Egan-Jones sides with Darden in Starboard proxy fight – Reuters

(Reuters) – Advisory firm Egan-Jones Proxy Services
on Tuesday recommended that Darden Restaurants Inc
shareholders vote for the company’s slate of board nominees at
its annual meeting next week.

Larger firms Glass, Lewis & Co and Institutional Shareholder
Services (ISS) on Thursday recommended that Darden investors
back activist Starboard Value LP’s 12-director slate, which
would oust the embattled company’s full board.

That same day Egan-Jones temporarily withdrew its
recommendation that shareholders vote for the eight director
nominees put up by Darden, which is leaving spots open for
Starboard candidates.

Egan-Jones re-released the information after responding to a
request to review a potential material error.

Darden, best known for its Italian-themed Olive Garden
chain, repeatedly has said a complete turnover of the board is
risky and would hand too much control of the company to
Starboard.

Darden’s annual shareholder meeting is scheduled for Oct.
10.

Starboard, Darden’s second-largest investor with an 8.8
percent stake, wants to improve results at the company by
selling real estate, franchising restaurants and spinning off
Capital Grille, Yard House and other chains.

Starboard’s recipe for boosting Olive Garden’s limp results
include salting the pasta water, giving away fewer breadsticks
and selling more wine.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Andrea
Ricci)

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Gulf proxy war: UAE seeks to further damage Qatar's already tarnished image – Huffington Post

By James M. Dorsey

The United Arab Emirates and Qatar are locked into a propaganda war with public relations agencies and front organizations as proxies that is backfiring on both Gulf states.

Disclosures of the proxy war have hit Qatar at a time that its image as the host of the 2022 World Cup is under renewed fire. In contrast to Qatar, the UAE has sought to counter revelations about its efforts to shore up its image through the creation of a network of human rights groups and negatively influence international media coverage of Qatar by touting the fact that its lead fighter pilot in allied attacks on the Islamic State, the jihadist group that controls a swath of Iraq and Syria, is a woman.
Tension between long-standing rivals Qatar and the UAE has been mounting for more than a year.

The UAE has detained and/or sentenced Qatari nationals on charges of espionage, one of which has been dubbed a prisoner of conscience by Amnesty International. It also earlier this year withdrew its ambassador to Doha alongside the envoys of Saudi Arabia and Bahrain. The rupture in diplomatic relations was part of a so far failed effort to force Qatar to halt its support for the Muslim Brotherhood.

The UAE, whose animosity towards Qatar predates the current multiple crises in the Middle East and North Africa, kicked into high gear with the realization that Qatar may make minor concessions but was unlikely to bow to Gulf pressure.

Qatar earlier this month asked several Muslim Brothers to leave the country in a nominal gesture but has not cancelled their residence permits. Moreover, family members of some of the departed Brothers remain resident in Qatar as does Sheikh Yusuf Qaradawi, one of the world’s most prominent Muslim clerics who has close ties to the Brotherhood. Similarly, Qatar has rejected pressure to expel Khalid Mishal, the leader of Hamas, the Islamist militia with close ties to the Brotherhood that controls the Gaza Strip.

The UAE is waging its proxy war against the backdrop of its adoption of a more activist foreign policy that aims to counter political Islam. The UAE took the lead in recent weeks in confronting the Brotherhood and other Islamists with air attacks on Islamist forces in Libya in cooperation with the Gulf-backed Egyptian government of general-turned-president Abdul Fattah al Sisi. At home, alleged Brothers were sentenced to lengthy prison terms in legal proceedings that have been condemned by human rights groups.

At the same time, the UAE has been touting its image as a forward-looking, progressive Muslim society by emphasizing the fact that a woman, Maj. Mariam al-Mansouri, led the UAE squadron in recent US-led attacks on Islamic State targets in Syria. Photos of Ms. Al-Mansouri released by WAM, the state-run Emirati news agency, went viral on social media. They highlighted the fact that the UAE is one of the few Arab states to include women in its military and allow them to rise to prominence.

