APRIL 2020

LAZARD'S SHAREHOLDER ADVISORY GROUP

Review of Shareholder Activism - Q1 2020

Lazard has prepared the information herein based upon publicly available
information and for general informational purposes only. The information is not
intended to be, and should not be construed as, financial, legal or other advice,
and Lazard shall have no duties or obligations to you in respect of the information.
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Observations on the Activism Environment Amid the Public Health Crisis

• Prior to the public health crisis, global activism activity in 2020 was off to a strong start with 42 campaigns initiated at 42 companies and
total capital deployed of $13.1bn in January and February
• Surge in January and February driven by Europe, which experienced record activity in terms of campaign initiations and capital deployed
Impact on − Local activists are increasingly initiating campaigns in Europe, accounting for 71% of activity in Q1 2020, compared with 58% in 2019
1 New • Since the outbreak in March, global activism activity significantly slowed by 38% month-over-month relative to February 2020 and 27%
Campaign year-over-year relative to March 2019
Activity − March campaign initiation was the slowest since 2013 and capital deployed was the lowest March since 2016
− Dampened activity in March has been consistent across the US, Europe and APAC
• Drop off in activity especially apparent on a weekly basis with average weekly campaign initiations falling from ~7 in February to ~4 in
March and average weekly capital deployed of ~$2.8bn in February falling to ~$0.3bn in March

• Some activists have taken advantage of market dislocation by ratcheting up pressure and/or opportunistically increasing positions
Impact on
• In other instances, activists have opted to settle, postpone or withdraw campaigns amid the market volatility
2 Existing
Campaigns − 10 campaigns settled in March (e.g., Starboard / Box, Elliott / Twitter), while multiple have withdrawn or postponed campaigns, citing
market conditions (e.g., Land & Buildings / American Homes 4 Rent, Bluebell / Lufthansa)
• As corporate behavior and priorities change in this new market paradigm, so too will activists’ ability to publicly agitate for change
• Overall near-term activity likely to remain subdued as activists face ongoing market volatility, uncertainty related to the duration and
severity of the crisis as well as the risk of being criticized as opportunistic and self-serving
• With M&A activity sinking to multi-year lows and corporations fighting to preserve liquidity, activists are losing arrows in their quiver
Impact on the
• Notable activists such as Icahn and Starboard have maintained their heightened level of activity amid the public health crisis (e.g., Icahn /
3 Activism
Occidental, Starboard / Commvault)
Landscape
• Expect only the most sophisticated and well-capitalized activist firms to emerge from the crisis relatively unscathed as smaller firms stand
subject to increasing outflows
• While activists will face additional hurdles following the public health crisis (increased poison pill activity, government equity stakes), expect
activity to pick up meaningfully post the public health crisis
• Large index funds have bolstered sustainability expectations and provided more specificity on how companies should report and respond,
noting that progress should not be curtailed despite the pandemic
Implications • In a time of crisis, where governance shortcomings are likely to be exposed, investors will be looking to understand what actions
for ESG and
4 Shareholder
companies have taken in response to the pandemic, particularly as it relates to human capital management, executive compensation, and
business strategy
Engagement
• Despite the market chaos, ESG and sustainability-oriented funds outperformed conventional funds globally in Q1
− Strong Q1 performance is in contradiction to recent observations which label sustainability as a “luxury good”
Source: FactSet, press reports and public filings as of 3/31/2020. 1
Note: All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
 REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Q1 2020 Campaign Activity and Capital Deployment

($ in billions)

Quarterly Campaigns Initiated1 Investors Launching Activist Campaigns

248 # of Investors # of “First Timers”
212 209 Q1 campaign 147
187 63 initiations in line with 131
49 46 2019, but lagging 109
34 43 103
historical averages
52 53 52 104
91
73 73 86
36 40 54 58 47

65 70 69 33
57 30 40 43
23 14
2016 2017 2018 2019 Q1 2020 2016 2017 2018 2019 Q1 2020
Q1 % of
Companies 61 64 67 53 58 Campaigns by 29% 21% 31% 29% 30%
Targeted First Timers
Q1 Q2 Q3 Q4
Capital Deployment in New Campaigns ($bn) Capital Deployment by Sector in Q1 2020

Aggregate Value of New Activist Positions2 Aggregate Value of New Activist Positions2
$66.4 35%
$62.4
7.8 13.5
27%
8.7 23%
17.3 $42.2
6.1
$30.5 19.0
11.5
6.0 20.9 7%
4% 2% 1% 1% <1%
12.8 13.0 $14.4 $5.1 $3.9 $3.3 $1.0 $0.3 $0.1
$0.5 $0.1 $0.1
25.3
6.0 16.5
Technology

Retail

Real Estate
Industrials

Institutions

Energy & Infra.

