Tesla’s shareholders have voted in favor of a compensation plan that could see CEO Elon Musk become the world’s first trillionaire. The potential incentives were laid out in September, and the company’s shareholders have agreed to allow this all-or-nothing package for its chief exec, who spent the first half of this year decimating the US federal government rather than working on any Tesla-adjacent projects.
The compensation plan lists several targets that the company must reach for Musk to reap the vast rewards. Tesla must reach a market value of $8.5 trillion, compared with its current worth of about $1.4 billion. Other requirements are metrics-based, such as selling a million robots with humanoid qualities, while others are strategic, such as establishing a succession plan for future Tesla leadership. Musk also has a lot of other irons in the fire across SpaceX and xAI, so the incentives may be an effort to keep the CEO focused on generating more money for this specific group of supporters.
Presently, most times the Tesla name makes headlines, it’s not for good press. The company coupled record-high revenue with tumbling profits in its Q3 2025 financial results. Just during October, it was the subject of multipleinvestigations by the National Highway Traffic Safety Administration and incurred the wrath of the California Department of Insurance.
Investor Cathie Wood, a long-time Tesla bull known for first investing in the company a decade ago at $13 per share, condemned the growing resistance to Tesla CEO Elon Musk’s potential $1 trillion pay package. Over the weekend, the ARK Invest CEO suggested the financial system that’s enabling the pushback against it is the one with the problem, not the company that wants to make the world’s richest man richer by such a magnitude.
Wood said in a Sunday post on X that it was “sad if not damning” that proxy advisory firms, which make recommendations for how shareholders should vote during companies’ annual meetings, have so much influence. Wood’s comments come after two of the most important proxy firms, Institutional Shareholder Services (ISS) and Glass-Lewis, urged shareholders to reject during Tesla’s annual meeting on Nov. 6 the giant pay package that would give the world’s richest man 29% of the company, up from about 13% now.
Wood particularly criticized the relationship between these proxy firms and index funds, which have an outsized influence over voting because of the large number of shares they control for their investors. Each shareholder gets a certain number of votes based on how many shares they own. Yet, large institutional investors, including index funds, control massive amounts of shares held by their investors, which gives them sway over voting.
“Index funds do no fundamental research, yet dominate institutional voting. Index-based investing is a form of socialism. Our investment system is broken,” she added.
While Wood claims index funds don’t do research, their parent companies absolutely do. The three largest index funds in the world are managed by Vanguard, State Street, and BlackRock, and all three do extensive research for proxy voting decisions and have their own proxy voting guidelines that they publish. Also, those three funds hold over $2 trillion tracking the S&P 500 index and represent the vast majority of retail traders invested in the stock market. While index funds don’t do research to pick stocks, they utilize their research base for voting decisions.
Both proxy firms recommended shareholders vote against Musk’s pay package partly because it dilutes existing investors’ shares and gives Tesla’s highly compensated board too much flexibility when it comes to the goals Musk has to meet to get the full payout, which is about equal to the company’s total market cap.
In another series of posts, Wood added that ISS and Glass Lewis don’t see the potential in Tesla that ARK Invest does and seemingly suggested index funds should be stripped of their voting power. ARK Invest’s flagship ARK Innovation ETF’s largest holding is Tesla, which makes up about 12% of its $8 billion portfolio.
“I believe that history will decide that Glass Lewis and ISS have been menaces to innovation, enabling passive investors who care about ‘tracking errors’ to their indexes but do not care about much else,” Wood wrote in a post referring to how closely index funds track indexes such as the S&P 500.
Russell Rhoads, a clinical associate professor of financial management at Indiana University, said while investors in an active fund know its management may push for changes to a company if it is struggling, the same isn’t true for passive investors who put their money into index funds.
“In general, if I put money into a fund, that’s supposed to mirror the index, that is a passive investment,” he said. “I’m just investing in the market and not trying to influence anything what any other companies are doing business wise.”
Tesla, for its part, said in a Monday statement that the proxy firms aren’t considering the previous 2018 pay package approved by shareholders on two different occasions that allocated $56 billion to Musk over 10 years. Both ISS and Glass Lewis also recommended voters reject the 2018 pay package.
“Glass Lewis’s one-size-fits-all checklists undermine shareholders’ interests, including by opposing proposals designed to build long-term value at Tesla,” the statement read.
When reached for comment, representatives from Glass Lewis and ISS directed Fortune to their respective proxy papers on Tesla.
Prior to the proxy firms’ reports, the SOC Investment Group, which works with pension funds sponsored by major unions such as the International Brotherhood of Teamsters, as well as several parties with an interest in Tesla including state financial officers, signed a letter with the Securities and Exchange Commission urging shareholders to vote no on Musk’s pay package earlier this month.
If Musk’s pay is approved and the three board members are reelected, “this year may be one of the last times that public shareholders have a meaningful voice in the Company and its leadership given the level of dilution that is likely to take place,” the letter argued.
Tejal Patel, the executive director of Tesla shareholder group SOC Investment Group, saiddespite the company claiming Musk needs more incentive to stay engaged with Tesla, Musk’s incentives should already align with the company whose shares represent the bulk of his $455 billion net worth. SOC has been vocally critical of Tesla and its corporate governance for multiple Musk pay packages on multiple grounds.
“We just don’t believe that these pay packages are going to really incentivize Mr. Musk to stay at Tesla, nor to be focused on Tesla over his other business endeavors,” Patel told Fortune.
Still, Wood said she was confident Musk’s pay package would pass, in part because of the support of retail investors, which hold about 40% of Tesla’s voting shares.
“Although the proxy firm ISS has recommended against the package, retail investors are likely to dominate the vote once again. America!”
[This report has been updated to include a paragraph providing additional context on the extent of the major index funds’ research activities.]
Faith-based shareholder activism dates back to 1970s
Up until the 1990s, the nuns had few investments. That changed as they began to set aside money to care for elderly sisters as the community aged.
“We decided it was really important to do it in a responsible way,” said Sister Rose Marie Stallbaumer, who was the community’s treasurer for years. “We wanted to be sure that we weren’t just collecting money to help ourselves at the detriment of others.”
Faith-based shareholder activism is often traced to the early 1970s, when religious groups put forth resolutions for American companies to withdraw from South Africa over apartheid.
In 2004, the Mount St. Scholastica sisters joined the Benedictine Coalition for Responsible Investment, an umbrella group run by Sister Susan Mika, a nun based at a Texas monastery who has been working in the field since the 1980s.
The Benedictine Coalition works closely with the Interfaith Center for Corporate Responsibility, which acts as a clearinghouse for shareholder resolutions, coordinating with faith-based groups—including dozens of Catholic orders—to leverage assets and file on social justice-oriented topics.
