Icahn says bylaw amendments on directors undercut shareholder rights
NEW YORK Feb 12 (Reuters) - Corporate bylaw amendments that prohibit a prospective board member from gaining a board seat if the person receives compensation from a shareholder undermine shareholders' rights, activist investor Carl Icahn said on Wednesday.
Icahn, in a posting on his website, said that 33 public companies had adopted such a bylaw amendment without shareholder approval as of late November.
The billionaire investor, who is known for taking large stakes in companies and pushing for corporate management change, cited Service Corporation International, an operator of cemeteries and funeral homes, and gaming company International Game Technology as two companies that have adopted such measures, which he called Director Disqualification Bylaws.
Icahn, in the article on his website, Shareholders' Square Table, said such measures bar a person from obtaining a spot on a company's board of directors if a shareholder nominated the person and agreed to pay the nominee a fee, including compensation for a proxy fight.
"It is absolutely offensive for an incumbent board to unilaterally adopt a Director Disqualification Bylaw without shareholder approval, and shareholders should also reject a Director Disqualification Bylaw if their incumbent board puts one up for a vote in the future," Icahn said.
He said that since shareholders are already fully informed of compensation arrangements between activist investors and board nominees under federal securities laws, the bylaw amendment "undermines the most basic right of shareholders" to decide who should join a company's board.
Icahn is chairman of investment firm Icahn Enterprises L.P. and holds substantial stakes in companies including Apple Inc, Ebay and Talisman Energy Inc .
"We'll continue to hold CEOs & boards more accountable & grow partnerships btwn activists & institutional investors to help #ShareholderValue," Icahn wrote on social media platform Twitter on Jan. 8.
On Wednesday, Icahn noted that proxy advisory firm Institutional Shareholder Services Inc. said in mid-January that it may recommend a vote against such bylaws.
"The adoption of restrictive director qualification bylaws without shareholder approval may be considered a material failure of governance because the ability to elect directors is a fundamental shareholder right," ISS said on Jan. 13.
ISS in its statement said that it has not recommended voting against directors and boards that have adopted bylaws prohibiting nominees who fail to disclose third-party compensation from taking board seats, saying that "such provisions may provide greater transparency for shareholders."
Icahn recently took a more than $4 billion stake in Apple Inc. and had waged a public campaign to get Apple to return more cash to shareholders.
In a letter to Apple shareholders on Monday, Icahn said he was ditching his non-binding proposal to force Apple to add another $50 billion to its stock buyback plan, citing the company's recent repurchases as well as ISS's call against his proposal.
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