US Airways Shareholders Approve Merger With American Airlines

The Justice Department and attorneys general from 18 states are still reviewing the deal, as are European Union officials, to see if it would create monopoly service on some routes.

The merger, an all-stock deal that has been valued at $11 billion, is the latest in an industry that has undergone substantial consolidation, leading to the mergers of United and Continental in 2010, Delta Air Lines and Northwest in 2008, and Southwest Airlines with AirTran in 2011.

US Airways said in a statement that more than 99 percent of the shares that were voted on Friday supported the merger. US Airways shareholders will have a 28 percent stake in the combined airline.

American has been in bankruptcy since November 2011, and final approval of the bankruptcy court is also required for the merger. The new airline would keep the American name and remain based in Fort Worth. American’s creditors would own 72 percent of the combined airline.

W. Douglas Parker, the chairman and chief executive of US Airways, said at the annual shareholders’ meeting on Friday that the combined airline would offer more than 6,700 daily flights to 336 destinations in 56 countries. He said it would offer customers more choices as well as provide cost savings for the airlines.

But the Government Accountability Office, a research arm of Congress, said in June that the merger would reduce competition in a far larger number of airports than earlier airline mergers, including the one that created United Continental.

The report found that 1,665 routes between cities would lose one competitor as a result of the merger, affecting more than 53 million passengers. A new competitor would be created in 210 routes, affecting 17.5 million passengers. The report added, however, that the great majority of those markets still had “effective competitors.”

Shareholders Approve Plan to Split News Corp.

Shareholders attended a special meeting at the media company’s New York headquarters early Tuesday where they voted in favor of the formation of two separate companies. The larger company, 21st Century Fox, will include Fox Broadcasting, cable channels like Fox News and FX, and the Hollywood studio; a newly formed News Corporation will contain newspapers like The Wall Street Journal and The New York Post, the HarperCollins publishing company and a handful of Australian television assets.

Investors have for years grumbled that many of News Corporation’s more than 120 newspapers were a drag on the company, in contrast to the strong performance of its cable television assets. Those complaints became more pronounced in July 2011 when a phone hacking scandal erupted at the company’s British newspaper division, prompting the chief executive, Rupert Murdoch, to abruptly close News of the World, one of News Corporation’s most profitable papers.

“With the split of our company, and the birth of the new News Corp., I have been given the extraordinary opportunity most people never get in their lifetime: the chance to do it all over again,” Mr. Murdoch told investors at a News Corporation investor day held May 28.

The vote on Tuesday was partly a foregone conclusion. The Murdoch family controls 39.4 percent of the company’s Class B voting shares. Prince Alwaleed bin Talal of Saudi Arabia controls another 7 percent and typically votes in support of the Murdoch family.

Representatives from the Nathan Cummings Foundation, a charitable organization and institutional investor that owns 3,686 Class B voting shares, on Tuesday protested the dual-class stock structure that allows the Murdoch family to control voting. That structure will also exist in both 21st Century Fox and the new News Corporation.

The company is expected to split officially on June 28.

Fair Game: Shareholders Are Speaking Up, but Who’s Listening?

Consider what happened after the May 14 annual meeting of the CommonWealth Real Estate Investment Trust. Joseph L. Morea, a CommonWealth trustee, was up for re-election, and more than three quarters of the shares voted were cast against him. Under the company’s guidelines, this meant that he had to resign. CommonWealth, as is typical at many companies, requires that its independent directors resign if they don’t receive majority support from shareholders for their re-election.

Mr. Morea dutifully stepped down. But that was not the end of it. The next day, CommonWealth said its board determined that Mr. Morea’s loss seemed related to its battle with outside shareholders hoping to oust the trustees, rather than to any personal failings. As a result, it said, the board had “requested that Mr. Morea accept appointment to the vacancy created by his resignation.” So he returned to the board and will serve on three of its committees: those relating to audit, compensation — and nominating and governance.

You’d never know that the shareholders, a majority of whom voted against Mr. Morea, were the actual owners of CommonWealth. As a point of reference, the trustees who reappointed him to the board own only one-quarter of 1 percent of the company’s shares. CommonWealth declined to comment further.

