-by-side to verify results. With so much at stake, pressure will build to scuttle this solicitor model in favor of a more transparent process, validated by technology.
Social media will become a voting platform. Social media is already playing a role in proxy campaigns. It is only a matter of time before blockchain or other technology allows shareholders to vote with verification through Facebook and other platforms. When this shift occurs, expect individual investors to vote on impulse, responding to the last ad or piece of information read on social media. Corporations that lack ongoing communication and connection with individual shareholders will be at a competitive disadvantage.
Entering the age of the permanent campaign. Shareholder communications usually pick up with annual meetings and corporate leaders squeeze investors when a proxy challenge emerges. Boards, C-suites and communications professionals must accept the truth that political players embraced long ago – we now live in an age of the permanent campaign.
Companies must learn to use social media – within the constraints of SEC rules – to listen and engage investors throughout the year, building understanding and loyalty of a shareholder army, long before it is needed.
Partisan politics will infect proxy elections, just as it has infected everything else. The loopy social justice nun at annual meetings of years gone by is giving way to sharp activists from unions, environmental groups, left and right NGOs, who have savvy and budgets of corporate raiders. In our divided nation, it will not be long before proxy battles take on more of an ideological tinge.
Corporate-speak flops. Marketing orientation and business leaders’ allegiance to internal jargon, acronyms and processes, accentuates why United Airlines three times failed to respond appropriately to the ugly removal of a passenger, in a way the public could understand or accept. Management must recognize the new visceral impact of images and address people in plain English not corporate speak or legalese. Today, everybody reads and sees everything.
As proxy wars escalate, corporate boards and leaders who do not embrace these trends will spend the rest of their lives working only on their favorite hobbies.
Richard Torrenzano, chief executive, The Torrenzano Group, spent almost a decade on Management and Executive Committees of the New York Stock Exchange. Mark Davis, a former White House speechwriter, is a corporate reputation consultant. They are the co-authors of Digital Assassination (MacMillan/St. Martin’s Press).
Read more about Richard Torrenzano's keynote at IAGA's New York Summit on June 1, 2017 in the Global Games and Gaming Magazine, May 2017 issue.
We are now several weeks into the Chinese New Year, which inaugurated the Year of the Fire Rooster. Not a bad moniker for the new president either, who has started off fiery, cocky, and disruptive.
President Donald Trump set off fireworks by doing the unthinkable — fulfilling his campaign pledges. Liberal activists and their media allies are busy trying to demonize Trump’s agenda. Trump responded by calling the media and fake news “the enemy of the American people.” The United States is more politically divided now than at any time since 1968, if not 1860.
With explosions and shrapnel all around us, how should corporate leaders conduct themselves?
With the best interests of shareholders in mind, executives need to take a deep breath and think strategically about the next four years.
Full story: http://www.newsmax.com/RichardTorrenzanoandMarkDavis/business-strategy-presidential-agenda-free-trade/2017/03/03/id/776711/
Retailers and big brands are increasingly getting pulled into partisan fights involving President Donald Trump, as a deeply divided nation seeks to punish those that don’t agree with their political views.
Full story: https://www.wsj.com/articles/retailers-are-caught-in-political-fights-over-trump-1486685345
Newsmax Launches Column by Richard Torrenzano and Mark Davis “Corner of Wall St. and Pennsylvania Ave.”
Richard Torrenzano, former chief spokesman for the New York Stock Exchange, and Mark Davis, former White House speechwriter, have launched a new opinion column on Newsmax.com.
Newsmax has rapidly grown to become a top online news site. Their column, posted inside the “Opinion” section, offers unique insights on business, policy and politics.
Their first columns include:
Visit their column at: http://www.newsmax.com/Insiders/RichardTorrenzanoandMarkDavis/id-386/
Richard Torrenzano is chief executive of The Torrenzano Group, a strategic communications and high-stakes issues management firm that helps organizations “take control of how they are perceived™.” For almost a decade, he was a member of the New York Stock Exchange’s Management and Executive Committees. He has managed some of the most visible global corporate crises in our lifetime.
Mark Davis, a former White House speechwriter, advised presidents, governors and other political leaders, as well as executives of the nation’s top defense-aerospace, energy, financial, IT and telecommunications companies.
Torrenzano and Davis are co-authors of, Digital Assassination: Protecting Your Reputation, Brand, or Business Against Online Attacks, St. Martin’s Press-Macmillan, praised by Groundswell author Charlene Li as “keen and timely advice,” and by Gen. Mike Hayden (Ret.), former head of the NSA and CIA, as a book that “should be in the hands of anyone who has a good name — or a good business — to protect.”
Donald J. Trump is about to enjoy the best chance any president has had for the fast enactment of an agenda since FDR’s first 100 days.
With Trump and a Republican Congressional majority at each end of Pennsylvania Avenue, that clogged artery can finally see traffic move in the form of economic reform legislation. Of course, the legislative calendar and its arcane procedures always impose some stateliness over the process of change. We should not expect speeds equal to Elon Musk’s Hyperloop. But the pace of change will be brisk, especially for Washington.
After years of stagnation, pragmatism is finally about to take precedence over ideology, "what works" over "what’s politically correct."
Full story: http://www.newsmax.com/RichardTorrenzanoandMarkDavis/president-trump-economy-taxes-business/2016/11/14/id/758816/
With Clinton and Trump neck-and-neck in the polls, one winner is certain — the powerful plaintiffs’ bar. For the first time in history, the presidential nominees of both parties are champions of aggressive legal tactics and excessive litigation.
