Two independent proxy advisory firms — Shareholder Services (ISS) and Glass Lewis — are advising that GM shareholders to vote against the proposal by Greenlight Capital and vote for all of the board’s nominees instead for GM’s 2017 Annual Meeting set to take place on June 6th, 2017.
In March, investment firm Greenlight Capital and its founder, David Einhorn, started a proxy fight seeking to eliminate the dividend on existing GM common stock and create a new dividend-focused security, the latter of which is an unprecedented instrument.
In its May 26, 2017 report, ISS concluded the following:
- “The negative outcomes associated with the proposed dual class share structure combined with the lack of visibility regarding value creation for shareholders drive our recommendation against the dual class proposal.” (ISS Report, pg. 19)
- “…considering that the dissident’s dual class share proposal does not warrant shareholder support, the dissident has not made a compelling case that change at the board level focusing on the implementation of its proposal is warranted.” (ISS Report, pg. 19)
In support of its conclusion, ISS stated:
- “The bottom line of this analysis is that Barra and her management team have delivered objective operational improvements.” (ISS Report, pg. 17)
- “…the company has closed the performance gap relative to peers since Barra took over as CEO, while outperforming Ford, and… the market has not reacted positively to the dissident’s proposal.” (ISS Report, pg. 16)
- “The dual class structure would create conflicts of interest as dividend and capital appreciation shareholders would have different objectives, adding complexity to decisions regarding the company’s capital structure and investments. For example, an investment to grow profits would primarily benefit capital appreciation shareholders.” (ISS Report, pg. 18)
The GM Authority Take
Einhorn and Greenlight Capital have been adamant about their recommendation, but it’s tough to argue that their proposal is more beneficial compared to the problems it presents. Looks likeJune 6th is sharping up to be quite the doozy.