Flouting its own trustee-election policies, as CommonWealth did, was brassy. But its board is by no means the only one that has thumbed its nose at concerned shareholders. A recent maneuver by Urban Outfitters, the retailer of youthful casual clothing, accessories and housewares, brings a new twist to the concept of good shareholder relations.

A vocal band of institutional investors in Urban Outfitters is concerned about board diversity. In the last three years, these investors have argued that the company’s all-male board is too homogeneous. They have mounted shareholder proposals requesting that the board focus on nominating at least one female or minority director. Shareholders will vote on the third such proposal on Tuesday at Urban Outfitters’ annual meeting in Philadelphia, where Richard Hayne, the chairman, C.E.O. and a co-founder, will preside.

To support their argument, these shareholders, including Calvert Investment Management, the Connecticut Retirement Plans and Trust Funds and the New York State Common Retirement Fund, cite research showing that companies with some heterogeneity among directors outperform those with none.

Studies done in 2007 and 2011 by Catalyst, a nonprofit organization that promotes opportunities for women in business, found that in two measures — return on sales and return on invested capital — companies with more women as directors significantly outperformed those with fewer.

“We’ve taken a very strong position that diversity on boards better positions a company to understand what’s going on in an increasingly diverse marketplace,” said Thomas P. DiNapoli, the New York state comptroller, who oversees the retirement fund.

Given that so many of Urban Outfitters’ customers are women, you might expect its directors to embrace the idea of adding a woman to its six-member board. But over the years that the diversity proposals have appeared on Urban Outfitters’ proxies, the company has urged shareholders to reject them. In this year’s filing, for example, the company said that imposing gender and minority requirements on the board selection process would be unduly restrictive and “would undermine the company’s holistic evaluation of candidates.”

Shareholder endorsement of the diversity proposal has been rising, though. It reached 39 percent in 2012, up from 23 percent of shares voted in favor of it in 2011.

And this support grows even larger if you remove from the calculation the shares owned by company insiders, who presumably voted their shares against the proposals according to the board’s recommendation. Subtracting the more than 30 million shares held by Mr. Hayne and his wife would bring the outside shareholder support for last year’s diversity proposal to 52.3 percent.

WITH that as a backdrop, let’s turn to this year’s proxy statement. In that document, in which companies describe the directors up for election, Urban Outfitters announced that it was — drum roll, please — nominating a woman to its board. It asked shareholders to support her at the coming meeting.

So who is the holistically evaluated candidate? Margaret Hayne, the wife of the chairman. Ms. Hayne, who is president of Urban Outfitters’ Free People division, joined the company in 1982.

Talk about poking your shareholders in the eye with a stick.

I asked Urban Outfitters about its nomination of Ms. Hayne, and whether it thought that would satisfy shareholders who were concerned about diversity. Neither the company’s director of investor relations nor Mr. Hayne responded to multiple requests for comment. Ms. Hayne could not be reached.

But Mr. DiNapoli took a dim view of the move. “To nominate someone who is also a long-term employee, an insider and married to the C.E.O. and chairman,” he said, “doesn’t pass the smell test of really trying to find someone that adds to diversity and is going to be an independent voice.”

Board diversity is not the only matter irking Urban Outfitters’ shareholders. Until this year, for example, its directors served for staggered terms, making it harder for shareholders to oust a group of them at once.

At the annual meeting in 2012, however, a majority of shareholders voted to declassify Urban Outfitters’ board, which would require directors to stand for election each year. The company’s directors again advised shareholders to vote against this proposal, but were unpersuasive. Instead of eliminating the staggered terms immediately, though, Urban Outfitters is making the change over the next few years.

Note well: Urban Outfitters is an extremely successful company. Over the last 12 months, its shares have risen 49 percent, and, last week, it posted record sales and a 39 percent earnings jump for its most recent quarter.

Perhaps the company’s directors think that superlative performance means that they can brush off shareholders’ concerns. Still, it hardly seems likely that adding an independent woman to the board would damage Urban Outfitters’ performance. And who knows? It might even enhance it.