The Benedictines have played a key role at ICCR for years, said Tim Smith, a senior policy advisor for the centre. It can be discouraging work, where the needle only moves slightly each year, but he said the sisters “have the endurance of long-distance runners.”
The resolutions rarely pass, and even if they do, they’re usually non-binding. But they’re still an educational tool and a means to raise awareness inside a corporation. The Benedictine sisters have watched over the years as support for some of their resolutions has gone from low single digits to 30% or even a majority.
Gradually environmental causes and human rights concerns have swayed some shareholders, even as a growing backlash foments against investments involving ESG (environmental, social and governance concerns).
Southwest Airlines has adopted a ‘poison pill’ following activist investor Elliott Investment Management taking a significant stake in the company.
The airline said Wednesday that the shareholder rights plan is effective immediately and expires in a year. Southwest shareholders would need to give prior approval for an extension.
Shareholder rights plans, or “poison pills,” allow existing shareholders to acquire shares at a discounted rate to discourage a takeover by an outside entity. Southwest’s plan is triggered when a shareholder acquires 12.5% or more of its common stock, which would let all other shareholders buy stock at a 50% discount.
Southwest said that it adopted the rights plans due to several concerns, including Elliott’s approximately 11% stake in the company and the flexibility that the firm has to acquire a significantly greater percentage of Southwest’s voting power across two of its funds starting as early as July 11.
“In light of the potential for Elliott to significantly increase its position in Southwest Airlines, the board determined that adopting the rights plan is prudent to fulfill its fiduciary duties to all shareholders,” Southwest Chairman Gary Kelly said in a statement. “Southwest Airlines has made a good faith effort to engage constructively with Elliott Investment Management since its initial investment and remains open to any ideas for lasting value creation.”
Last month it was disclosed that Elliott bought a $1.9 billion stake in Southwest and was looking to force out the CEO of the airline, which has struggled with operational and financial problems.
Elliott, in a letter to Southwest’s board, then said that Southwest’s stock price has dropped more than 50% in the last three years. The firm also criticized the airline, saying it has failed to evolve, hurting its ability to compete with other carriers. Elliott blamed the Dallas-based company’s massive flight cancellations in December 2022 on what it described as the airline’s outdated software and operational processes.
Elliott is looking for executives from outside the company to replace CEO Robert Jordan and Kelly, and for “significant” changes on the board, including new independent directors with experience at other airlines.
Southwest has said that it remains confident in Jordan and its management and their ability to drive long-term value for shareholders. For his part, Jordan has said that he won’t resign and that in September his leadership team will present a plan to boost the airline’s financial performance.
In midday trading, Southwest shares added 11 cents to $28.41. Shares of the company are down about 21% in the past year, while the benchmark S&P 500 index is up roughly 25% over the same time.
Canada Goose reports $5M Q4 profit, YOY revenue up 22%
Canada Goose Holdings Inc. (TSX:GOOS) reported a profit in its fourth quarter compared with a loss a year earlier as its revenue rose 22%. The luxury parka maker says it earned net income attributable to shareholders of $5.0 million or $0.05 per diluted share for the quarter ended March 31, compared with a loss of $3.1 million or $0.03 per diluted share a year earlier. Revenue for the totalled $358.0 million, up from $293.2 million in the same quarter last year.
On an adjusted basis, Canada Goose says it earned $0.19 per diluted share in its latest quarter, up from an adjusted profit of $0.13 per diluted share a year earlier. The outlook for its 2025 financial year, Canada Goose says it expects total revenue to grow in the low-single-digits year-over-year. It also says its adjusted net income per diluted share for the full year is expected to grow by a mid-teen percentage compared with a year earlier.
Lightspeed reports Q4 revenue up 25%
Photo by The Canadian Press/Christinne Muschi
Photo by The Canadian Press/Christinne Muschi
Photo by The Canadian Press/Christinne Muschi
Three months after Dax Dasilva returned to the helm of Lightspeed Commerce Inc. on an interim basis, the company says he’s staying put. The Montreal-based payments technology business said Thursday that Dasilva, Lightspeed’s founder, has been reappointed as chief executive on a permanent basis, dropping the interim tag from his title.
Dasilva stepped back into the CEO job on an interim basis in February after JP Chauvet left the company. Chauvet joined Lightspeed as chief revenue officer in October 2012 and replaced Dasilva in the top job in February 2022, when the founder became executive chair.
“We’re in a new phase,” Dasilva told analysts on a conference call to discuss the company’s latest results. “This is the profitable growth phase of Lightspeed, so (I’m) thrilled to be leading.”
That new phase, he said, has three objectives:
accelerating software revenue growth,
advancing the adopting of Lightspeed’s financial services products
and controlling costs.
To improve software revenue growth, Dasilva said the company would invest in product innovation, redeploy account managers to upsell clients and focus on customers that tend to adopt more software.
On the financial services front, the company wants to get more clients using not just its payments technology, but also its capital and instant deposit offerings. Dasilva’s final objective is to control costs and find more savings.
Barry Diller, IAC chairman, had some harsh words for Trump Media and its shareholders.Mike Blake/REUTERS
Barry Diller thinks that shareholders of Truth Social’s owner have been scammed.
The IAC chairman pointed to Trump Media’s low revenue and said he doubts Truth Social will grow.
Shares for Trump Media and Technology Group initially surged after going public, but have since tumbled.
Barry Diller has a message for Trump Media shareholders: “I think they’re dopes.”
The owner of the Truth Social app, Trump Media and Technology Group, enjoyed a soaring debut when it went public last week, attracting the interest of retail investors and the “meme stock” crowd.
But that moment in the sun was short-lived, and shares of the former president’s social media platform have since come crashing down to earth.
Diller, media mogul and chairman of IAC and Expedia Group, didn’t sound very optimistic about the stock’s future when asked about it during a recent interview — and doesn’t get why people were so excited about it in the first place.
“Why are you even talking about this? It’s a scam,” Diller said in an interview on CNBC’s Squawk Box on Thursday.
TMTG’s total revenue in 2023 was just $4.1 million, according to an SEC filing on Monday — while losing $58 million. Those numbers, Diller suggested, should not indicate “buy” to any reasonable investor.
“It’s ridiculous,” he said. “The company has no revenue.”
Questioning how anyone could see Trump Media as a valuable company, Diller concluded that its shareholders must not have financial soundness in mind when purchasing the stock. “They’re buying it for other reasons,” he said, calling them “dopes.”