As with much of its response to widespread international criticism, Qatar’s response to the campaign against it has been a combination of too little too late, less willingness than its opponents to engage highly priced public relations agencies and lobbyists, and bungled efforts of its own to influence media coverage. The Qatari effort has been further stymied by the recent designation as international terrorists by the US Treasury of four men with links to the Gulf state accused of fundraising for jihadist groups. Qatari sources say at least two of the men had been arrested prior to their designation.

The weak Qatari counteroffensive got into further hot water with revelations last week by Britain’s Channel 4 that Qatar had engaged Portland Communications founded by Tony Allen, a former adviser to Tony Blair when he was prime minister. Channel 4 linked Portland to the creation of a soccer blog that attacked Qatar’s detractors by Alistair Campbell, Mr. Blair’s chief communications advisor at Downing Street Number Ten and a former member of Portland’s strategic council.

Channel 4 accused the blog that projected itself as “truly independent” and claimed to represent “a random bunch of football fans, determined to spark debate” of “astro-turfing,” the creation of fake sites that project themselves as grassroots but in effect are operated by corporate interests. Portland admitted that it had helped create the blog but asserted that it was not part of its engagement with Qatar.

The UAE has been waging its propaganda war on multiple levels. In July, the UAE backed the establishment of the Muslim Council of Elders (MCE) in a bid to counter Sheikh Qaradawi’s International Union of Muslim Scholars as well as Qatar’s support for political change in the Middle East and North Africa as long as it does not include the Gulf. The MCE promotes a Sunni Muslim tradition of obedience to the ruler rather than activist elements of the Salafis who propagate a return to 7th century life as it was at the time of the Prophet Mohammed and his immediate successors.

The UAE’s efforts to tarnish Qatar’s image contrast starkly with its official support for Qatar’s hosting of the World Cup. The Emirate’s targeting of Qatar’s hosting became evident with this month’s detention in Qatar of two British human rights activists who were investigating human and labour rights in the Gulf state. Their detention also highlighted Emirati efforts to shape international public opinion in response to mounting criticism of the UAE’s own human and labour rights record.

The detentions exposed a network of Emirati-backed human rights groups in Norway and France that seemingly sought to polish the UAE’s image while tarnishing that of Qatar. The Brits of Nepalese origin were acting on behalf of the Global Network for Rights and Development (GNRD), a Norway-based group with alleged links to the UAE.

Established in 2008 “to enhance and support both human rights and development by adopting new strategies and policies for real change,” GNRD is funded by anonymous donors to the tune of €3.5 million a year, according to veteran Middle East journalist and author Brian Whitaker.

The group’s International Human Rights Rank Indicator (IHRRI) listed the UAE at number 14 as the Arab country most respectful of human rights as opposed to Qatar that it ranked at number 94. The ranking contradicts reports by human rights groups, including the United Nations Human Rights Council (OHCHR), which earlier this year said it had credible evidence of torture of political prisoners in the UAE and questioned the independence of the country’s judiciary. Egypt’s State Information Service reported in December that GNRD had supported the banning of the Muslim Brotherhood as a terrorist organization and called for an anti-Brotherhood campaign in Europe.

An Emirati human rights activist told Middle East Eye: “They are supported by the UAE government for public relations purposes. The GNRD published a fake human rights index last year that wrongly praised the UAE.”

More recently, The New York Times and The Intercept revealed that the UAE, the world’s largest spender on lobbying in the United States in 2013, had engaged a lobbying firm to plant anti-Qatar stories in American media. The firm, Camstoll Group, is operated by former high-ranking US Treasury officials who had been responsible for relations with Gulf state and Israel as well as countering funding of terrorism.

The successful effort to portray Qatar as a prime backer of jihadist terrorists coincided with a similar campaign by Israel calling for Qatar to be deprived of its right to host the World Cup because of its support for Hamas. The campaign is designed to counter Qatari efforts, according to Palestinian sources, to coax Hamas into accepting full-fledged peace talks with Israel and agreeing to surrender much of its authority in Gaza to the Palestine Authority headed by Hamas rival, President Mahmoud Abbas.