Two shareholders rescind Heinz lawsuits

Pittsurgh, Pa. (AP) - Two H.J. Heinz shareholders who had filed lawsuits over the $28 billion buyout of the Pittsburgh ketchup maker on Thursday asked a federal judge to dismiss their complaints, saying that the price tag is fair.

Occidental Shareholders Vote Out Long-Time Chairman Irani

The company had been forced to deny there was a fight at the top after the Wall Street Journal reported pressure from Irani for Chief Executive Steve Chazen to leave, even though Chazen had the support of several big investors.

More than three-quarters of the votes cast went against Irani, according to a tally released late on Friday. Earlier, Chazen had said at the annual shareholder meeting that Irani would step down from the board.

Edward Djerejian, a former ambassador, will take over as independent chairman of the Los Angeles-based company. A director since 1996, he most recently chaired the corporate governance, nominating, and social responsibility committee.

Shares of Occidental rose nearly 3 percent to close at $90.76 on the New York Stock Exchange.

"Ultimately this clears the path for Chazen to continue what he is focusing on so far, which is cost improvement," said Allen Good, an oil company analyst at Morningstar in Chicago. "It also might clear the way for the break-up of the company. They are much bigger now, so it might make sense to create a couple of different companies out of Oxy."

Chazen spoke at length on a conference call last week about the potential shape of a sale of its Middle East businesses, long more favored by Lebanon-born Irani.

On Friday, while still displaying his well-known sense of humor, Chazen talked emotionally of his two-decade relationship with the 78-year-old chairman. "I'm not going to say that every day was a trip to Disneyland," he said, before adding: "Every day I learned something."

Irani took over as CEO in 1990 from tycoon Armand Hammer - a time when Chazen said the nicest thing you could say about the company was it was "nearly insolvent" - and oversaw dramatic growth, while raising eyebrows with his lavish pay packages.

In a call at the meeting for better governance, shareholder John Chevedden pointed to what Irani received for financial planning: $390,000 last year. About 63 percent of shareholders backed the latest executive compensation plan in an advisory vote on Friday.

Chazen, 66, took over as CEO two years ago, having served in the executive suite since 1994. Occidental revealed in February it was seeking his replacement, and then said in April that he would continue through 2014, in order to reduce uncertainty.

Referring to the very public succession battle, Chazen said "it's been tough to tell the last few weeks" that oil and gas is the company's primary business.

Chazen received more shareholder support than any other boardmember, at 623.2 million votes - nearly 99 percent.

The CEO went on to say he would still ask Irani for advice regularly "because I'm addicted to it" and concluded his remarks by thanking his wife for "letting me fool around a little longer."

Influential advisory firm ISS this week had reaffirmed its recommendation to vote against Irani.

"I didn't see anybody predicting that he would be forced," said Jack Zwingli, leader of information services at Farient Advisors, an independent executive compensation consulting firm. "Most people would take it as a surprise."

Zwingli said investors would watch to see if the pay package of the next CEO is brought down to the level of Occidental's peers.

The chairman of Occidental's compensation committee, Aziz Syriani, withdrew his nomination prior to the election, and Chazen said that a search firm would start working on replacements for open board seats.

(Reporting by Braden Reddall, writing by Anna Driver; Editing by Kenneth Barry and David Gregorio)

DealBook: JPMorgan Board Feels Heat From Upset Shareholders

Keith Bedford/ReutersJamie Dimon, chairman and chief executive of JPMorgan Chase.

As JPMorgan Chase’s annual meeting nears, much of the tension surrounds a critical vote to split the chairman and chief executive roles — a decision that could strip Jamie Dimon, the bank’s influential leader, of the dual titles he has held since 2006. Behind the scenes, though, another battle is brewing.

Some JPMorgan shareholders are taking public aim at individual directors who hold crucial positions on the bank’s audit and risk committees as the bank grapples with an onslaught of regulatory challenges.

On Friday, the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said it planned to vote against the three directors on the risk policy committee and the head of the audit committee. While it is not known how other shareholders are voting on directors, big stakeholders like BlackRock, T. Rowe Price and TIAA-CREF have increasingly taken aim at boards, voting against directors they think are performing poorly.

