Xerox Proxy Battle Hinged On CEO Conflict

For ousted Xerox CEO Jeff Jacobson, the perception (echoed by a judge) that he was pushing forward with a merger deal with Fujifilm to save his own job proved too much to overcome.
Xerox investor Carl Icahn.

Xerox came to an agreement with activist investors Carl Icahn and Darwin Deason that terminates the company’s proposed merger deal with Fujifilm, replaces five directors on the company’s board, and replaces CEO and chairman Jeff Jacobson with tech industry veteran and Icahn Capital consultant John Visentin. Icahn and Deason will drop their proxy battle in return.

A deal earlier this month to oust Jacobson and reshuffle the board expired before it could formally take effect, making headlines and forcing Xerox to perform a very public about-face. That deal came after a judge temporarily blocked the Fujifilm merger, saying that Jacobson’s actions were not in the best interests of shareholders and calling him “massively conflicted.”

The perception that Jacobson was pushing forward with the Fujifilm merger to protect his job was most damning part about this saga, according to TK Kerstetter, CEO of Board Resources LLC, and editor at large for Corporate Board Member.

“Conflicted leadership is not an insignificant challenge.” – TK Kerstetter

“It seems to me you can get around a lot of investor accusations, but when the major shareholders are supported by the courts in saying that the CEO is conflicted, yet still seems to be controlling the transaction and board, it’s no surprise to me that activists seem to be getting plenty of support,” Kerstetter told Corporate Board Member.

“The lesson is that examining whether conflicted parties are involved is an important question that boards should be asking in any deal, much less M&A-type deals that are always looked at under a very bright light and, typically, involve some kind of dissident lawsuits,” Kerstetter says.

While CEOs and directors should stay in close contact with major shareholders to monitor their concerns and hopefully avoid proxy fights, a conflicted CEO brokering major deals presented too many issues for Xerox. “Conflicted leadership is not an insignificant challenge, and every board should learn from that,” Kerstetter says. “That is going to stop a lot of things in its tracks.”

Icahn says the deal will put Xerox in position to succeed in the future, and that Visentin is the best leader to get the company where it needs to be.

“We are extremely pleased that Xerox finally terminated the ill-advised scheme to cede control of the company to Fujifilm,” Icahn said in a statement. “With that behind us and new shareholder-focused leadership in place, today marks a new beginning for Xerox. We have often said that the most important person at a company (by far) is the CEO. We are therefore also pleased that John Visentin, a tried and true veteran in this area, will be taking the helm.”

As part of the deal, directors Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter, and Stephen H. Rusckowski have resigned from the Xerox board, with Jonathan Christodoro, Keith Cozza, Nicholas Graziano, Scott Letier and John Visentin replacing them.

According to Xerox, the new board of directors plans to meet immediately to evaluate all strategic alternatives to maximize shareholder value.

Read More – Xerox: It Didn’t Have To End This Way

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