Diller likened the surge in Truth Social’s owner to the frenzy around Gamestop and other “meme stocks.”
Diller said the platform offers little opportunity for future growth.
“Why would it be bigger?” he asked, adding that Donald Trump — a major part of the platform’s appeal — is “only interesting now” because he’s “out there entertaining the folks” on the campaign trail.
TMTG did not return a request for comment before publication.
Truth Social’s barnstorming debut briefly inflated Trump’s net worth to an estimated $7.8 billion, making him richer than George Soros. But just a few days later, that number has tumbled to $6.4 billion, per the Bloomberg Billionaires Index on Friday.
Meanwhile, short-sellers are already betting millions against the company, The New York Times reported, citing data from S3 Partners.
Trump could also find it difficult to materially benefit from Trump Media in the short-term, since he is prevented from selling his shares for another six months as part of a “lock up” period — unless the company’s board allows otherwise.
The ides of March is upon us and Paytm’s future hangs in the balance. March 15 is the deadline for subsidiary Paytm Payments Bank (PPBL) to wind down its operations, taking with it a significant portion of parent One97 Communication’s (OCL) business.
One97 insists that it will be business as usual post March 15. While the financial implication of PPBL may seem negligible to One97’s overall business, it needs to be seen in the context of the payments bank perhaps being the only profitable entity of OCL’s associates and JVs, in addition to being a critical component of the overall payments piece given that a significant portion of the transactions were routed through the bank.
In this scenario, shutting down of the bank is bound to have business implications for the parent.
Of OCL’s revenue base of ₹7,990 crore in FY23, the payments business accounted for ₹4,930 crore. PPBL suffered losses in FY22 but bounced to a net profit of ₹2 crore in FY23. In FY21, it was the most profitable arm of the holding company contributing ₹25 crore towards the net profit.
As per One97 Communication’s annual report for FY23, revenue from the bank stood at about ₹2,277 crore, of which ₹783 crore was received by the parent as ‘services received as payment processing charges’ and ₹1,494 crore as ‘amount receivable from the payment gateway’. There are other payables and receivables apart from these as well.
In terms of balance sheet impact, investors should brace for a markdown of ₹195.9 crore in OCL’s investments attributable to PPBL. Net worth attributable to shareholders at ₹254.3 crore may also suffer a mark down post March 15 if the payments bank is wound down after March 15.
Paytm secured the TPAP (third party application provider) licence from NPCI on Thursday which will help it continue its UPI-based operations that account for a bulk of the payments business and are key for its survival and growth. Other payment options include netbanking, debit and credit cards.
Since the regulatory directive against subsidiary PPBL on January 31, parent OCL has made all efforts to severe ties with its arm to dispel allegations of inter-connectedness of business operations and lack of transparency between the two entities.
This included Founder and Chairman Vijay Shekhar Sharma stepping down from the board of the bank and reconstitution of the bank board. However, Sharma continues to be the majority shareholder with 51 per cent stake whereas One97 holds the remaining 49 per cent in the bank. Also to be noted is that all communication so far has been from One97 and Paytm and not from the bank, which begs the question of how independent the bank really is?
One97, since the beginning of February, has lost major ground–losing its privilege to offer banking services such as savings accounts, allow wallet payments, and issue FastTag or NCMC travel cards. The company has now shifted FasTag and NCMC operations from Paytm Payments Bank to other banks albeit at lower margins and higher expenses. It has also lost ground to competitors such as BharatPe and PhonePe in terms of merchant payments, new merchant acquisition, UPI transaction volumes and exiting human resource.
These peers also have the advantage of Payment Aggregator (PA) licence, in the absence of which Paytm will for now be forced to only facilitate payments which in itself is not a profitable business.
Paytm vs the bank
The RBI, on its part, has been highlighting concerns with respect to compliance and governance, inter-connectedness of business and lapses in KYC/AML processes at the bank. Even as it took action against the payments bank (which falls under its supervisory jurisdiction), it intervened and asked NPCI to fast-track a TPAP licence for Paytm despite repeatedly highlighting governance issues, absence of appropriate demarcation between the two businesses and inadequate checks and balances.
This willingness to ensure a licence for Paytm, even if it meant ensuring customer convenience, appears to contradict the regulator’s communication so far, especially if customer data protection and safety are the main considerations.
Meanwhile, the central bank is expected to supersede the board of Paytm Bank post March 15 to ensure that all remaining balances are utilised and/or returned to customers before the bank’s licence is officially revoked.
Whether Paytm can manage to regain its position as a top payments player and grow hereon is then dependent on whether merchants and customers continue to trust the brand and whether One97 is able to diversify its revenue streams going forward. While peers Google Pay and PhonePe already have a PA (Payment Aggregator) licence, it remains to be seen if and when the regulator would be comfortable enough to grant similar access to Paytm.
This seems to be the end of the payments bank’s journey. But does that mark a new beginning for One97 Communication or has it dragged its parent along to the end, we will know in the next 6-9 months.
He has a twin brother, Theodore Dimon Jr., who is the founder of the Dimon Institute in New York.
1982-1985 – Assistant to American Express president Sandy Weill.
1996-1997 – Chairman and CEO of Smith Barney.
1997-1998 – Co-chairman and co-CEO of Salomon Smith Barney Holdings.
1998 – President of Citigroup. Dimon is forced out of the company after a falling-out with Weill.
2000-2004 – Chairman and CEO of Bank One Corporation.
2004 – Becomes president and chief operating officer of JPMorgan Chase & Co. when it merges with Bank One Corporation.
December 31, 2005 – Assumes title of chief executive officer and president at JPMorgan Chase & Co., effective January 1, 2006.
December 31, 2006 – Named chairman of the board at JPMorgan Chase & Co., effective January 1, 2007.
2011 – Earned $23.1 million in compensation as chairman and CEO of JPMorgan Chase & Co., making him the best paid bank CEO.
May 10, 2012 – On a conference call, reveals that a trading portfolio that was designed to help JPMorgan Chase hedge its credit risk lost $2 billion and could lose $1 billion more.
May 15, 2012 – Apologizes to JPMorgan Chase shareholders at the annual meeting. Shareholders approve Dimon’s $23 million pay package and preliminary results show that only 40% support a proposal that calls for the appointment of an independent chairman.
May 17, 2012 – Senate Banking Committee announces Dimon has been invited to appear before the committee at hearings looking into the JP Morgan trading losses from a regulatory angle.
June 13, 2012 – Dimon testifies before the Senate Banking, Housing and Urban Affairs Committee telling senators that while he did not approve the trades that led to the multi-billion dollar loss, he was aware of it.