Consumer

Healthcare

Media
11.7 Financial
5.7

Power,
2016 2017 2018 2019 Q1 2020
Q1 Q2 Q3 Q4 Above/Below
2016-19 Avg.3         
Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
2
1 Companies spun off as part of campaign process counted separately.
2 Calculated as of campaign announcement date. Does not include derivative positions.
3 4-year average based on aggregate value of activist positions.
 REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Q1 2020 Board Seats Won

Board Seats Won1 Non-Activist Employees vs. Activist Employees Appointed as Directors

Board Seats Won1 Non-Activist Fund Employees Appointed

Board Seats Won1 # of Companies Targeted for Board Seats
Activist Fund Employees Appointed
Board Seats Won in Q1
161
72 Board seats 145
Currently “in play”2
79 880 seats have 122
67 changed hands 103
58 since 2013
53 106 125

Mean: 133 161 94

145 75 43
122 21
103 29
39 28 36 28 14
65 2016 2017 2018 2019 Q1 2020
51 47 43 Activist
39
Employees 27% 27% 22% 23% 33%
as % of Total
2016 2017 2018 2019 Q1 2020
Settlements vs. Proxy Contests Timing of Board Seat Wins

Board Seats Won1 Board Seats Won Through Settlements

Board Seats Won Through Proxy Fights
161
145
4
122
Zero Board seats
103 were won through 16
126 proxy fights in Q1
127 2020
102 43
89 43
0 23
35
18 14 20
2016 2017 2018 2019 Q1 2020 Outside Proxy Proxy Process After Proxy Total Seats
Won Through
Proxy Contest
Process Initiated Filing Won
12% 14% 22% 16% 0%
as % of Total

Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
3
1 Represents Board seats won by activists in respective year, regardless of the year in which the campaign was initiated.
2 Board seats “in play” includes currently announced proxy contests at upcoming shareholder meetings as of 3/31/2020.
 1 Impact on New Campaign Activity
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Strong Global Activity in First Two Months of the Year

($ in billions)

Global activism activity in January and February was in-line with historical averages while capital deployed posted a record $13.1bn

Historical January/February Campaigns Initiated1 Historical January/February Capital Deployed ($bn)2

January February January February

$13.1
46 46
Driven by Elliott’s $2.5bn
43 stake in SoftBank, Harris
42
Associates’ $2.5bn stake in 11.3
Daimler and Third Point’s
$2.4bn stake in Prudential
13 35
21
$8.7
28 $8.4

26 $7.6
2.3
18

5.4 3.6

$4.5

30
25 2.5 6.4
18 17 16 4.0
3.0
2.0 1.8

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
4
1 Companies spun off as part of campaign process counted separately.
2 Calculated as of campaign announcement date. Does not include derivative positions.
 1 Impact on New Campaign Activity
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Strong January and February Activity in Europe

($ in billions)

Europe witnessed a historic number of campaigns in the beginning of 2020

Quarterly Campaigns Initiated in Europe Capital Deployment in New Campaigns in Europe ($bn)

Average Q1 initiations 2020 Q1 saw an acceleration of

campaigns leveling up to historic highs,
Q4 with the UK and Germany representing Q4 $9.2
Q3 more than 57% of campaigns Q3 Harris Associates’ $2.5bn
Q2 Q2 0.9 stake in Daimler and Third
Q1 21 21 Q1 Point’s $2.4bn stake in
Prudential accounts for
$4.9bn out of $6.5bn

17 $6.5
16 16 3.9
15 15 Rest of
14 14 the Year
14

11
10 10 4.9
9 9
16 out of 21 campaigns
8 8
took place before COVID-
19 market downturn 3.1

4 During Q1,
activists deployed ~70%
of the amount of capital
deployed in all of 2019
Q1 1.3

2016 2017 2018 2019 2020 2019 Q1 2020

Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement.
5
 1 Impact on New Campaign Activity
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

In Europe, U.S. Agitators Remain the Main Players but are Joined by Local Players
U.S Agitators are Outnumbered by Local Players… … but Continue to Lead the Effort

U.S. Agitators’ 2020 European campaigns

47% 2% 51%
2018 57
27 1 29

58% 42%
2019 48
28 20

$0.2bn $2.4bn
71% 29%
Q1 2020 21
15 6

Campaigns launched by European activists Campaigns launched by others

Campaigns launched by U.S. activists

Most Prolific European Activists $0.4bn $2.5bn

2018 2019 Q1 2020

Activists # Campaigns Activists # Campaigns Activists # Campaigns

3 6 2

3 2 2

2 2 Rumored <$0.1bn

2 2 $ Investment size

• Despite the success of many U.S. activists, Europe has continued to attract • During the first quarter, U.S. agitators deployed ~$5.5bn in new campaigns
new European players
• Elliott remains “the most active activist” in Europe. The fund has launched

• Several players became more vocal and visible in the European landscape, the most new campaigns in Europe so far this year, even if those

competing with global players investments are generally smaller compared to other Elliott holdings

Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted at companies with market capitalizations greater than $500 million at time of campaign announcement.
6
 1 Impact on New Campaign Activity
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Activism Campaigns Slowed Substanially in March

($ in billions)
In March, campaign initiations dropped by 38% and weekly capital deployed decreased from ~$2.8bn to ~$0.3bn, compared with February

