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Advisory Service Backs DuPont Challenger

Institutional Shareholder Services says Trian Fund Management should get seats on DuPont’s board

by Marc S. Reisch
April 27, 2015

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Credit: Jason Cohn/Reuters/Newscom
Peltz
Photo of Nelson Peltz, CEO of Trian Fund Management.
Credit: Jason Cohn/Reuters/Newscom
Peltz

Activist investor group Trian Fund Management today won the backing of an influential voting advisory service in its contest to win seats on DuPont’s board of directors at the company’s May 13 annual meeting. DuPont downplays the value of the recommendation and says shareholders will make up their own minds when they vote.

The advisory service, Institutional Shareholder Services (ISS), recommends that shareholders elect two of Trian’s four nominees for seats on the board, including Trian Chief Executive Officer Nelson Peltz. “This is not a broken company,” contends ISS in its assessment of DuPont, “but there is compelling evidence that the dissidents are onto something in their critique.”

Trian aggressively promotes change at companies in which it takes a stake. Its targets have included PepsiCo, industrial conglomerate Ingersoll Rand, and food maker Danone.

Peltz and Trian have argued that DuPont’s overhead costs are too high and that the firm ought to be broken up. ISS gives some credence to that assessment: “Operating efficiency is not what it should be, yet instead of addressing the core issues, the [DuPont] board and management, at least in their communications with shareholders, are more inclined to obfuscation than accountability.”

DuPont disagrees. “We strongly believe ISS reached the wrong conclusion,” the company says. ISS “demonstrates a fundamental lack of understanding of our business and the needs of a global science company,” it adds.

In unseating four of the 12 DuPont directors up for election, Trian “would deprive DuPont’s board of critical skills that are central to DuPont’s purpose and value proposition,” the company claims.

DuPont also points out that institutional shareholders, which control about 70% of its stock, don’t always accept ISS’s recommendation. “We are confident that shareholders will do their own analysis,” DuPont says.

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