June 19, 2012 – Dimon testifies before the House Financial Services Committee and says that he did not mislead shareholders.
July 13, 2012 – JPMorgan announces that the trading loss originally believed to be $2 billion is now approximately $5.8 billion. JPMorgan later discloses that the loss increased to $6.2 billion in the third quarter.
2012 – Due to the London Whale losses, Dimon’s pay package is reduced to $11.5 million, down from the previous year’s $23.1 million.
January 23, 2013 – Dimon apologizes to the shareholders by stating that the “whale” trade that caused the $6 billion loss was a “terrible mistake.”
May 21, 2013–Approximately 68% of JPMorgan Chase stockholders vote to keep Dimon as chairman and CEO at the annual meeting, but three directors on the risk committee receive a narrow majority of only between 51% and 59% of votes.
September 19, 2013 – JPMorgan Chase agrees to pay about $920 million in fines to US and UK regulators to settle charges related to the “London Whale” trading scandal.
November 19, 2013 – Officials announce JPMorgan Chase has agreed to a $13 billion settlement to resolve several investigations into the bank’s mortgage securities business. According to the Justice Department, the deal is the “the largest settlement with a single entity in American history.”
January 24, 2014 – Dimon gets a 74% pay hike for 2013, even though JPMorgan Chase & Co was forced to pay billions in fines and settlements last year. In a government filing, JPMorgan Chase says that Dimon will receive $18.5 million worth of restricted stock that will vest over the next three years as his 2013 bonus. That’s up from a $10 million bonus for 2012. His $1.5 million base salary remains unchanged.
July 1, 2014 – Dimon releases a memo saying that he has been diagnosed with a curable throat cancer. He will receive radiation and chemotherapy treatment over the next eight weeks at Memorial Sloan Kettering Hospital in New York, but will remain working while undergoing treatment.
March 5, 2020 – In a letter to employees, shareholders and clients, JPMorgan Chase’s co-COOs Gordon Smith and Daniel Pinto announce that Dimon is recovering after undergoing emergency heart surgery. Dimon required surgery after experiencing an “acute aortic dissection,” a tear in the inner lining of the aorta blood vessel.
WILMINGTON, Delaware (Reuters) – Elon Musk suffered one of the biggest legal losses in U.S. history this week when the Tesla CEO was stripped of his $56 billion pay package in a case brought by an unlikely opponent, a former heavy metal drummer.
Richard Tornetta sued Musk in 2018, when the Pennsylvania resident held just nine shares of Tesla. The case eventually made its way to trial in late 2022 and on Tuesday a judge sided with Tornetta, voiding the enormous pay deal for being unfair to him and all his fellow Tesla shareholders.
Tornetta could not be reached for a comment and his attorney declined to comment.
Until Tornetta’s case, Musk prevailed in a string of trials accusing him of defamation, of breaching his duty to shareholders and of violating securities laws.
Based on his online presence, Tornetta seems to have more of an interest in creating audio gear for car-customizing enthusiasts than going after corporate excess and malfeasance.
He has posted light-hearted videos about gadgets he has created or mishaps, including describing how he torched his eyebrows.
Tornetta also turned up in videos drumming at the legendary former New York club CBGB with his now-defunct metal band “Dawn of Correction”, which described its sound as “a swift kick to the face with a steel-toed work boot.”
On social media, fans of Tesla and Musk seemed to find the case a travesty of justice and speculated about Tornetta’s intentions and political affiliations, asking how an investor with such miniscule holdings could wield such power.
Delaware corporate case law is full of cases bearing the names of individual investors with tiny shareholdings who wound up shaping America’s corporate law.
Many law firms that represent shareholders keep a stable of investors they can work with to bring cases, says Eric Talley, who teaches corporate law at Columbia Law School. They might be pension funds with a broad range of stock holdings but they are also often individuals like Tornetta.
The plaintiff signs paperwork to file the lawsuit and then generally gets out of the way, says Talley. The investors don’t pay the law firm, which takes the case on contingency, as the lawyers did in the Musk case.
Tornetta benefits from winning the case the same way other Tesla shareholders benefit: saving the company billions of dollars that a subservient board of directors paid to Musk.
Business groups have long criticized cases brought by individuals as an indication of potentially abusive litigation. Delaware 10 years ago was plagued with lawsuits led by retail investors owning a few shares challenging merger deals. The cases were often quickly resolved with meaningless settlements that always included payments to the attorneys bringing the cases. Delaware judges and lawmakers eventually reined in the practice.
Experts said people like Tornetta are vital for policing boardrooms. Lawmakers and judges have long wanted large investment firms to lead such corporate litigation since they are better equipped to keep an eye on their lawyers’ tactics. But experts said fund managers do not want to jeopardize relationships on Wall Street.
So it was up to Tornetta to take on Musk.
“His name is now etched in the annals of corporate law,” Talley said. “My students will be reading Tornetta v Musk for the next 10 years.”
(Reporting by Tom Hals in Wilmington, Delaware; Editing by Noeleen Walder and David Gregorio)
Shareholders at the 99th annual general meeting of Karnataka Bank approved distribution of ₹5 a share (that is 50 per cent) as dividend for the financial year 2022-23. The annual general meeting was held in Mangaluru on Tuesday through videoconferencing.
The bank informed stock exchanges that P Pradeep Kumar, Chairman of the bank, who chaired the meeting, addressed the shareholders regarding the developments that took place during the financial year 2022-23 and the progress made by the bank during the reporting financial year.
United States Steel Corp. (X) is considering a sale after fielding acquisition offers, according to a Sunday press release from the company.
The steel producer is under a formal review process after “receiving multiple unsolicited proposals” for both specific assets and the entire firm, the release announced.
“U. S. Steel’s Board and management team are committed to maximizing value for our stockholders, and to that end, we have commenced a comprehensive and thorough review of strategic alternatives,” wrote David Burritt, U. S. Steel’s CEO. “The Board is taking a measured approach to considering these proposals, including seeking more information in order to evaluate proposals that are preliminary and subject to ongoing due diligence and review.”
There is currently no set timeline or end date for the review process.
A judge on Friday blocked a proposed settlement on AMC Entertainment Holdings’ stock conversion plan that would allow the company to issue more shares, sending its common shares soaring and preferred shares down in after-hours trading.
Delaware Vice Chancellor Morgan Zurn said in the ruling that she cannot approve the settlement “as submitted,” because it would release potential claims by preferred shareholders who were not represented in the lawsuit or settlement.
AMC shares were up 69% at $7.44 in trading after the bell. Its preferred shares were down 20% at $1.43.