The New York Times reported that Camstoll’s public disclosure forms “filed as a registered foreign agent, showed a pattern of conversations with journalists who subsequently wrote articles critical of Qatar’s role in terrorist fund-raising.” The Intercept asserted that Camstoll was hired less than a week after it was established in late 2012 by Abu Dhabi-owned Outlook Energy Investments, LLC with a retainer of $400,000 a month.

“The point here is not that Qatar is innocent of supporting extremists… The point is that this coordinated media attack on Qatar – using highly paid former U.S. officials and their media allies – is simply a weapon used by the Emirates, Israel, the Saudis and others to advance their agendas,” The Intercept said.

UAE opposition to Qatar and the Muslim Brotherhood dates back at least a decade. Abu Dhabi Crown Prince and Armed Forces Chief of Staff Sheikh Mohammed bin Zayed bin Zayed Al Nahayan warned US diplomats already in 2004 that “we are having a (culture) war with the Muslim Brotherhood in this country,” according to US diplomatic cables disclosed by Wikileaks. In 2009. Sheikh Mohamed went as far as telling US officials that Qatar is “part of the Muslim Brotherhood.” He suggested that a review of Al Jazeera employees would show that 90 percent were affiliated with the Brotherhood. Other UAE officials privately described Qatar as “public enemy number 3″, after Iran and the Brotherhood.

James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies as Nanyang Technological University in Singapore, co-director of the Institute of Fan Culture of the University of Würzburg and the author of the blog, The Turbulent World of Middle East Soccer, and a forthcoming book with the same title.

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Why the SEC is being asked to revisit proxy rules – MarketWatch (blog)

September 26, 2014, 3:36 PM ET

Bloomberg
The Securities and Exchange Commission (SEC) headquarters building in Washington D.C.

The Securities and Exchange Commission has received a new push to revisit a 2011 proposed rule that would have given shareholders proxy access.

In a 132-page report, the CFA Institute attempted to answer questions that the Washington D.C. Circuit Court of Appeals put forth when it struck down the the SEC’s proposed rule–the biggest question being, the lack of a cost benefit analysis.

Matt Orsagh, director of capital markets policy at CFA Institute, said it was a difficult process, but being able to watch the market react to the proposed rule and then its rejection gave them insight.

“We found that the markets generally react favorably to proxy access,” Orsagh said. “What happened to companies on that day, when the SEC announced the proxy access rule, that told us some things.”

A proxy access rule would allow shareowners to add their board member recommendations, essentially giving shareowners more a voice in decision making.

Along with the likely positive impact on the market, Orsagh said the CFA Institute concludes a proxy access rule would also improve accountability.

“In one sentence,” Orsagh said, “it’s all about board accountability.”

He also mentioned that he doesn’t think the argument of a proxy access rule allowing special interest groups to press their agendas, will be an issue.

Under the previous proposed rule that CFA Institute wants the SEC to revisit, in order to gain proxy access, shareowners have to own at least 3% of a company for three years. Orsagh said those requirements would likely prevent the Carl Icahns of the world from swooping in to push agendas.

Orsagh said they hope to just get the conversation going again and that hopefully the SEC will pick up where it left off in considering a proxy access rule.

The SEC declined to comment on the issue.

– Trey Williams

Follow Trey on Twitter @trey3williams

Follow Capitol Report @capitolreport

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Nonprofit boards not as effective with proxy members – Minnesota Public Radio News

  1. Listen Nonprofit boards not as effective with proxy board members

    4min 39sec

Minnesota is weighing legal action against a well known Minneapolis nonprofit after a state audit found the organization — Community Action of Minneapolis — misspent hundreds of thousands of taxpayer dollars.

More: Questions raised for years about Community Action’s spending

The audit placed much of the blame on the organization’s board, which included several prominent DFL politicians, among them Congressman Keith Ellison. But the politicians say they had little direct involvement with its actual governance because they each sent someone else to attend meetings and cast votes.

MPR News’ Cathy Wurzer spoke with Jon Pratt, executive director of the Minnesota Council of Nonprofits, about that practice.

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Proxy advisers turn up heat in Darden Restaurants board brawl – Reuters

(Reuters) – Advisory firms Glass, Lewis & Co and Institutional Shareholder Services (ISS) each have recommended that Darden Restaurants Inc investors back Starboard Value LP’s 12-director slate, which would oust the embattled company’s full board.