Campaign Initiations in Last Six Months1 Capital Deployed in Last Six Months ($bn)2
$11.3
26 0.2
2 2.5
20 3

16 16
6
13 13 1 11 2
1 5.9
4
2 3 $3.9
6 5
2
2 5 1.5
$1.8
10 10 $1.3 0.7 $0.9 0.1 $1.3
7 8 8 0.4 2.7
6 0.3 1.7 0.3 0.2
0.3 1.1 0.4
0.2 0.7 0.5 0.7
October November December January February March October November December January February March

United States Europe APAC Rest of World United States Europe APAC Rest of World

Q1 Campaign Initiations by Week1 Q1 Capital Deployed by Week ($bn)2

$4.8
9

7
$3.1 $3.1
5 5 5 5 5
4 4
3
2 2 2 $1.1
$0.7
$0.4 $0.4 $0.3 $0.3
$0.0 $0.1 $0.1 $0.1
Week Week
Ended: 1/10 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3 Ended: 1/10 2 1/17 1/24 1/31 2/7 2/14 2/21 2/28 3/6 3/13 3/20 3/27 4/3
Campaigns Initiated 4 Week Rolling Average Capital Deployed 4 Week Rolling Average

Source:
Note:
FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
7
1 Companies spun off as part of campaign process counted separately.
2 Calculated as of campaign announcement date. Does not include derivative positions. Excludes positions not publicly disclosed.
 2 Impact on Existing Campaigns
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Amid the Chaos, Some Activists Have Ratcheted Up Investment and Activity…
($ in billions)
Some U.S. and European activists have taken advantage of the market chaos by escalating existing campaigns and/or increasing stakes in
existing positions to increase influence and lower cost bases
Notable Stake Increases in Campaigns Notable Post-COVID-19 Campaign Demands
YTD Launch Company /
Activist Date Company % O/S
Performance2 Date Market Cap Activist Highlights

3/12 Occidental 2.5% 9.9% (71.1%) • On 3/26, Amber Capital released a letter
pushing for renewal of the entire
Newell Supervisory Board, simplification of the
3/11
Brands
9.7% 10.7% (62.1%) 5/2017
group structure and suspension of the
$4.1bn dividend; Amber also nominated 8
3/23 Box 4.9% 7.7% (28.3%) candidates to the Board

3/2 Mednax 7.5% 9.0% (37.3%) • On 3/25 CIAM published a letter which
criticized SCOR for having an AGM
earlier than usual, in light of the COVID-
3/16 Rexel 17.6% 20.1% (43.5%) 9/2018
19 pandemic; Scor later postponed its
$8.7bn AGM, citing concerns from the COVID-
1
3/25 CRH 3.1% (32.3%) 19 pandemic

2/28 Telenet 1.3%

1
(13.8%) • On 3/19, Starboard revealed its four-
person slate ahead of the 2020 AGM
• Also pushed incumbent Directors to
3/17 Europcar 5.0% 10.5% (66.9%) 1/2019 focus on their current CEO search, given
the “unique state” of global markets,
Bloomin’ $31.7bn overwhelmed by the effects of the
3/12 7.4% 9.2% (55.6%)
Brands COVID-19 pandemic

3/26
Lindblad
7.4% 9.9% (65.3%) • On 3/12, Icahn filed an 13D/A, in which
Expeditions he reiterated his desire for the Company
to encourage takeover bids and his
Howard
3/31 5.2% 29.8% (60.2%) 5/2019 intention to seek Board representation
Hughes
• Later in March, Icahn settled for three
$44.0bn Board seats, formation of an oversight
3/26 Lagardère 10.6% 16.4% (43.0%)
committee and governance changes

Previous Stake Current Stake

Source: Lazard Analysis, FactSet, press reports and public filings as of 3/31/2020.
1 Previous stake was undisclosed.
8
2 As of updated stake announcement date.
 2 Impact on Existing Campaigns
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

…While Others Have Reduced Aggression or Suspended Campaigns

($ in billions)
Amid the uncertainty, many activists have opted to postpone, settle or withdraw campaigns

Examples of Notable Campaign Developments Amid Public Health Crisis Q1 Monthly Settlements
Launch Company /
Date Market Cap Activist Highlights
15

• On 3/23, Bluebell announced that it was 12

suspending its campaign after Lufthansa's
3/2020 10
CEO stated that COVID-19 had a severe, 9 9 9
$4.6bn long-lasting impact on its business 8
7 7

4 4
• On 3/23, L&B withdrew its Director 2
candidate, stating the need for AMH to
2/2020 focus on its business during the current
"turmoil"; L&B also said it “will not hesitate
$8.5bn 2017 2018 2019 2020
to run a proxy contest next year"
Jan Feb Mar

• On 3/18, Elliott announced it had ended Q1 Monthly Board Seats Won

its opposition to Capgemini's offer for
7/2019 Altran, declaring it will tender its shares, 39
$4.2bn citing "market conditions" for its decision
to sell