The company was sued in February for allegedly rigging a shareholder vote that would allow AMC to convert preferred stock to common stock and issue hundreds of millions of new shares.
The conversion would dilute the common stockholders’ ownership, but allow AMC to pay down some of its $5.1 billion in debt.
AMC has told investors it is burning cash at an unsustainable rate and warned that an inability to raise capital could force the company into bankruptcy.
It cannot carry out its plan to do so until the litigation has been resolved.
The settlement received more than 2,800 objections from shareholders, a level of interest Zurn called “unprecedented” in her ruling on Friday.
“AMC’s stockholder base is extraordinary,” she said, adding that many “care passionately about their stock ownership and the company.”
The judge rejected the settlement after determining the holders of common stock could not release AMC from potential claims that belong to holders of preferred shares, an issue which objectors did not raise.
Many objectors sought permission to opt out of the settlement and sue on their own behalf, dismissing AMC’s dire financial predictions as “fear tactics.”
Australian gold miner Newcrest Mining said on Monday it would back Newmont A$26.2 billion ($17.8 billion) takeover offer in one of the world’s largest buyouts so far this year.
The deal, subject to approval from shareholders of both companies and other regulatory hurdles, would lift Newmon
(NEM)t’s gold output to nearly double its nearest rival, Barrick Gold
(GOLD), and catapult the miner past Freeport McMoRan to become the largest US gold and copper producer by market capitalization.
Newcrest
(NCMGF) shareholders would receive 0.400 Newmont share for each share held, with an implied value of A$29.27 a share, higher than a previous exchange ratio of 0.380 that Newcrest
(NCMGF)’s board rejected in February.
Newcrest shares opened on Monday 1.5% higher at A$28.68, and the offer is a 30.4% premium to the stock’s price in February before the Newmont bid became public.
Newmont is also allowing Newcrest to pay a franked special dividend of up to $1.10 per share on the implementation of the deal that returns tax credits to Australian shareholders.
The merger is set to be the third-largest deal ever involving an Australian company and the third-largest globally in 2023, according to data from Refinitiv and Reuters’ calculations.
“This transaction will combine two of the world’s leading gold producers, bringing forward significant value to Newcrest shareholders through the recognition of our outstanding growth pipeline,” said Newcrest Chairman Peter Tomsett.
Newmont said it would have about 8 million ounces of total combined annual gold production once the deal closed, with more than 5 million gold ounces from 10 long-life and low-cost mines.
The Denver-based miner added it would have combined annual copper production of approximately 350 million pounds from Australia and Canada.
Newcrest shareholders will be able to choose to receive New York Stock Exchange-listed Newmont shares or Australian-listed CHESS Depository Instruments (CDIs) as payment.
Newcrest said it recommended its shareholders vote in favor of the deal at a meeting expected to be held in September or October.
The deal requires Australia’s Foreign Investment Review Board (FIRB) approval as well as Newcrest and Newmont shareholders to vote in support the transaction, among other regulatory requirements.
The companies said the deal was due to be finalized in the fourth quarter of 2023.
Do mass layoffs reflect poor management? That’s up for debate. But a new analysis suggests the practice harms shareholder returns, and companies should instead consider tactics like a four-day workweek to cut costs.
CFOs tend to underestimate the “organizational drag” that’s created as a result of layoffs, according to the research and advisory firm Gartner. This can inadvertently reduce shareholder returns in the long term instead of protecting them, an analysis finds.
“The first thing to recognize is that there is an immediate upfront cost to layoffs as a business will need to reorganize itself around a smaller group of employees and typically incur costly upfront severance payments,” Vaughan Archer, senior director of research and advisory in the Gartner Finance practice, said in a statement. And what will follow is an increased need for contractor hiring, which can be costly, and remaining employees have a ton of more work and more demands for increased compensation, according to Archer.
Within three years, the forecasted savings from layoffs tend to become offset by the unforeseen consequences, Gartner said. Even if a business avoids “a vicious cycle of employee turnover” driven by overworked staff and low morale, any cost savings from layoffs will likely be lost. And when businesses start to rehire at some point, it will likely be at higher rates than the employees who were laid off.
“In the more negative scenarios, the factors detailed here are also going to harm growth in existing and new business, and ultimately a firm will start losing its customers,” Archer said.
Four days instead of five
A four-day workweek is one of the 10 cost savings actions companies can take instead of mass layoffs, Gartner suggests. Trimming the traditional workweek model to four days is “not about cutting pay, but may control pay growth and staff turnover as employees find better work-life balance and increased productivity as burnout is reduced,” the firm noted.
This work dynamic has certainly been a hot topic of discussion. Monster conducted a survey of 868 workers in March focusing on work productivity. Sixty-one percent said they’d rather have a four-day workweek and 33% say they’d leave their job for one with a shortened week.
Britain announced in February the results of the world’s biggest trial of a four-day working week, Fortune reported. The six-month pilot included over 60 companies and just under 3,000 to feedback on the “100:80:100” working model: 100% pay for 80% of the time, in exchange for 100% productivity. The results included a 65% reduction in the number of sick days, maintained or improved productivity at most businesses, and a 57% decline in the likelihood that a worker would quit, improving job retention.
Andrew Barnes is the cofounder of the nonprofit 4 Day Week Global, helping organizations in various countries, including the U.K., pilot shorter schedules. Barnes also owns Perpetual Guardian, one of New Zealand’s largest corporate trustee companies. During MIT Sloan Management Review’s virtual summit on May 4, he talked about his company’s experience.
“We implemented the four-day workweek five years ago,” he said. “We’re twice as productive on a per capita basis now as our nearest competitor. We’re not seeing any adverse impacts.”
Voluntary reduction in hours, internal redeployment, reducing executive compensation, remote work, voluntary leave of absence, a hiring freeze, benefit cuts, organization-wide pay cuts, and sabbaticals are the other options companies can take instead of mass layoffs, Gartner advises.
If the livelihood and well-being of employees and shareholder returns are on the line, there’s a lot to consider before deciding on a major workforce reduction.
Sheryl Estrada sheryl.estrada@fortune.com
Big deal
Microsoft has released its 2023 Work Trend Index report, “Will AI Fix Work?” The pace of work has accelerated faster than humans can keep up, and it’s impacting innovation, according to the report. “This new generation of A.I. will remove the drudgery of work and unleash creativity,” Satya Nadella, Microsoft chairman and CEO, said in a statement. The report shares three key insights for business leaders: digital debt is costing innovation, there’s a new A.I.-employee alliance, and every employee needs A.I. aptitude.