In an unusual move late on Thursday, smaller firm Egan-Jones Proxy Services temporarily withdrew its recommendation that shareholders vote for the eight director nominees put up by Darden, which is leaving spots open for Starboard candidates.

Egan-Jones, in a statement, cited recent Securities and Exchange Commission guidance regarding proxy advisers in its reasoning and said it would re-release the report after two separate conference calls tentatively planned for Sept. 26 with representatives from both Darden and Starboard.

Darden, best known for its Italian-themed Olive Garden chain, repeatedly has said a complete turnover of the board is risky and would hand too much control of the company to Starboard. Its annual shareholder meeting is scheduled for Oct. 10.

The Orlando-based chain, which has been under pressure from activists since last year, frustrated investors when it rebuffed a shareholder vote in April calling for a special meeting to debate the then-proposed sale of its struggling Red Lobster chain.

Darden sold Red Lobster for $2.1 billion in July. Since then, it has made significant concessions that have failed to satisfy Starboard and fellow dissident investor Barington Capital Group.

In addition to ceding four board seats to Starboard and nominating just four incumbent directors to stand for election at the annual meeting, the restaurant operator announced in July that Clarence Otis would step down as chief executive officer and chairman.

Starboard, Darden’s second-largest investor with an 8.8 percent stake, two weeks ago unveiled a proposal that included plans to sell Darden’s real estate, franchise its restaurants and to spin off the Capital Grille, Yard House and other chains.

The activist also shared its recipe for improving sales at Darden’s flagship Olive Garden chain. That prescription included salting the pasta water, giving away fewer breadsticks and boosting wine sales.

Shares in Darden were up 0.1 percent to $51.35 in after-hours trading on Thursday.

(Reporting by Lisa Baertlein in Los Angeles and Ross Kerber in Boston; Editing by James Dalgleish, Chizu Nomiyama, Lisa Shumaker and Ken Wills)

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UPDATE 4-Proxy advisers turn up heat in Darden Restaurants board brawl – Reuters

(Adds Egan-Jones temporary withdrawal of recommendation)

By Lisa Baertlein and Ross Kerber

(Reuters) – Advisory firms Glass, Lewis & Co and
Institutional Shareholder Services (ISS) each have recommended
that Darden Restaurants Inc investors back Starboard
Value LP’s 12-director slate, which would oust the embattled
company’s full board.

In an unusual move late on Thursday, smaller firm Egan-Jones
Proxy Services temporarily withdrew its recommendation that
shareholders vote for the eight director nominees put up by
Darden, which is leaving spots open for Starboard candidates.

Egan-Jones, in a statement, cited recent Securities and
Exchange Commission guidance regarding proxy advisers in its
reasoning and said it would re-release the report after two
separate conference calls tentatively planned for Sept. 26 with
representatives from both Darden and Starboard.

Darden, best known for its Italian-themed Olive Garden
chain, repeatedly has said a complete turnover of the board is
risky and would hand too much control of the company to
Starboard. Its annual shareholder meeting is scheduled for Oct.
10.

The Orlando-based chain, which has been under pressure from
activists since last year, frustrated investors when it rebuffed
a shareholder vote in April calling for a special meeting to
debate the then-proposed sale of its struggling Red Lobster
chain.

Darden sold Red Lobster for $2.1 billion in July. Since
then, it has made significant concessions that have failed to
satisfy Starboard and fellow dissident investor Barington
Capital Group.

In addition to ceding four board seats to Starboard and
nominating just four incumbent directors to stand for election
at the annual meeting, the restaurant operator announced in July
that Clarence Otis would step down as chief executive officer
and chairman.

Starboard, Darden’s second-largest investor with an 8.8
percent stake, two weeks ago unveiled a proposal that included
plans to sell Darden’s real estate, franchise its restaurants
and to spin off the Capital Grille, Yard House and other chains.

The activist also shared its recipe for improving sales at
Darden’s flagship Olive Garden chain. That prescription included
salting the pasta water, giving away fewer breadsticks and
boosting wine sales.