25
• On 3/13, Xerox (in which Icahn holds an
~11% stake) halted its hostile takeover 19 19 19
attempt, citing prioritization of the “health 14 15 14
12
and safety of its employees, customers, 10
11/2019 partners and affiliates over and above all 5
considerations, including its proposal to 3
acquire HP”
$29.8bn • On 3/31, Xerox formally withdrew its slate 2017 2018 2019 2020
and tender offer
Jan Feb Mar
Source: FactSet, press reports and public filings as of 3/31/2020.
9
 3 Impact on the Activism Landscape
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

The Diminishing Activist Toolkit: M&A

With M&A activity sinking to multi-year lows, activists will face near-term challenges in urging for consolidation or divestitures

Historical M&A Activity by Month (Number of Announced Deals)1 Campaigns with M&A Thesis

Q2 – Q4
Q1

99

84

Median: 64 Deals 76

59

37 Only 5 of 16 campaigns
initiated in March had an
March
M&A thesis
marked the
2nd slowest
month in
seven years 5 March
27
21 23 20
19

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

% of Total
32% 36% 34% 47% 34%
Campaigns

Source:
Note:
Lazard analysis, FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement
10
1 Includes all completed or pending transactions >$500mm. Sorted by date announced.
 3 Impact on the Activism Landscape
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

The Diminishing Activist Toolkit: Capital Returns

Activist have decreasingly focused on dividends or buybacks as a primary campaign objective, and given the corporate focus on cash
preservation and government policies opposing return of capital, it is unlikely to return as a theme in the near term

Examples of Decreased / Suspended Capital Return Policies Campaigns with Capital Return Thesis

Dividends Buybacks

• 80 U.S. companies and 201 European
companies have suspended or
decreased their dividend1
• 123 U.S. companies and 48 European Q2 – Q4 37
companies have announced
Q1
suspensions or reductions to their
share repurchase program1

18
16

10
“Given the economic uncertainty facing many companies and
industries, boards may open themselves and their companies up
to intense criticism and reputational damage by undertaking
repurchases at the current time, especially (although not only) if 12
the company’s workforce has been reduced or has suffered other
kind of cutbacks” 5 6
4
1
- Impacts of the COVID-19 Pandemic – ISS Policy Guidance, 4/8/2020
2016 2017 2018 2019 2020

% of Total
Campaigns 9% 8% 15% 5% 2%

Source:
Note:
Lazard analysis, FactSet, press reports and public filings as of 3/31/2020.
All data is for campaigns conducted globally by activists at companies with market capitalizations greater than $500 million at time of campaign announcement.
11
1 Includes companies with market capitalizations greater than $250 million at time of announcement, as of 4/10/2020.
 3 Impact on the Activism Landscape
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Impact of COVID-19 on Activist Hedge Funds

Certain activist hedge funds have aptly weathered the market turmoil while others are faring worse; reports of certain firms raising capital in
this environment highlight desire to take advantage of attractive valuations and value-creation opportunities

Outperformers • A few leading activist firms reportedly have employed hedging strategies to mute broader market impacts
and have outperformed the market
− Pershing Square purchased credit protection on investment-grade and high-yield bond indexes to
protect against volatility and downside risk
− Elliott reportedly has hedges in place that have mitigated downside risk and allowed the firm to be
poised to take advantage of bargain opportunities
Disparate • Some activist firms reportedly suffered losses as a result of concentrated, outsized positions
Performance
Underperformers − Third Point was reportedly down through Q1, much of which was attributed to its large stakes in two
hard hit companies: Prudential and EssilorLuxottica
• A number of activist firms reportedly experienced notable declines in Q1
− Sachem Head was supposedly down through Q1, compared with a 24% gain in 2019
− During March, TCI reportedly endured its worst month since initiation
− Trian Partners reportedly saw large decreases in its portfolio through Q1

• Smaller activist shops—with lower cash buffers and shorter lock-up periods with LPs—have begun to face
Smaller Shops significant pressure and capital outflows and may be unable to hold positions long enough for the market to
recover
Beginning to
Close − Raging Capital, an activist who recently agitated at Tidewater and Park Aerospace, is reportedly
liquidating due to poor performance

• Seeking to take positions in healthy companies battered by the virus-induced rout, some activist funds are
reportedly raising fresh capital from investors
− Engaged Capital reportedly aims to add ~$250mm to its existing ~$1.1bn in AUM; primarily plans to
Some Firms
augment its existing positions, while investing in a few selective new names
Raising Capital
− Land & Buildings is reportedly setting up a new vehicle that will accept any amount money clients are
willing to commit; the fund wants to make new investments in undervalued companies with strong
balance sheets
Source: Press Reports; Activist Insight; Activist Monitor.
12
 3 Impact on the Activism Landscape
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Return of the Poison Pill

($ in billions)
With poison pills being implemented at levels not seen since the financial crisis, companies must strike the right balance between creating a
reasonable line of defense, while not compromising shareholder rights
Historical Poison Pill Activity Implementation 1 Key Observations