Amid fears of A.I. job loss, when asked what they would most value A.I. for, business leaders were two times more likely to choose “increasing employee productivity” (31%) than “reducing headcount” (16%).
The findings are based on 31,000 people in 31 countries, an analysis of both Microsoft 365 productivity signals, and labor trends from the LinkedIn Economic Graph.
Going deeper
“A.I. Can Be Both Accurate and Transparent,” a new report in Harvard Business Review, examines the question: Is there always a tradeoff between accuracy and explainability in artificial intelligence? The research tested a wide array of A.I. models on nearly 100 representative datasets and found that 70% of the time, a more-explainable model could be used without sacrificing accuracy. In many applications, less transparent models come with substantial downsides related to bias, equity, and user trust, according to the report.
Leaderboard
Sarah Wells was promoted to CFO at Spruce Power Holding Corporation (NYSE: SPRU), an owner and operator of distributed solar energy assets across the U.S., effective May 19. Wells succeeds Don Klein, who is departing in connection with the previously announced transition from XL Fleet to Spruce Power executive management. She joined Spruce Power in 2018, and most recently served as SVP of finance and accounting and head of sustainability. Before joining the company, she held various financial roles including finance and SOX manager at Cornerstone Building Brands (formerly NCI Building Systems, Inc.). Earlier in her career, Wells served as a senior auditor at PKF Texas.
William Bardeen was promoted to EVP and CFO at The New York Times Company (NYSE: NYT), effective July 1. Roland A. Caputo, who announced his planned retirement as CFO in December 2022, will remain with the company through Sept. 30 for a transition period. Bardeen, 48, joined The New York Times Company in 2004. He’s served as chief strategy officer since 2018, also overseeing investor relations on an interim basis since March. Before that, he was SVP of strategy and development from 2013 to 2018. Bardeen has also served in various other leadership roles at The Times in corporate development, business development, and strategic planning. Before joining the company, he was a management consultant.
Overheard
“My personal belief is it will be like that movie Her with Scarlett Johansson and Joaquin Phoenix: Humans are a bit boring, and it’ll be like, ‘Goodbye’ and ‘You’re kind of boring.’”
—Emad Mostaque, CEO of the fast-growing London-based startup Stability AI, which popularized the text-t0-image generator Stable Diffusion, hopes A.I. will find us “a bit boring” but acknowledges that in the worst-case scenario it “basically controls humanity,” he told BBC in an interview.
Adidas shareholders filed a class-action lawsuit against the brand, accusing it of failing to warn investors about the antisemitism and “extreme behavior” exhibited by the rapper formerly known as Kanye West, before their partnership ended last year.
In the lawsuit, filed Friday in a federal court, shareholders allege that Adidas “routinely ignored” his behavior as early as 2018. They claim that senior executives “ignored serious issues” affecting the Yeezy partnership, namely his antisemitic remarks and troubling public comments about slavery.
In a report from that year, Adidas was “generally alluding” to the risks “rather than stating that the company had actually considered ending the partnership as a result of West’s personal behavior,” according to the lawsuit. During that time, Ye said that slavery was a “choice” in a TMZ interview.
The lawsuit said that Adidas was aware of his behavior and that the company “failed to take meaningful precautionary measures to limit negative financial exposure” if the partnership ended.
The lawsuit doesn’t name the rapper, who now goes by Ye. Adidas’ Chief Financial Officer Harm Ohlmeyer and former CEO Kasper Rørsted are named as defendants. The suit covers anyone who bought an Adidas share from May 3, 2018 (when Ye made the slavery remark) until 2023.
“We outright reject these unfounded claims and will take all necessary measures to vigorously defend ourselves against them,” Adidas said in a comment to CNN.
Adidas
(ADDDF) ended its almost decade-long partnership in October 2022 after Ye wore a “White Lives Matter” T-shirt in public. The Anti-Defamation League categorizes the phrase as a hate slogan used by White supremacist groups, including the Ku Klux Klan. Days later, Ye said “I can say antisemitic s*** and Adidas
(ADDDF) cannot drop me” during a podcast taping.
Adidas said that its partnership with Ye ended because it “does not tolerate antisemitism and any other sort of hate speech” and said his comments were “unacceptable, hateful and dangerous.” It also said they violated the company’s “values of diversity and inclusion, mutual respect and fairness.”
The company said in February that it was expected to lose $1.3 billion in revenue this year because it’s unable to sell the designer’s Yeezy clothing and shoes. In a statement, Adidas said its financial guidance for 2023 “accounts for the significant adverse impact from not selling the existing stock.” If the company can’t repurpose any of the remaining Ye clothing, Adidas said that could cost the company $534 million in operating profit this year.
The deep uncertainty that the COVID pandemic created in the workforce hasn’t waned. U.S. workers are struggling with inflation, burnout, and fresh waves of layoffs. This comes as people expect more from employers — more leadership, more urgency, more action, and better jobs.
The public’s perspective is clear and consistent: companies need to prioritize their employees. In today’s unstable economic climate, worker wages and treatment are more important to Americans than ever.
When it comes to creating U.S. jobs with strong wages, good benefits, safe environments and opportunities for upward mobility, a handful of companies lead the pack.
Bank of America BAC,
NVIDIA NVDA
and Microsoft MSFT
are the top-three companies in JUST Capital’s 2023 rankings of America’s most JUST companies. They all share one crucial thing in common — a clear commitment to addressing worker issues and investing in employees.
Since 2018, JUST Capital’s rankings have provided a snapshot of how U.S. companies are measuring up to the public’s priorities, as determined through an annual survey to identify issues that define principled business behavior. Companies that are just provide a clear benefit for investors. For example, If an investor purchased an index tracking the JUST 100 companies at its March 2019 inception, the index would have generated 13.3% in excess return versus the Russell 1000 as of December 2022.
Worker issues have risen to the forefront of Americans’ vision for what is a just business. Paying a fair and living wage, supporting workforce advancement, protecting worker health and safety, and providing benefits and work-life balance are top priorities for the public. Notably, regardless of demographic differences including political affiliation, Americans agree that companies should do more to address worker needs.
What makes a great company?
Bank of Americademonstrates strong leadership on the top priority — paying a fair, living wage – by raising its minimum wage to $22 per hour, a key step in its pledge to offer a $25 starting wage by 2025. In addition, employees receive an extensive benefit package, including 16 weeks of paid parental leave for primary- and secondary caregivers, and career development opportunities through tuition assistance and professional training.
NVIDIA works to ensure equal pay for equal work, performing detailed pay equity analyses, and is one of only a few companies to disclose pay-analysis results separated by racial and ethnic categories. Like Bank of America, NVIDIA is one of 10% of Russell 1000 RUI
companies that offer at least 12 weeks of paid parental leave for both caregivers, providing 22 weeks of paid leave to primary caregivers.