Shares in Darden were up 0.1 percent to $51.35 in
after-hours trading on Thursday.

(Reporting by Lisa Baertlein in Los Angeles and Ross Kerber in
Boston; Editing by James Dalgleish, Chizu Nomiyama, Lisa
Shumaker and Ken Wills)

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The 8 Proxy Wars Going On in Syria Right Now – Huffington Post

The Syrian war is not only a proxy war. There is a strong internal dimension to the war in Syria but it has been obscured by various layers and dimensions of outside intervention and agendas. The Syrian regime wants to stay in power at any cost while there was certainly a civil popular opposition in Syria when the uprising first began. There are thousands of reasons for the Syrian people to protest against a family dictatorship that has controlled much of their lives since 1970 but the civil protest movement did not erupt by itself, the Western media narrative notwithstanding. Concurrent with the protest movement that erupted in 2011, Turkey and Gulf regimes had already set up armed rebel groups to help bring down a regime.

The internal dimension of the war in Syria, however, is now probably marginal to the global and regional war raging in the country today. There are several proxy wars in Syria today and they can be summarized as follows:

1. The internal Wahhabi war: There is no war within Islam in Syria, as Thomas Friedman and his ilk keep asserting. There has been a moderate and progressive strand of Islam in Syria and many of its elements have aligned themselves with the regime. And contrary to early claims made by the hired external opposition and its advocates in the West, there was never a moderate and progressive version of Islam among the rebel groups. How could that be the case when the sponsors of Syrian rebel Islam are Turkey, Qatar, and Saudi Arabia? Mufti Hassun (although he is an ally and perhaps a tool of the regime, and even the slain Sheikh al-Buti) is far more progressive than any of his adversaries on the other side, including Mu`adh al-Khatib who has railed in the past about the ills of social media, masturbation and Jews, and who praised al-Nusrah Front early on his tenure as leader of the Syrian National Council. The internal Wahhabi war is pitting the various Wahhabi parties in the region against each other. The Saudi regime, Qatari regime, al-Qa`idah (Nusrah Front) and ISIS: all four are Wahhabi and each is trying to dominate the field of the Wahhabi movement.

2. The Iranian-Saudi war: The two sides are engaged in struggles in different parts of the region, from Yemen to Lebanon and Syria. The conflict over political dominance and hegemony.

3. The Sunni-Shia war: This is a rather contrived war that was instigated by the Saudi regime — at the behest of US and Israel — to undermine the basis of Arab support for Hizbullah and Iran in the region.

4. The Russian-American war: This war is reminiscent of the Cold War. The conflict between the Russian government and the American government has never reached this level since the demise of the Soviet Union. The conflict over Ukraine and Syria, among other places, has pushed both sides to resort to the tricks and methods of the Cold War, including proxy wars.

5. Qatari and Saudi conflict: The two Wahhabi regimes are fighting over many issues but they both wish to speak on behalf of political Islam. Qatar banks on the Muslim Brotherhood and some elements of Jihadi Islam, while the Saudi regime banks on the Salafis and some elements of Jihadi Islam. This conflict may explain the conflict between the Nusrah Front and ISIS.

6. The Hezbollah versus the Future Movement:
Both of those Lebanese movements have been fighting in Syria. The Future Movement is a broad and loose movement which comprises various stands, including Salafis.

7. Clash of Islamic identities: Saudi Arabia, Turkey, and Iran are all hoping to leave their national imprint on the political Islamist movement in the region.

8. The regional conflict between the global organization of the Muslim Brotherhood on one hand and the regional Salafis on the other.

These proxy conflicts now determine the course of events in Syria and the Syrian people themselves, on either sides of the conflict, have very little control over them. The slogans that are being raised by both sides of the conflict merely serve to rationalize the policies and decisions of external patrons.

Dr. As’ad AbuKhalil is a Professor of Political Science at the University of California, a lecturer, author of several books, and creator of the blog The Angry Arab News Service. This post first appeared on Al Alkhbar English.