On pace for most

new poison pills • Shareholders and proxy advisors have made it clear that
35 since 2009 (50) today’s unique market conditions warrant some leeway for
30 29 companies to protect themselves through the use of poison
27 28
pills; however such actions must serve a specific purpose
27 − A rapid decline in stock price is seen as a valid reason to
15
24 22 implement a poison pill, but the terms of the pill must reflect
the decline as a short-term aberration
22 March
12 − Shareholders and proxy advisors are less likely to take issue
6 7 8
with poison pills enacted to preserve NOLs and other similar
2016 2017 2018 2019 Q1 2020 assets
Q1 Q2 - Q4 • Regardless of market conditions, poison pills with non-
market, unreasonable terms will likely be rejected
− ISS recently recommended to vote against the Chairman of a
Market Cap. of Companies Enacting Poison Pills in March 2020 ($bn)2 large-cap midstream company following the adoption of a
poison pill with a 5% ownership trigger, citing it as “highly
restrictive” and that it “could negatively impact the market for
14% the company’s shares as the market recovers”
$0 - $0.5bn • The vast majority of poison pills have been implemented by
$0.5 - $2.0bn
small- and micro-cap companies
23%
63%
$2.0bn+ − In March 2020, the median market capitalization of Company
enacting a poison pill was $0.2bn; only three companies that
implemented poison pills had market capitalizations greater
than $2bn
Source:
1
FactSet, ISS as of 3/31/2020.
Based on U.S. incorporated companies.
13
2 Based on market capitalization at time of implementation.
 3 Impact on the Activism Landscape
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Predictions on the Activism Landscape Following the Public Health Crisis

• The pandemic will create a new class of activist targets which will include companies with:
− High cost structures incompatible with “new normal” business models
− Complex or vulnerable supply chains
Who will be most
− Insufficient scale to generate attractive return profiles
vulnerable?
− Misaligned portfolios ill-suited to the recovery economy or with unattractive global exposure
− Leveraged balance sheets in industries where fortress balance sheets are required
− Inappropriate liquidity profiles (e.g., either too much or too little for the new operating environment)

• Consistent activist playbook pre- and post-pandemic with key themes regarding:
− Streamlining businesses through M&A, optimizing capital allocation, improving operations and cutting costs

Will there be a new − Pandemic-related business shocks will expose weaknesses across sectors and companies that activists will use to
activist playbook? formulate new campaign themes
− Governance failings with regard to human capital, executive compensation, disaster preparedness and risk
management will be used to garner sympathies with passive investors’ stewardship teams and other governance
focused investors

• Extreme volatility and lack of visibility into a return to a stable operating environment is likely to keep most activists focused
on their existing portfolio investments; however, selected new campaigns may be initiated
Near • Activists are likely sensitive to being seen as tone-deaf / opportunistic during the pandemic and drawing criticism from
Term skeptical shareholders when they need to coalesce investors around their approach
When will
• Activists may take advantage of steep price declines to accumulate new positions for “wait and watch” or may engage
activism
privately with management
return?

• Expect a return to public campaigns as operating environment normalizes, economic recovery takes hold and M&A market
Long returns as a viable path to value creation
Term
• Late 2020 and early 2021 may see an aggressive ramp of public campaigns as Director nomination windows reopen

14

REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020
Updates From the “Big 3” Index Funds Views on ESG
BlackRock, Vanguard and State Street have made clear the thematic priorities they believe influence long-term corporate performance and the
ways they will evaluate them
“A Fundamental Reshaping of Finance”
• BlackRock believes that climate change is leading
to a “fundamental reshaping of finance” and
therefore expects portfolio companies to:
− Publish in line with Sustainability Accounting
Standards Board (SASB) industry guidelines
− Disclose climate risks according to Task Force on
Climate-related Disclosure (TCFD) recommendations
− Be prepared to discuss the UN Sustainable
Development Goals in stewardship engagements
• BlackRock plans on enforcing this belief by voting
against Directors at companies that have not
implemented SASB and TCFD climate reporting by
the end of 2020
• Additional actions BlackRock is undertaking to
address climate change:
− −
Defaulting to sustainable investment strategies
across its main offerings
− Incorporating ESG as a core risk area in all active
portfolio strategies
− Exiting high-risk sectors across its active portfolio and
doubling offering of ESG ETFs
− Improving transparency around its sustainable
product offerings and voting practices
Source: Company websites, press reports and public filings as of 3/31/2020.
4 Shareholder Engagement
The Four Principles of Good Governance
• Board Composition
− Boards should be comprised of independent Directors
with adequate time and experience
− Companies should disclose Board diversity on
expertise, tenure and personal characteristics
− Boards should evolve with long-term strategy
• Oversight of Strategy and Risk
− Oversight of long-term strategy and relevant risks is
the Board’s responsibility
− Boards should understand and be involved in
executing the long-term strategy
− Long-term, material risks should be comprehensively
disclosed
• Executive Compensation
Compensation should be performance linked and
should incentivize outperformance in the long term
− If a company underperforms, executive compensation
should reflect that
• Governance Structures
− Governance structure must protect shareholder rights
− Boards need to hold themselves accountable to
shareholders
Implications for ESG and
The “Responsibility” Factor
• State Street has indicated that it views ESG issues,
such as climate change, labor practices and
consumer product safety, as intrinsically tied to
shareholder value
• State Street will increasingly use its “R-Factor” –
the “R” stands for “Responsibility” – tool in its
evaluation of whether companies are incorporating
ESG into their long-term strategies
− “R-Factor” is a proprietary ESG scoring system that
uses SASB’s materiality framework and four ESG-
related data sources to assign companies a score
measuring “the performance of a company’s
business operations and governance as it relates to
financially material ESG challenges facing the
company’s industry”
• Beginning in 2020, State Street will take
“appropriate voting action” against companies
with a poor R-Factor score who cannot explain
how they will improve their score
• Starting in 2022, State Street will begin voting
against Directors at companies where their “R-
Factor” score lags peers
15
 Implications for ESG and
4 Shareholder Engagement
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Key Considerations for Navigating Shareholder Engagement in 2020