Microsoft offers at least 12 weeks of parental leave for both caregivers, in addition many other generous paid-time-off benefits, including 15 days of paid vacation and an additional 10 days of paid sick leave for every worker — a policy still rare for many companies. Additionally, Microsoft discloses the results of its pay-equity analyses, going above and beyond other companies by disaggregating pay ratios for specific racial and ethnic categories — including Black, Asian and Latinx — all of whom are paid on par with their white counterparts.
“ When companies ensure the economic security, advancement, equity and safety of their workforces, employees are more engaged and productive. ”
These efforts provide tangible benefits to employees, but prioritizing workers offers much more to companies than just an assurance of moral good. When companies ensure the economic security, advancement, equity, and safety of their workforces employees are more engaged and productive, strengthening their companies’ business in turn.
Americans expect the private sector to better support employees. Effective business leadership today puts workers at the center of an organization’s strategy. When businesses take this approach, we get much closer to an economy that works for all Americans.
Alison Omens is chief strategy officer at JUST Capital.
South Korean internet company Kakao has become the largest shareholder of SM Entertainment, winning a battle for control of one of the country’s most iconic music agencies.
Kakao and its entertainment unit have increased their stake in SM to 39.9%, they said in a Tuesday regulatory filing. Previously, the firm had held 4.9% of SM.
Kakao purchased the additional shares for about 1.25 trillion Korean won ($963million) through a tender offer launched earlier this month.
In securing a controlling stake, Kakao has seen off rival HYBE, South Korea’s top music agency and home to boy band sensation BTS, after a bruising takeover battle.
Ina separate Tuesday filing, HYBE said it had sold some of its SM shares to Kakao, reducingits stake to 8.8%.
Kakao CEO Hong Eun-taek acknowledged the acquisition, telling shareholders Tuesday that the companies would work to combine the strengths of Kakao’s tech expertise and SM’s intellectual property and production skills “to expand our collective growth.”
“After the swift and amicable completion of the acquisition, we will form the business cooperation plans between Kakao, Kakao Entertainment and SM Entertainment, and share them with our investors,” he added.
Kakao raised eyebrows earlier this month by doubling down on its quest to take control of SM, seeking to get a bigger piece of the music label just days after a previous share sale agreement between the two parties was blocked by a South Korean court.
SM was founded by Lee Soo-man, a legendary music producer who is widely referred to in South Korea as “the godfather of K-pop” for introducing the genre to a mass audience. The company is known for representing hit artists such as NCT 127, EXO, BoA and Girls’ Generation.
Recently, however, it’s made headlines for a different reason: shareholder battles.
Lee has tussled with his firm’s management on multiple fronts this year — including how much of the company should be sold to either Kakao or HYBE. He sold most of his shares to HYBE for 422.8 billion Korean won ($334.5 million) in February, giving the agency a 14.8% stake.
HYBE had also tried to increase its stake in the company in recent weeks, with its own tender offer that failed to gain traction.
After that, Kakao swooped in by offering SM shareholders 150,000 won ($115) per share, significantly more than HYBE’s previous offer of 120,000 won ($92) per share. HYBE then formally called off its takeover bid.
SM’s management said it wanted to move forward with Kakao because the two parties were aligned on how the agency should operate.
SM Entertainment’s stock rose 3.5% on Tuesday following the news, while Kakao’s shares were little changed.
Investors in a riskier type of Credit Suisse’s bonds had the value of their holdings slashed to zero Sunday after Swiss authorities brokered an emergency takeover of the bank by rival UBS.
On Sunday, the Swiss National Bank (SNB) announced that UBS would buy Credit Suisse for 3 billion Swiss francs ($3.25 billion) — or about 60% less than the bank was worth when markets closed on Friday. Credit Suisse shareholders will be largely wiped out, receiving the equivalent of just 0.76 Swiss francs in UBS shares for stock that was worth 1.86 Swiss francs on Friday.
But it is the owners of Credit Suisse’s $17 billion worth of “additional tier one” (AT1) bonds who have been left fully in the cold. Swiss authorities said those bondholders would receive absolutely nothing. The move is at odds with the usual hierarchy of losses when a bank fails, with shareholders typically the last in line for any kind of payout.
“The extraordinary government support will trigger a complete write-down of the nominal value of all AT1 shares of Credit Suisse in the amount of around 16 billion [Swiss francs],” the Swiss Financial Market Supervisory Authority said in a statement Sunday.
David Benamou, chief investment officer at Axiom Alternative Investments, a French wealth management firm with exposure to AT1 bonds, called the decision “quite surprising, not to say … shocking.”
The European market for such bonds is worth about $250 billion, according to the Financial Times. It could now go into a deep freeze.
AT1 bonds are also known as “contingent convertibles,” or “CoCos”. They were created in the wake of the 2008 financial crisis as a way for failing banks to absorb losses, making a taxpayer-funded bailout less likely.
They are a risky bet — if a lender gets into trouble, this class of bonds can be quickly converted into equity, or written down completely.
Because they are higher-risk, AT1s offer a higher yield than most other bonds issued by borrowers with similar credit ratings, making them popular with institutional investors.
It is not the write-down of Credit Suisse’s AT1 bonds that has rocked investors, but the fact that the bank’s shareholders will receive some compensation when bondholders will not.
Ordinarily, bondholders are higher up the pecking order than shareholders when a banks fails. But because Credit Suisse’s demise has not followed a traditional bankruptcy, analysts told CNN, the same rules don’t apply.
“The hierarchy of claims remains applicable in the EU… there is no way that shareholders can be paid and AT1 holders [are] paid zero,” Benamou said. “The decision taken by the Swiss authorities is really very strange.”
Michael Hewson, chief market analyst at CMC Markets, told CNN: “It appears that in this case, because it was not a bankruptcy situation it was considered that AT1 bondholders and shareholders would both feel the pain.”
EU banking regulators and the Bank of England moved Monday to reassure AT1 investors more broadly that they would take priority over shareholders in the event of future bank crises.
“Common equity instruments [stocks] are the first ones to absorb losses, and only after their full use would additional tier one be required to be written down,” the EU regulators said in a statement. “This approach has been consistently applied in past cases.”
Christine Lagarde, president of the European Central Bank, said in a speech Monday that banks in the eurozone had “a very limited exposure” to Credit Suisse, particularly in relation to AT1 bonds.
“We’re not talking billions, we’re talking millions,” she said.