JPMorgan, once the darling of Washington after emerging from the financial crisis in far better shape than its rivals, suffered a multibillion-dollar trading loss last year. Since then it has increasingly found itself under regulatory scrutiny for potential risk and compliance lapses.

The Office of the Comptroller of the Currency, one of the bank’s chief regulators, is deciding whether to bring new enforcement actions, according to people who spoke on the condition of anonymity. One action the agency is considering, these people said, focuses on whether JPMorgan used faulty documents in lawsuits to collect overdue credit card debt.

In one of the latest regulatory crackdowns, investigators from the Federal Energy Regulatory Commission sent a scathing message to the bank in March that warned of a potential action over accusations of manipulation in the energy markets. The confidential government document, reviewed by The New York Times, also took aim at a top executive, Blythe Masters, contending she gave “false and misleading statements” under oath.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank, which is the nation’s largest. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

While Mr. Dimon apologized in a recent letter to shareholders for disappointing “our regulators,” vowing to bolster controls and “do all the work necessary to complete needed improvements,” some shareholders are not satisfied and are now considering how to cast their votes. Some shareholders are reluctant to vote to split the role of chairman and chief executive, saying the right way to send a message is to vote against certain directors, a move they think will result in positive change at the board level.

JPMorgan’s annual meeting is scheduled for May 21 in Tampa, Fla., and the results of shareholders’ votes on all the proposals will be announced then. Directors and senior executives at the bank have been contacting major shareholders in recent weeks, hoping to ease any concerns they might have. They hope to persuade investors not only to back the board but also to vote against a proposal calling for the separation of the chairman and chief executive role. Last year, 40 percent of shareholders supported the proposal.

Shareholders like CtW are singling out members of the risk committee because they think the board failed to police the bank in important areas, contributing to the trading loss in 2012.

“What we have learned over the past year is that the performance of the risk committee is even worse than we thought,” said Richard Clayton, CtW’s research director. “Their behavior is a combination of being out at sea and asleep at the wheel. Both are bad and together they are disastrous.”

James S. Crown, who has been a director of JPMorgan or one of its predecessor companies since 1991, is chairman of the risk policy committee. The other members are David M. Cote, the head of Honeywell International; Timothy P. Flynn, a former KPMG executive; and Ellen V. Futter, president of the American Museum of Natural History. Mr. Flynn was appointed to the risk policy committee in August 2012.

CtW also plans to vote against Laban P. Jackson, chairman of the audit committee, which shares responsibility for oversight.

CtW voted against all four directors last year but went public only about its displeasure with Ms. Futter, contending she lacked banking experience. Last year, 86 percent of shareholders voted for Ms. Futter, the lowest amount of support for any director. A person close to JPMorgan who spoke on the condition of anonymity because he was not authorized to discuss board matters publicly, said that while Ms. Futter was not a career banker, she was well steeped in issues like reputational risk, bringing value to the committee.

Failing to receive a majority of shareholder votes does not necessitate a resignation, but such a vote might prompt a director to leave.

In 2011, before the big trading loss, CtW met with senior bank executives, warning that risk controls needed to be improved. It felt its concerns fell on deaf ears.

At a recent meeting with bank management, including the chief financial officer, Marianne Lake, and the general counsel, Stephen M. Cutler, the company owned up to its recent risk lapses, CtW said, but it has failed to devise any significant changes to improve the risk committee’s operations.

“We realize there was a management failure,” said Dieter Waizenegger, CtW’s executive director. “But it is as if the board didn’t do anything wrong and that is puzzling.”

Ms. Lemkau, the bank spokeswoman, said, “We disagree with CtW on the points they have raised but continue to engage with them.”

CtW’s six million shares are worth about $285 million. In contrast, the company’s biggest shareholders own more than 100 million JPMorgan shares each.

Since the trading loss last year, JPMorgan and its board have worked to fortify controls. JPMorgan’s board reduced Mr. Dimon’s pay this year by more than 50 percent, to $11.5 million, and issued a public report on the trading misstep. With the approval of the board, JPMorgan also clawed back more than $100 million in pay from the employees at the center of the soured wagers.