Despite COVID-19, expectations for shareholder engagement remain high, with investor focus areas expanding to include company directives
regarding the pandemic and their impact on human capital, executive compensation and business strategy and operations

Selected Stakeholder Perspectives

“Boards contemplating defensive maneuvers may want to consider that an effective

“We recognize that our engagement conversations will shift to more immediate ESG
response to the pandemic could be more advantageous than any pill. Although
issues such as employee health, serving and protecting customers and
the outbreak of COVID-19 may not have been…predictable…the risk oversight
ensuring the overall safety of supply chains in the context of the current crisis—
function of many boards will…be under a microscope once the market begins to
the scope and duration of which none of us can predict…we encourage you to
emerge from this downturn and activists sift through the wreckage for new
communicate to investors COVID-19’s short- and medium-term potential impact to
targets…Companies that fail to safeguard the health of their employees, or
your business, overall operations and supply chains, including management
whose business continuity plans prove to be inadequate, could eventually
preparedness and scenario-planning analysis”
face…opposition.“
CYRUS TARAPOREVALA, 6 APRIL 2020
ISS SPECIAL SITUATIONS RESEARCH, 20 MARCH 2020

“How are we engaging with companies? Virtually. On March 11 and 12, for example,
we hosted the very first Buy-side Global Consumer CEO Conference. It was planned
months ago as an in-person event, but in less than a week, we pivoted to make
it 100% virtual. We still had 23 consumer company CEOs participate. We continue
to have a steady flow of virtual meetings with companies to ensure we stay
close to the changing business dynamics they are experiencing”
BRENDAN SWORDS, WELLINGTON MANAGEMENT, 11 MARCH 2020
“The sell side is doing its best to convert planned corporate access meetings to either
conference calls or videoconference calls whenever possible…The best thing
issuers can do for the investment community is keep the lines of
communication open and try to provide as much transparency as possible.”
LISA RUBINGER, ASHLER CAPITAL (CITADEL), 18 MARCH 2020

Range of Discussion Topics Pertaining to the Public Health Crisis

Impact of Government Operational Short- and Long-Term

Financial Impact / Liquidity
Stimulus Package and Business Continuity Changes to Capital Allocation

Board Oversight of
Customer / Supply Chain Changes to CEO /
Employee-Related Matters Response Plan and
Maintenance Director Compensation
Broader Risk Management

Source: Investor Websites, ISS.

16

REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020
Sustainable Investing in the Current Market Environment
While it is unclear whether COVID-19 and the steep decline in oil prices will have a longer term effect on the growth of sustainable investing,
common themes of sustainable investing—including managing tail-end risks and employee wellbeing—have arguably become more
prominent as the pandemic evolves
• Certain investors and market observers view sustainability as a “luxury
good” viable only in bull markets
− In the near-term, the steep drop in the prices of public equities may
invite these market participants to focus on low valuations while
placing less emphasis on the ESG practices of a company
What Now For • However, over the long term, the COVID-19 pandemic could cause
Sustainability? increased focus on sustainability initiatives as investors will desire
stable businesses that can withstand sudden macroeconomic shocks
− In particular, the sustainable investment community may heighten its
attention on areas such as the health and safety of employees,
customers, suppliers and other stakeholders, as well as crisis
management planning
Sustainable • Total inflows to sustainable equity ETFs since the start of market
Fund Inflows turbulence in late February remain positive year-to-date, whereas the
Continue top non-ESG focused U.S. equity ETFs have seen substantial outflows
• While still suffering losses due to the rapid market sell-off, ESG-
oriented funds outperformed conventional funds globally
Sustainable − According to Morningstar, during Q1, 70% of ESG-focused funds had
Funds returns in the top half of peer groups, while only 11% finished in the
Outperformance bottom quartile1
− In the U.S., 24 out of 26 sustainable index funds had returns superior
to those of their closest conventional index fund1
Source: Equity research, Morningstar, press reports
1 Based on Morningstar categorizations.
Implications for ESG and
4 Shareholder Engagement
“The concept of long-term sustainability would suggest that
companies that come through [COVID-19 pandemic] and do
well would be exactly the kinds of companies you would
look to as role models…Companies can still demonstrate
that they have effective leadership. In times of crisis that
becomes more apparent, not less apparent.”
MICHELLE EDKINS, BLACKROCK, 18 MARCH 2020
“There is obviously a lot of volatility and a lot of big open
questions just in the very near term that need to get
answered…Over the long term, I think if anything [the
COVID-19 pandemic] would likely accelerate the focus on
ESG from an investor standpoint”
JEFF MELI, BARCLAYS, 24 MARCH 2020
“We have long argued that companies don’t operate in a
vacuum. Their success reflects their ability to adapt to
challenges and trends in the societies to which they belong.
That is more true now than ever; social and environmental
challenges, and investment drivers, are increasingly
overlapping.”
ANDREW HOWARD, SCHRODERS, 24 MARCH 2020
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 Implications for ESG and
4 Shareholder Engagement
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Performance of ESG-Focused Funds During the Public Health Crisis