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Religious Proxy Warriors Renew Attack on Fossil Fuels – Acton Institute (blog)

image

UN Climate Summit

No sooner does one proxy resolution season end, it seems, then another begins. The religious shareholder activist group As You Sow has announced last week it will continue to push proxy resolutions at Exxon Mobil Corporation in 2015. If there’s any doubt what stance they’ll take, those doubts should be allayed by As You Sow’s presence at last weekend’s Climate Summit at the United Nations:

The world will be watching, and this is a time to stand up and be counted. As You Sow will be there to march and stand up for the voice of investors. We invite you to walk with us, raising our voices together against climate risk, for a sustainable future, and a strong economy.

What exactly is meant by AYS’s assertions for climate risk, sustainability and a strong economy? In a Sept. 12 press release, the shareholder activists reference a recent report by Carbon Tracker Initiative, a London-based nongovernmental organization in which ExxonMobil is accused of “understating climate-change risk to investors.” CTI’s agenda is to reduce the use of fossil fuels, of course, but over the past several years they’ve presented a new wrinkle to the argument. It seems that – if successful in their renewable-energy mandates and carbon caps – ExxonMobil investors will be left holding an empty sack as a result. According to AYS and Arjuna Capital, another group of progressive investor activists:

ExxonMobil is underplaying the risks presented to its business and investors by the need for international action to prevent climate change, according to a new report.

The analysis, from the financial think tank the Carbon Tracker Initiative (CTI), warns that the oil giant is unprepared for a major shift in the market, with carbon-cutting policies and the rise of renewable energy likely to curb demand for oil in the coming decades.

Supporters of the ‘carbon bubble’ theory warn that such a trend would leave the fossil fuel reserves already claimed by Exxon as devalued stranded assets. Even if world leaders fail to agree on effective climate change policies, some analysts say demand for oil will still fall, leaving Exxon and the other oil majors exposed.

The presumptuousness and spin above exposes AYS and CTI as little more than anti-fossil fuel activists. It barely merits mention that ExxonMobil’s in a far better position to calculate the potential financial risks and advantages of stranded assets than a group of “concerned” activists working at cross-purposes with a majority of shareholders.

The release continues:

Although Exxon did concede that it needed to manage climate change-related risks, the CTI report concludes that the firm is failing to adapt its investment strategy and business model accordingly.

In a statement, wealth manager Arjuna Capital and the nonprofit As You Sow, which jointly submitted the initial share-holder resolution to Exxon, claim the CTI report proves that ‘the dinosaur has no clothes’.

‘Exxon’s cost profile is headed in the wrong direction as they invest in high-cost unconventional assets. This flawed strategy has contributed to a significant deterioration in returns over the last five years –essentially reversing a 40-year trend of outperformance,” said Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital.

‘A fossil fuel volume play in the face of climate risk is faulty logic. As investors, we prefer Exxon protect value by diverting capital from high risk, high carbon projects to low carbon alternatives and return money to shareholders through increased dividends and share buybacks.’

As part of the investor engagement group the Carbon Risk Initiative, As You Sow and Arjuna Capital have pledged to battle for more transparency and responsiveness from fossil fuel firms as the 2015 shareholder season approaches.

Let’s suss this out: ExxonMobil’s core business is, according to the Arjuna spokeswoman, “unconventional.” Viewed from the AYS, CTI and Arjuna ivory towers, perhaps. The Wall Street Journal’s Andrew Peaple, however, relates a scenario far different from that of CTI and its over-eager disciples:

As The Wall Street Journal’s Russell Gold reports, naysayers have long argued that the surge in U.S. oil and gas supply over the past decade, stemming from greater use of the fracking technique to extract resources, would eventually peter out. The reason: the U.S. would run out of wells to frack.

That ignored one other possibility: that frackers might find ways to get more resources from any given well.

The best new well drilled last year—in Susquehanna County, Pa.—produces more than four times as much oil each day as the best well drilled back in 2003, at the outset of the shale revolution.

According to Gold, while the number of rigs drilling for oil onshore in the U.S. has been broadly flat in recent times, production is increasing because of this sort of rising productivity.

If this trend carries on, it could alter estimates of how long the U.S. can sustain its energy production boom. A recent government report suggested U.S. oil production would level off in 2019. But under a scenario where extraction technology continues to improve, it could keep rising until 2040, the report concluded.