The Bank of England said that “holders of [AT1s] should expect to be exposed to losses” when a bank fails according to their usual ranking in the capital hierarchy.
The legal basis for the Credit Suisse losses may be contested. Quinn Emanuel Urquhart & Sullivan, a litigation firm headquartered in Los Angeles, said Monday that it had assembled a team of lawyers who were discussing options with Credit Suisse’s AT1 bondholders.
The surprise move by the SNB has rattled Europe’s AT1 bond market, with investors now questioning whether their holdings could be obliterated if another bank collapses.
Joost de Graaf, co-head of European credit at Van Lanschot Kempen, a Dutch wealth management firm, told CNN that his fund did not invest in AT1s because he was “afraid [of] something like this,” where regulators could decide that a bank was no longer viable and write down the bonds’ value.
“For the coming few years, [the AT1] market is going [to go] into some kind of a hibernation probably, where new AT1s will be very hard to place for issuers at acceptable levels,” de Graaf said.
The impact will likely spill over into the wider bond market, he added, with investors demanding higher yields for bonds now seen as riskier.
“For the foreseeable future, [banks’] funding [through bonds] will be more expensive,” de Graaf said.
There are signs that shift may already be happening.
Invesco’s AT1 Capital Bond exchange-traded fund, which tracks AT1 debt, is currently trading down 5.5% compared with last Friday’s close. WisdomTree, another AT1 ETF listed on the London Stock Exchange, fell 7.4% in afternoon trade.
But the real damage is the precedent the write-down may have set, said Benamou of Axiom Alternative Investments.
“No financial analyst had ever believed that AT1 bonds would be brought to zero… given the level of solvency of Credit Suisse… [and] pretty high level of regulatory capital,” he said.
Tesla
(TSLA) and its Chief Executive Elon Musk were sued on Monday by shareholders who accused them of overstating the effectiveness and safety of their electric vehicles’ Autopilot and Full Self-Driving technologies.
In a proposed class action filed in San Francisco federal court, shareholders said Tesla defrauded them over four years with false and misleading statements that concealed how its technologies, suspected as a possible cause of multiple fatal crashes, “created a serious risk of accident and injury.”
They said Tesla’s share price fell several times as the truth became known, including after the National Highway Traffic Safety Administration began investigating the technologies, and reports that the Securities and Exchange Commission was investigating Musk’s Autopilot claims.
The share price also fell 5.7% on Feb. 16 after NHTSA forced a recall of more than 362,000 Tesla vehicles equipped with Full Self-Driving beta software because they could be unsafe around intersections.
Tesla has said it acquiesced to the recall, though it disagreed with NHTSA’s analysis.
“As a result of defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s common stock, plaintiff and other class members have suffered significant losses and damages,” the complaint said.
Tesla, which does not have a media relations department, did not immediately respond to requests for comment.
Monday’s lawsuit led by shareholder Thomas Lamontagne seeks unspecified damages for Tesla shareholders from Feb. 19, 2019 to Feb. 17, 2023. Chief Financial Officer Zachary Kirkhorn and his predecessor Deepak Ahuja are also defendants.
Tesla’s share price closed Monday up $10.75, or 5.5%, at $207.63, but the stock has lost about half its value since peaking in Nov. 2021.
Musk is expected at Tesla’s March 1 investor day to promote the company’s artificial intelligence capability and plans to expand its vehicle lineup.
The case is Lamontagne v Tesla Inc et al, U.S. District Court, Northern District of California, No. 23-00869.
Union Pacific shares jumped 10% in premarket trading Monday after the railroad company announced CEO Lance Fritz will leave the company by year-end, following a call by an activist hedge fund for his ouster.
Union Pacific just reported a record profit for the second straight year. But the hedge fund, Soroban Capital Partners, put out a statement saying that Fritz had lost the confidence of “shareholders, employees, customers, and regulators.”
“UNP’s total shareholder return has been the worst in the industry,” said Soroban’s letter to the board. “Among all S&P 500 companies, UNP is rated by employees as the worst place to work and has the lowest employee CEO approval rating (ranked 500th out of 500 in both),” said the letter. And it said that the Surface Transportation Board, one of the regulators of freight railroads, ranked Union Pacific as providing the worst service among the major railroads.
Soroban only owns about 1% of Union Pacific’s shares.
“It is my honor and privilege to serve this great company. I am proud of our team and all we have built together,” said Fritz in a statement. “Union Pacific has been my home for 22 years and I am confident that now is the right time for Union Pacific’s next leader to take the helm.”
Union Pacific said its process of looking for a new CEO had been ongoing for a year and that it decided to make a public statement in light of Soroban’s public call for a change.
“The Board is grateful to Lance for his unwavering leadership, dedication and oversight in driving our company forward over the last eight years as CEO. Lance created an environment that has allowed Union Pacific to make a measurable impact with our customers, communities and employees alike,” said Michael McCarthy, lead independent director of the Board. “He has capably led our company during a time of significant challenge and change.”
But, overall, the level of service and on-time performance in the freight railroad industry has been declining for years, as the railroads attempted to trim costs and staffing.
Despite the industry’s record profits, stocks in major freight railroads have lagged other sectors. Shares of Union Pacific
(UNP) are down about 20% over the last 12 month through Friday’s close, even with a rebound in share price so far in 2023. That’s worse than the drop in share price at other major railroads like Norfolk Southern
(NSC) and CSX
(CSX).
As far as employee relations, Union Pacific was seen as a leader among freight railroads in contentious labor negotiations last year that would have resulted in an economy-crippling strike had Congress not stepped in and imposed an unpopular contract. The contract granted employees an immediate 14% raise, including back pay, but denied them the paid sick days they had sought.
Union Pacific and other railroads argued during the negotiations that it couldn’t afford to meet union demands for paid sick days, even though the unions estimated it would cost the entire industry $321 million a year at a time when the railroads are each making billions of dollars in profits.
Union Pacific last year earned a net income of $7 billion, up about $500 million, or 7%, from the previous record profit it posted for 2021. Total employee compensation for the year came to $4.6 billion, far less than the $6.3 billion that Union Pacific spent repurchasing shares of stock in the period.
Last week, Union Pacific reached an agreement with two of its smaller unions granting their members up to four sick days a year, as well as greater flexibility to use three personal days as sick days without prior notice and approval.
“We will continue to work with other unions to address paid sick time solutions,” according to the company’s statement on sick pay last week. The move came after another major railroad, CSX, reached deals granting sick days with six of its unions. UP did act before a third railroad, Norfolk Southern, reached a deal with one of its unions on sick days in the wake of a major train derailment in East Palestine, Ohio, which released toxic materials into the area.