Last year, the board met 15 times, according to documents filed with the Securities and Exchange Commission. In the bank’s proxy filing, the 11-member board said that Mr. Dimon should continue to hold the dual top posts.

“The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both,” the filing said.

Fair Game: Shareholders Can Slow the Executive-Pay Express

A more important question may be this: Do this year’s figures show any evidence of progress toward a new pay paradigm? You know, where the gap between the compensation of executives and workers narrows, or where company directors put shareholders’ interests before those of the hired hands?

After looking over the numbers, I asked some experts in the compensation arena if they’d seen any promising shifts toward greater fairness in executive pay.

“The more things change, the more they stay the same,” said Brian T. Foley, an independent compensation consultant in White Plains.

Still, there were some encouraging signs. Some outliers, like Alan R. Mulally of Ford Motor and James P. Gorman of Morgan Stanley, took pay cuts in 2012 because their company’s performance declined. That’s the way it’s supposed to be.

And there are some cases where shareholders are actually reining in executive pay. Consider the work of some 128,000 Verizon shareholders who are also retirees of the company.

Known as the Association of BellTel Retirees, this group, for the last 15 years, has achieved a series of corporate governance and executive compensation changes at the company. This year, the association won a partial victory in a battle over performance-based stock awards. The company, according to its proxy statement, agreed to reduce such awards to senior executives when Verizon shares underperformed, a change the retirees had urged.

The retirees have also proposed that Verizon shareholders approve any severance package that exceeds 2.99 times an executive’s base salary plus incentives. This proposal will be voted on at the company’s annual meeting on May 2.

There is movement elsewhere, too. James F. Reda, an independent compensation consultant in New York, said he was noticing a shift among boards to award lower compensation to incoming chief executives, especially if they are from inside the company. “When new C.E.O.’s are hired, in a lot of cases, they are getting below-median total-compensation packages, with the idea that higher pay will get phased in over time,” Mr. Reda said. “New hires are not coming up to the C.E.O. level of pay right away as they did in the past. Now boards are making sure that they work out.”

Mr. Reda’s point brings up what compensation experts say may be the most formidable roadblock to fairer pay practices: longstanding chief executives who prefer the status quo and who hold sway over their directors.

Jon F. Hanson joined the board of HealthSouth in late 2002, just before a long-running accounting fraud at the company came to light. He has been its chairman since 2005 through a turnover of the company’s top management and board. “When a new C.E.O. comes in,” he said, “it emboldens the compensation committees to look at the methods we are using to compensate our C.E.O.”

In a vote last year, 98.8 percent of HealthSouth shareholders supported its pay practices; the compensation of its C.E.O. Jay F. Grinney stayed essentially flat last year, even though the company turned in solid gains in the period.

“It’s the hardest to introduce a new form of compensation when you have a long-entrenched C.E.O.,” Mr. Hanson said.

There are plenty of those around, of course. And that may explain why a pay practice that has contributed mightily to ever-rising compensation — the use of the corporate peer group — remains intact at most companies.

Using peer groups to determine executive pay was supposed to ground it in reality, basing it on the practices of similar companies. Instead, such benchmarking created a kind of arms race in pay.

One problem is that the makeup of the peer group is easily manipulated. For example, if a medium-size company uses much larger and more complex businesses as its benchmark, its compensation can be skewed, sending it far higher than it should be.

“Peer-group data is, as always, part art, part science,” said Mr. Foley, the compensation consultant. “It can be very constructive if done well, but can also be heavily gamed.”

A decade ago, directors at the New York Stock Exchange awarded Richard A. Grasso, its chief executive at the time, $140 million in compensation. He was compared against a peer group made up of companies with median revenue more than 25 times that of the exchange and median assets 125 times its own.

A furor erupted back then, but the reliance on peer groups goes on. A compelling paper on the problems with peer groups was published last fall by Charles M. Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, and Craig K. Ferrere, a fellow there. In it, the authors argue that corporate directors should eliminate peer groups and instead “develop internally consistent standards of pay based on the individual nature of the organization concerned, its particular competitive environment and its internal dynamics.”

Investor groups have embraced this argument against benchmarking, said Yale D. Tauber, the director of programs on executive compensation at the Conference Board Inc. “There is a growing dissatisfaction with where benchmarking takes us,” he said.