Your writer is loathe to ascribe motives to any individual or group of people, but the above indicates AYS and Arjuna aren’t concerned in the slightest about ExxonMobil’s shareholder value inasmuch they’re convinced climate change is incontrovertibly real, manmade, catastrophic and reversible. Belief in some or all of the above certainly is within the rights of AYS and Arjuna, but what of other shareholders in the equation? After all, these organizations and individual men and women of every set of beliefs and non-beliefs simply seek a decent return on their investments in ExxonMobil stock. Additionally, the value of cheap and plentiful fossil fuel is a boon for not only the world’s economic engines but as well the quality of life for every rung of the economic ladder.

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Alibaba Proxy Drain – Wall Street Journal (blog)

There’s nothing like the real thing. Shares of companies that investors played as Alibaba proxies fell sharply in Asia Monday, even after the Chinese e-commerce company bolted out of the gate with a 38% jump in its first day of trading Friday. Japanese conglomerate SoftBank, which owns around a third of Alibaba, was down 4.4% in morning trading, while sportswear maker China Dongxiang Group , with a smaller stake, was down nearly 10%.

Investors could merely be taking profits, as both stocks have seen strong gains in anticipation of the IPO. U.S.-based Yahoo , which has a 16.3% stake after the offering, fell 2.7% Friday. Indirect plays on Alibaba are also less coveted now that investors have direct access to its shares. It remains to be seen if Alibaba can stay at its current high valuation, so it might be a good time for these proxy plays to do something with the shares to realize value for shareholders, rather than just sitting on huge paper gains.

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SoftBank Falls After Alibaba Listing Removes Proxy Appeal – Bloomberg

SoftBank Corp. (9984) fell after Alibaba Group Holding Ltd. (BABA) went public as investors who had been buying the Japanese carrier as a proxy for the Chinese e-commerce company were able to buy Alibaba shares directly.

SoftBank, the biggest shareholder in Chinese e-commerce company Alibaba with about a third of its equity, tumbled 4.4 percent to 8,354 yen at the midday trading break in Tokyo for its biggest drop on an intraday basis since May. Japan’s third-largest carrier had gained 29 percent between Aug. 8 and Alibaba’s listing in New York on Sept. 19.

Alibaba surged 38 percent in its U.S. trading debut after raising a record amount in an initial public offering. The company is now valued at more than $231 billion, and Japan’s third-largest carrier forecast a gain of about 500 billion yen ($4.6 billion) related to the listing.

“SoftBank will lose its proxy appeal after Alibaba’s listing,” said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. in Singapore.

Another big Alibaba shareholder, Yahoo! Inc., also fell after Alibaba’s debut on Friday. The Web portal’s shares fell 2.7 percent to $40.93, and it now is worth less than the value of its Asian assets. Yahoo sold more than 20 percent of its Alibaba shares in the Chinese company’s IPO.

Photographer: Noriyuki Aida/Bloomberg

Masayoshi Son, Chief Executive Officer of SoftBank Corp., said he has no plans to sell his stake in Alibaba. Close

Masayoshi Son, Chief Executive Officer of SoftBank Corp., said he has no plans to sell… Read More

Open

Photographer: Noriyuki Aida/Bloomberg

Masayoshi Son, Chief Executive Officer of SoftBank Corp., said he has no plans to sell his stake in Alibaba.

SoftBank didn’t plan to sell shares and will have a 32.4 percent stake, according to the prospectus.

Masayoshi Son’s company may use some of that stake as collateral to raise money for strengthening U.S. operations that include Sprint Corp. (S), Anvarzadeh said. Sprint is the No. 3 U.S. carrier, trailing AT&T Inc. and Verizon Communications Inc., and failed in its recent effort to merge with No. 4 T-Mobile US Inc.

“SoftBank has said it is a long term holder of its roughly 33 percent stake in Alibaba,” said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trading Ltd. “So while its balance sheet looks very healthy, there is no injection of hard cash to its war chest that could have caused a special dividend, for example.”

To contact the reporters on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net Aaron Clark

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