While it is still too early to determine how sustainable funds will perform throughout the crisis and during the recovery, sustainable funds
have had above-market performance in Q1

Q1 Performance of Selected ESG-Oriented Funds1 Key Observations

Weighting Relative to
Performance
Relative to
Benchmark • The largest ESG-focused funds have
AUM Total % Tech. % Power &
Fund ($bn) Benchmark Return Benchmark Energy
generally had performance superior to
the relevant benchmarks
Vanguard FTSE Social Index $6.8 S&P 500 (20.0%) (0.4%) 2.1% (3.7%)
− On average, the largest ESG-oriented
iShares ESG MSCI USA 3.8 S&P 500 (19.0%) 0.6% 0.2% (0.3%) funds returned (20.0%) over Q1, an
outperformance of their benchmarks by
an average of 0.9%
iShares ESG MSCI EM 2.0 MSCI EM (23.8%) 0.9% 2.7% (1.0%)

• ESG-oriented funds have tended to fare

Calvert U.S. Lg.-Cap Core Resp. Index 2.0 S&P 500 (18.3%) 1.3% 2.7% (2.7%) better due to mandates generally
preventing holdings in Power and
iShares ESG MSCI USA Leaders 1.7 S&P 500 (18.4%) 1.1% 1.6% (0.5%) Energy companies, coupled with the
outsized representation of Technology
iShares MSCI KLD 400 Social 1.7 S&P 500 (18.5%) 1.1% 8.8% (2.6%) companies in ESG indices

− Top ESG-centric funds were on average

iShares ESG MSCI EAFE 1.6 MSCI EAFE (22.7%) 0.9% (0.6%) 0.3%
overweight Technology companies and
underweight Power and Energy
Xtrackers MSCI USA ESG Leaders Eq. 1.6 S&P 500 (18.2%) 1.4% 1.6% (0.5%) companies by 2.6% and (1.6%),
respectively
iShares MSCI USA ESG Select 1.2 S&P 500 (17.7%) 1.8% 0.4% (1.4%)
− During Q1, Technology companies have
Vanguard ESG International Stock 0.6 MSCI EAFE (22.9%) 0.6% 6.9% (4.0%) outperformed the market while Power and
Energy companies have lagged the
market, returning (9.5%) and (27.5%)
Average (20.0%) 0.9% 2.6% (1.6%)
respectively2
Source: FactSet, Morningstar as of 3/31/2020.
1 Based on Morningstar categorized Large-Blend sustainability funds.
18
2 Reflects market cap weighted performance of companies in the Russell 3000 index. Performance as of 3/31/2020.
CONFIDENTIAL REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

