An email has been sent to your address with instructions for changing your password.
There is no user registered with this email.
Sign Up
To create a free account, please fill out the form below.
Thank you for signing up!
A confirmation email has been sent to your email address. Please check your email and follow the instructions in the message to complete the registration process. If you do not receive the email, please check your spam folder or contact us for assistance.
Welcome to our platform!
Oops!
Something went wrong while trying to create your new account. Please try again and if the problem persist, Email Us to receive support.
CalSTRS Joins Politan Capital Management in Legal Action Against Masimo CEO’s Employment Agreement
Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Neutral)
Tags
Rhea-AI Summary
Politan Capital Management, holding 9% of Masimo (NASDAQ: MASI), announced that the California State Teachers’ Retirement System (CalSTRS) has joined its lawsuit against the Company’s CEO Joe Kiani over his controversial employment agreement. The agreement may grant Mr. Kiani approximately $600 million if specific board changes occur, raising governance concerns. Critics argue this undermines shareholder rights and enables 'dead hand control' over future boards. A Delaware court recently criticized the agreement, noting the substantial payments tied to limited board changes.
Positive
CalSTRS joins Politan, indicating strong institutional support for governance reform.
Politan remains open to constructive dialogue with Masimo's management and Board.
Negative
Kiani's employment agreement could cost Masimo approximately $600 million for minor board changes.
Legal challenges undermine confidence in corporate governance practices at Masimo.
Current Employment Agreement Undermines the Stockholder Franchise and Exerts ‘Dead Hand Control’ Over the Actions of All Future Boards
Agreement Pays Approximately $600 million to CEO if the Board Merely Appoints a Lead Independent Director or if Stockholders Replace More Than One-Third of the Incumbent Board
NEW YORK--(BUSINESS WIRE)--
Politan Capital Management (together with its affiliates, “Politan”), a 9% stockholder of Masimo Corporation (“Masimo” or the “Company”) (NASDAQ: MASI) today announced that the California State Teachers’ Retirement System (CalSTRS) has joined Politan’s ongoing legal action against Masimo and its Board of Directors (the “Board”). Politan’s lawsuit, filed in the Court of Chancery of the State of Delaware, challenges the validity and legality of the employment agreement (the “Employment Agreement”) of Masimo’s Chairman and Chief Executive Officer (“CEO”) Joe Kiani.
Aeisha Mastagni, CalSTRS Portfolio Manager of Sustainable Investment and Stewardship Strategies, stated, “CalSTRS has been a Masimo stockholder for more than a decade and believes an essential part of managing our portfolio is taking a stand against problematic corporate governance practices that impede stockholder rights and raise investment risks. The Masimo CEO’s employment agreement is not only counter to the best interests of the Company’s stockholders, but also sets a dangerous precedent. Ultimately, good governance drives greater value and that is why we are joining this lawsuit.”
Quentin Koffey, Managing Partner and Chief Investment Officer of Politan, said, “CalSTRS is widely recognized as one of the most influential and respected champions for stockholders in the country. Their participation in this action underscores its importance. We remain open to working constructively with management and the Board and have continued to make efforts to engage. However, we believe that pursuing our claims is imperative to fixing corporate governance at Masimo.”
Politan’s lawsuit challenges a number of illegal elements of Mr. Kiani’s Employment Agreement:
The Employment Agreement provides Mr. Kiani restricted stock units equal to 5% of the Company’s outstanding shares and a $35 millioncash payment (the “Special Payment”) – inadditionto accelerated salary, bonus, unvested stock options, and equity awards – for a total payment of approximately $600 million(approximately 250% of Masimo’s 2022 earnings), if any one of the following actions are taken:
If more than one-third of Masimo’s classified, five-member Board is voted out over a two-year period, a strict-single trigger kicks in and Mr. Kiani is unconditionally entitled to receive the Special Payment – even if there is no change to his role or position.
If the Board appoints a lead independent director, Mr. Kiani is entitled to terminate his employment and receive the Special Payment.
If Mr. Kianiceases to serve as both Chairman and CEO, he is entitled to terminate his employment and receive the Special Payment.
The Employment Agreement includes a “dead hand” provision that irrevocably eliminates the Board’s authority to disable the change in control provision for any new director whose “initial assumption of office is in connection with an actual or threatened election contest.”
The Employment Agreement renews every year, has no expiration date, and nonrenewal by the Board entitles Mr. Kiani to terminate his employment and receive the Special Payment.
On February 3, 2023, Vice Chancellor Nathan Cook of the Delaware Court of Chancery denied Masimo’s motion to dismiss Politan’s current case, specifically criticizing the change in control payment by noting, “[t]his is an astounding amount of consideration for a change in the composition of one-third of the board. Not a majority. One-third.” He also noted that, it is “truly amazing” for the “appointment of a lead director to trigger these provisions.”
The Vice Chancellor also cited in his ruling the deposition testimony from one of Masimo’s own sitting directors, Adam Mikkelson, who described the risk of triggering the Special Payment provision as “a very scary prospect for me in that it's a lot of shares and a lot of dollars,” and stated he "thought that the employment contract that existed alone was a sufficient poison pill." Mr. Mikkelson also stated that when making his decision to approve Masimo’s heavily criticized new advance notice bylaws, his “biggest concern was always around the change in control impact of any board nomination.”
Three days after the February 3rd ruling denying Masimo’s motion to dismiss, Masimo repealed its advance notice bylaw amendments and waived the application of the change in control provision for the 2023 Annual Meeting of Stockholders under the condition that the trial against the broader Employment Agreement be delayed. The trial is now scheduled for September.
What are the implications of the lawsuit involving Masimo and Politan Capital?
The lawsuit challenges the legality of CEO Joe Kiani's employment agreement, which could potentially pay him $600 million under certain conditions, raising governance concerns.
How does CalSTRS involvement impact Masimo's governance issues?
CalSTRS' participation in the lawsuit emphasizes the importance of shareholder rights and could increase pressure on Masimo to address its corporate governance practices.
What criticisms has Masimo's employment agreement received?
Critics point out that the agreement includes excessive compensation tied to minor board changes, which could undermine shareholder interests and governance.
What is the current status of the trial related to Masimo's employment agreement?
The trial is scheduled for September, following a Delaware court's ruling that denied Masimo's motion to dismiss the claims made by Politan and CalSTRS.
What does 'dead hand control' mean in the context of Masimo's lawsuit?
'Dead hand control' refers to provisions in Kiani's agreement that limit the Board's ability to alter critical control features, potentially hampering future board member appointments.
