Two Big Shareholders of Lockheed Say They Voted With Simmons : Proxy fight: Other institutions may join the pension fund managers in favoring the dissident group trying to unseat the defense contractor’s board.
Two of Lockheed Corp.’s institutional shareholders said Tuesday that they had voted their shares in favor of a dissident slate of directors led by Harold C. Simmons, the Texas financier who is waging a proxy fight to take control of the nation’s sixth-largest defense contractor.
As both sides struggled for shareholder votes, two state pension fund managers--the California Public Employees’ Retirement System and the Florida State Board of Administration--disclosed their support for Simmons’ slate. Together, the two institutions control about 1.1% of Lockheed’s stock.
In addition, informed sources said at least four other institutional investors are planning to support Simmons’ slate, bringing another 1.7% of the voting shares to the rival faction. The core of Simmons’ strength in the contest is the 18.9% of Lockheed stock owned by NL Industries, a Houston chemical company he controls.
Simmons needs a majority of the shares voted to gain the election of his slate of director candidates and, thus, control of Lockheed.
Proxy fights for board seats are rare, and victories by dissident board slates are rarer still. Simmons was given little chance to unseat the Lockheed board when he launched his proxy fight last month. However, he now appears poised to mount a respectable challenge.
The issue will be decided this week, but it is likely that results will not be announced at Lockheed’s annual meeting Thursday, as had been expected earlier. It was learned that the large number of late votes--and the vote switches that will be possible through the annual meeting--could mean that the results won’t be known for as much as two weeks.
A manager of Florida state’s pension fund, Luther Jones, said he has already voted his organization’s 210,000 Lockheed shares--about 0.3% of the total--in favor of the Simmons slate. Jones said he supports Simmons because of the way he has said he would manage the company. Simmons has criticized Lockheed’s diversification efforts, contending that the Calabasas firm should focus more on its core businesses of aerospace and defense contracting.
Simmons has also said he would put operations in two Lockheed divisions--electronic systems and technology services--up for sale if he could not quickly make them more profitable. “What he has put forward is in the best interest of the shareholders,” Jones said Tuesday.
Jones said his fund is also supporting the dissident slate because Simmons has supported certain shareholder rights proposals that will be voted on at the annual meeting. Among the proposals is one that would eliminate Lockheed’s anti-takeover “poison pill” defenses.
The Florida pension fund is an active national advocate of shareholder rights, a movement designed to make corporate managers more responsible to stockholders.
Simmons’ position in support of shareholder rights also swayed the managers of California’s public employees’ pension fund, said Kayla Gillan, a lawyer for the fund. The fund has about 500,000 Lockheed shares, or nearly 0.8% of the total. Gillan said the pension fund managers leaned toward Simmons because they believe he would establish a better management team.
“We don’t think one (slate’s) strategy is better than the other,” she said, adding that the fund managers believe that Simmons’ slate “has more flexibility and a better ability to react to changing market conditions.”
However, the pension fund did not decide to support the dissident slate until Simmons promised to appoint an advisory board made up of shareholders. The shareholder board would advise Lockheed’s board of directors if Simmons’ challenge is successful.
But Lockheed, in an effort to win the backing of big shareholders, promised that soon after the annual meeting it will add one or more directors nominated by institutional investors to its board. In a prepared statement, Lockheed Chairman and Chief Executive Daniel M. Tellep said: “As part of our ongoing effort to be responsive to our various shareholder constituencies, we are looking into methods that would provide greater input from our institutional shareholders.”
The California public employees’ fund is considered to be a leader in the area of shareholder policy on corporate governance. Analysts say other public pension funds often follow the California fund’s lead on corporate proxy issues.
Thomas Flanigan, head of the California Teachers Retirement Fund, said his organization is still undecided. With 425,412 Lockheed shares, the fund has less than 1% of the total. Flanigan said he had asked the two factions to compromise and end the proxy battle. Lockheed, for example, could allow Simmons to appoint some members to the board, he said.
Meanwhile, Michael L. Nairne, an assistant New York City controller and representative to the city’s pension funds, refused to comment on reports that the funds had decided to vote for the incumbent Lockheed board. The funds involved hold between 1% and 2% of Lockheed, he said.
Patrick Dougherty, director of the funds’ investment responsibility unit, will represent them at Thursday’s annual meeting in Burbank, Nairne said.
Four other institutional investors--Oppenheimer Management Corp., Oppenheimer & Co., the Colorado Public Employees Retirement Fund and the Wisconsin Investment Board--are planning to vote for the Simmons slate, informed sources said. Managers of those investment funds, controllers of about 1.7% of Lockheed stock, were not immediately available for comment.
In trading on the New York Stock Exchange Tuesday, Lockheed’s shares rose $1.125 to close at $37.