BUT effecting change in the boardroom on pay matters is a glacial process.

“When you have a new idea that is different from the status quo, there’s always some resistance to it,” explained Mr. Hanson, the HealthSouth chairman. “The dialogue is in the early stages, but at least people are discussing management’s compensation and benchmarking it against how they are performing and how the shareholders are doing. Management is beginning to realize that it’s not just about their compensation. We also have to make sure that the shareholders benefit. That’s the change I’m seeing.”

Let’s hope these discussions turn into action sooner than later.

Fair Game: Dell Shareholders Look Hard at Takeover Effort

That’s what more and more Dell shareholders appear to believe about the $13.65 per-share price proposed on Feb. 5 by Mr. Dell and Silver Lake Partners, a technology investment firm. Initial objectors to the buyout have been joined by additional shareholders concerned about getting a fair shake.

The issue of fairness is a hazard of management-led buyouts, of course. Are insiders, who have an enormous information advantage owing to their deep knowledge of a company’s operations, trying to get control of an enterprise when its shares are perhaps temporarily depressed? Over the last year, Dell’s stock has lost 19 percent of its value.

Some investors wonder if Mr. Dell, who owns 14 percent of the shares outstanding, might have a hot new product on the drawing board that has the potential to make the company a highflier again.

Neither management nor Mr. Dell is saying much of anything about the company’s prospects. Last Tuesday, when Dell announced mixed earnings for the year, the company declined to make any projections for coming quarters on the conference call with investors and analysts. Its chief financial officer cited the pending deal as the reason no outlook was given.

As is the case with all insider deals, there’s great potential for outside shareholders to be treated unfairly. Making the deal even more problematic, Dell’s shareholders have little data upon which to assess its price. Dell’s regulatory filings say that the $13.65 per-share price is the result of extensive “bids and arms-length negotiations” between Silver Lake and the special committee of Dell’s board beginning in late October 2012.

Still, there’s no mention of how the $13.65 per-share offer stacks up against the company’s long-term enterprise value, an assessment of future earnings potential that is a typical measure in a takeover. Instead, the offer by Mr. Dell and Silver Lake seems based on the company’s recent stock price. Their $24.4 billion deal represents a 37 percent premium to the stock’s average price over the previous three months, they say.

Meanwhile, Southeastern Asset Management, one of Dell’s largest outside shareholders, estimates that the company is worth $23.72 a share, almost 75 percent more than the buyers are offering. Southeastern has come to that conclusion using publicly available information, however, because that’s all it has access to.

Naturally, both of these parties have a vested interest in getting their price in the deal. Mr. Dell and his group want to pay as little as possible, while long-suffering outside owners hope for more.

Trying to remedy this unsatisfying situation, an uninvolved investor organization has made an excellent suggestion: an independent, peer-reviewed analysis of Dell’s enterprise value should be done on behalf of its outside shareholders. Based on the same information Dell’s management has, such an assessment would assure investors that they are being bought out at a fair value.

This idea comes from the Shareholder Forum, a nonpartisan, independent creator of programs devised to provide the kind of information investors need to make astute decisions. The Forum, overseen by Gary Lutin, a former investment banker at Lutin & Company, suggests hiring a qualified expert to analyze the company’s operations. This would be similar to the so-called fairness opinions provided to shareholders in takeovers by outsiders. The analysis would be subject to confidentiality when necessary and would be reviewed by recognized analysts, academics and other investment professionals.

On Feb. 14, Mr. Lutin sent a letter to Mr. Dell and Alex Mandl, chairman of the special committee of Dell’s board charged with ensuring the deal’s fairness to all shareholders. In the letter, Mr. Lutin asked that the company support the independent analysis and provide assistance in its preparation.

Mr. Lutin said he had assumed that the board committee and Mr. Dell would want to support this project. “Shareholders have a very well-established right to any information relevant to their investment decisions under Delaware law,” Mr. Lutin said last week. “They also have the right to expect management to be responsible for addressing those interests.”

But last week, Mr. Lutin said that lawyers representing Mr. Mandl and his committee told him they would not be supporting the independent analysis.