By David Benoit
Nelson Peltz scored a key recommendation in his fight to join
the board of DuPont Co., as an influential proxy adviser backed his
campaign to shake up the chemical giant.
Institutional Shareholder Services Inc. said Monday that DuPont
shareholders should elect Mr. Peltz and John Myers, two of the four
nominees Mr. Peltz's Trian Fund Management LP had put forward.
"This is not a broken company--but there is compelling evidence
that the dissidents are onto something in their critique," ISS
wrote. "Operating efficiency is not what it should be, yet instead
of addressing the core issues, the board and management, at least
in their communications with shareholders, are more inclined to
obfuscation than accountability."
DuPont said in a statement that ISS reached the "wrong
conclusion" and that the opinion was "ignoring the success of our
transformative strategy and the value-destructive nature of Trian's
break up agenda."
The company defended its current board as having the "right mix
of experience and skills" and reiterated its concern that what it
called Trian's "shadow management team" could harm the company.
DuPont shares rose 4.6% in afternoon trading to $74.79.
DuPont and Trian have been engaged in what has become a bitter
proxy fight over the future of the chemical maker.
While both sides had tried to make offers to settle the
campaign, both have been steadfast on the one breaking point:
Whether Mr. Peltz deserves a seat on the board.
ISS came down on the side of Mr. Peltz on that issue, rejecting
DuPont's arguments that his ideas have been reviewed already and
that he would set up a "shadow management" that would interfere
with running the business.
"The testimonials from prior boards on which Peltz has served
suggest this is ultimately not a 'shadow management team' so much
as a commitment to ensuring informed and effective advocacy
participation in the boardroom," ISS wrote, adding that Mr. Peltz's
election "thus seems clearly in the best interest of all
shareholders."
ISS declined to pick a side on whether to break up the company,
something Trian pressed for, although it more recently has said it
would be open to other ideas.
"Arguably the biggest question raised in this entire proxy
contest--should DuPont be broken up--turns out, after analysis of
the numerous other aspects of the dissident critique, to be the
easiest to answer," ISS wrote. "We don't know, and neither does
anyone else outside the DuPont boardroom."
Trian says DuPont has underperformed its peers and that its
underlying businesses are weighed down by a large corporate
structure. The activist Trian says the board and management's
performance warrants new voices and shareholder oversight.
DuPont has maintained that its stock has outperformed, that it
is already reshaping itself with the plan to spin off its
performance chemicals business and cut costs. It argues its board
and management have performed well and engaged with shareholders
and that Trian's ideas about breaking up the company would destroy
value.
Write to David Benoit at david.benoit@wsj.com
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