Appendix
CONFIDENTIAL REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

A Q1 2020 Activist Activity

REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020
Notable Q1 2020 Public Campaign Launches and Developments—United States
($ in billions)
Launch Company /
Date Market Cap Activist Highlights
• Ancora and Marcellum nominated a full slate of
nine Directors and claimed the Company
“pursued a poor capital allocation strategy and
3/20 rejected credible offers to monetize Big Lot’s
real estate assets”; Macellum and Ancora later
$0.7bn
released a letter calling for a sale-leaseback of
the distribution centers
• Elliott nominated four Directors and pushed for
the removal of CEO Jack Dorsey
• Twitter and Elliott settled, with Elliott receiving
2/20
three Board seats and Silver Lake investing
$25.8bn $1bn, which would be used with cash on hand
to fund a $2bn share repurchase program
• Sachem Head nominated four Directors
• Olin and Sachem Head settled for two Board
2/20 seats, with Sachem Head’s Directors serving
on the newly created Operating Improvement
$3.0bn Committee; Olin also agreed to declassify the
Board
• Elliott sent a letter to Evergy’s Board calling for
the Company to simultaneously explore stock-
for-stock mergers and develop a "high-
performance" standalone plan
1/20
• Elliott later settled for two Board seats and the
$15.7bn
commitment to undergo a strategic review; the
deadline for the strategic review was extended
due to the COVID-19 pandemic
• KKR filed a 13D and disclosed that it had held
discussions with the Board and management;
1/20 this represented KKR’s first 13D filing
• In March, Dave & Buster’s enacted a 1-year
$1.5bn
shareholder rights plan
Source: FactSet, press reports and public filings as of 3/31/2020.
A Q1 2020 ACTIVIST ACTIVITY
Launch Company /
Date Market Cap Activist Highlights
• HP adopted a poison pill which declared a
distribution of one preferred share purchase
right for each share of HP common stock
11/19
• Xerox (in which Icahn holds an ~11% stake)
halted its hostile takeover, citing the shifting
$29.8bn priorities due to COVID-19 pandemic
• Starboard filed a 13D but didn’t disclose any
further intentions; Box’s CEO later stated that
he would work collaboratively with Starboard
9/19 • Box and Starboard settled for three new
independent Directors, with Box creating a new
$2.2bn committee to identify and recommend
opportunities for further improvement
• Icahn pushed for additional disclosures around
M&A plans prior to the Anadarko acquisition
• Occidental and Icahn settled for three Board
5/19 seats, as well as giving shareholders the right
$44.0bn to call special meetings and nominate
Directors; Occidental also added two of the
new Directors to a newly created Oversight
Committee
• Starboard published a letter announcing the
nomination of 9 Directors, two of which were
2/19 current Directors
$2.2bn • Starboard and GCP subsequently went back
and forth with public letters
• In March, Starboard revealed its four-person
slate ahead of the 2020 AGM
1/19 • Also pushed incumbent directors to focus on
their current CEO search, given the “unique
$31.7bn
state” of global markets, overwhelmed by the
potential effects of the Covid-19 pandemic
19
REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020
Notable Q1 2020 Public Campaign Launches and Developments—Rest of World
($ in billions)
Launch Company /
Date Market Cap Activist Highlights
• Third Point called for Prudential to separate its
U.S. and Asian operations, initiate cost-cutting
procedures and improve its capital allocation
2/20 $47.8bn
strategy
• Prudential later announced that it would IPO
part of its U.S. insurance business
• Bluebelll pushed for management change and
stated that it may have people to suggest for
the Supervisory Board (however, none of its
2/20 $3.4bn
partners were interested in Board seats)
• Hugo Boss announced that its CEO would step
down
• Elliott announced a $2.5bn position and
pushed for governance improvements and
substantial share repurchases
2/20 $89.8bn • SoftBank announced a $4.8bn share
repurchase program; SoftBank later approved
a $41bn asset sale to fund $18bn in additional
share repurchases
• Oasis pushed to improve operations corporate
governance and to dispose of non-core assets
1/20 $0.9bn
through an investor presentation and campaign
website
• Murakami’s Reno withdrew its proposal to
remove 10 Directors after failing to secure
support from Ardisia Investment (a ~16%
shareholder)
12/19 $0.7bn Murakami
• Shareholders rejected the Reno nominee, but
approved the independent Directors that
management recommended
Source: FactSet, press reports and public filings as of 3/31/2020.
A Q1 2020 ACTIVIST ACTIVITY
Launch Company /
Date Market Cap Activist Highlights
• CIAM stated it had met with Management
several times to discuss strategy, governance
11/19 $5.5bn and financials; CIAM also called for an
additional EUR 970mm extraordinary dividend
payment ahead of the AGM
• IFP urged Kirin to reverse its diversification
strategy, to dispose of certain non-core stakes
and questioned its Board overhaul; IFP also
pushed for two Board seats
11/19
$19.2bn • Kirin announced that shareholders rejected the
proposals from IFP to divest and launch a
share repurchase program, as well as rejected
the two dissident Director candidates
• In January, Capgemini’s tender offer for Altran
was successful
7/19
$4.2bn • In March, Elliott announced it had ended its
opposition to Capgemini's offer for Altran, citing
"market conditions"
• Argo and Voce settled for three Board seats,
2/19 $2.3bn with Voce being reimbursed up to $1.8mm,
ending Voce’s push for five Board seats
• Amber called for a renewal of the entire
Supervisory Board, simplification of group
structure and suspension of the dividend;
5/17 $4.1bn
Amber also stated the Company should
develop certain business segments and later
nominated eight Directors to the Board
20
CONFIDENTIAL REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020

B Selected Members of Shareholder Advisory

REVIEW OF SHAREHOLDER ACTIVISM - Q1 2020 B SELECTED MEMBERS OF SHAREHOLDER ADVISORY

Shareholder Advisory Group—Key Contacts

Managing Director and

Jim Rossman (212) 632-6088 jim.rossman@lazard.com
Head of Shareholder Advisory

Mary Ann Deignan Managing Director (212) 632-6938 maryann.deignan@lazard.com

Andrew T. Whittaker Managing Director (212) 632-6869 andrew.whittaker@lazard.com

Managing Director and

Rich Thomas +33 1 44 13 03 83 richard.thomas@lazard.com
Head of European Shareholder Advisory

Dennis K. Berman Managing Director (212) 632-6624 dennis.berman@lazard.com

Christopher Couvelier Director (212) 632-6177 christopher.couvelier@lazard.com

Kathryn Night Director (212) 632-1385 kathryn.night@lazard.com

Todd Meadow Director (212) 632-2644 todd.meadow@lazard.com

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