One candidate, Trump, views legal intimidation as an effective weapon to stymie personal and political criticism. The other, Clinton, is a former law firm partner whose perpetual campaign has long run on trial lawyer donations.
As the plaintiffs’ bar anticipates tightening its grip on the Oval Office, it is also renewing class-action assaults on business. Engorged by large winnings from tobacco settlements, litigants are spinning frivolous claims based on junk science into contingency-fee gold.
Take some recent cases from just one sector, food companies, as examples of a trial bar out of control.
Full story: www.newsmax.com/RichardTorrenzanoandMarkDavis/social-media-lawsuit-corporate-digital/2016/09/28/id/750607/
The four corners of today’s geopolitical earth are blazing wildfires.
In Eastern Europe, for the first time since World War II, military force has been used to redraw borders as a revanchist Russia digests the Crimea. In Syria, Russia is demonstrating its re-emergence as a great power by using aerial sorties effectively in defense of the Assad regime, including bombing bases the United States set up for its allies.
In Southeast Asia, China ignores international law by creating reefs to expand illegal claims on a large portion of the South China Sea. In Northeast Asia, Kim Jong-Un — who starved millions of his people to death and lashed out at his neighbors with terrorist acts — is now doubling down as a global fountain of instability by initiating his fifth nuclear missile test. And, in case anyone missed the significance of this act last week, Kim fired missiles towards Japan.
Continue Reading: http://www.newsmax.com/RichardTorrenzanoandMarkDavis/corporate-risk-iran-north-korea/2016/09/16/id/748732/
American companies that do business in or with China may be on the verge of the ultimate “black swan” event, an international crisis that threatens assets, shipping and supply chains, as well as the safety of employees.
Reuters reports that China’s military, finding humiliation in the Hague’s recent ruling that its expansion into the South China Sea violates Filipino sovereignty, is pushing President Xi Jinping to give the United States and its allies “a bloody nose.”
The dispute over the South China Sea has become a risk that must now be addressed by boards and leaders of global enterprises, as well as by generals and admirals. Seventy percent of world trade passes through the South China Sea, about $5 trillion in goods a year in shipborne trade. “Restricting or managing shipping in the South China Sea would be a huge setback to a world still struggling to recover economically,” reports Xeneta, which benchmarks pricing for shipping and logistics.
The financial stakes of an economic, diplomatic or limited military conflict make it essential that any business operating in China or shipping through these sea lanes prepare now to protect their people, capital and investments in the case of conflict.
China and the United States are escalating toward an aggressive military posture. China has installed surface-to-air missiles in the Paracel island chain and is reported to have built hangers for fighter jets in the Spratlys. The United States dispatched a naval strike group into those disputed waters, led by the supercarrier John C. Stennis.
Dogged along the way by Chinese war ships, the Stennis rendezvoused in June with another supercarrier, the Ronald Reagan, in the Philippine Sea for joint exercises. While U.S. officials are quick to characterize these as routine drills, other observers see them as a deliberate show of US force.
It is tempting to downplay the potential for conflict by pointing to the intimacy between the two largest economies. By this line of reasoning, both sides will realize there is simply too much at stake to risk destroying decades of mutual growth over a few tiny atolls. The United States imported $482 billion of goods and services from China in 2015. China controlled $1.2 trillion of American debt last year.
This sanguine view, however, fails to recognize that human leaders are capable of catastrophic mistakes. The argument that economic interdependence rules out war between industrial nations was first and famously put forward in Norman Angell’s 1909 book The Great Illusion. Of course, Angell was proven wrong five years later when the First World War broke out.
It wouldn’t take a shooting war between the two powers to pose a severe challenge for those who do business in China. Both sides state diametrically opposed goals, and ostentatiously display determination to protect those goals with force. “Let us face squarely the paradox,” a chastened Angell wrote years later, “that the world which goes to war is a world, usually, genuinely desiring peace.” Despite a desire for peace from both sides, some confrontation at some level seems inevitable. Even a diplomatic standoff could entail serious consequences for those with assets in China.
While such a clash is not inevitable, it would be irresponsible for any US company with substantial holdings or business in China to be unprepared for a spectrum of scenarios, and to have a strategy at the ready to manage them.
Companies must foresee the wide-ranging effects this dispute might have on brand, asset and equity value, as well as supply chains. At the forefront, of course, is protection of human capital, from the need to move people out of harm’s way, to scenario planning for repatriating employees stranded under belligerent regimes.
While there is time for cooler heads to prevail, now is the time for responsible business leaders to discreetly address these scenarios. Detailed, well thought-out plans and likely effects must be mapped. To some, this may seem like overkill, but the current world instability requires such planning as an urgent priority.
Richard Torrenzano is a former New York Stock Exchange senior officer who organized and was part of the U.S. delegation sent by President Reagan to open exchanges in China. Mark Davis is a former White House speechwriter and has drafted foreign policy and arms control addresses for President George H.W. Bush.
For article on Journal of Commerce, visit: http://www.joc.com/maritime-news/industry-must-prepare-worst-south-china-sea_20160908.html
Companies quickly protect brand, when bad behavior by athletics or celebrities erupts publicly on the global stage. Seattle Times interviews Richard Torrenzano on why companies protect affiliations and brand name. He says trust, honesty and Olympic values of sportsmanship and fairness are what corporate sponsors seek. And nowadays, they’re quicker to drop athletes betraying those ideals.
Read the full article here: http://www.seattletimes.com/sports/olympics/hope-solo-or-ryan-lochte-whose-earning-potential-was-damaged-more-during-olympics/