ISS Backs Dissident Director Candidates: Implications for Air Products and the Market

In a significant development within the corporate governance landscape, Institutional Shareholder Services (ISS) has expressed its support for three out of four dissident director candidates in the ongoing proxy battle at Air Products and Chemicals, Inc. (ticker: APD). This news has potential implications for both Air Products and the broader financial markets. In this article, we will explore the short-term and long-term impacts of this event, drawing parallels to historical occurrences in corporate governance disputes.

Short-Term Impact on Financial Markets

The immediate market reaction to such news is often characterized by volatility. When a reputable advisory firm like ISS endorses dissident candidates, it can lead to:

1. Stock Price Fluctuations:

• Investors may react quickly to the news, leading to increased trading volume and price movements in Air Products' stock (APD). Historically, when ISS backs dissidents, the stock price of the targeted company typically experiences downward pressure as investors reassess their outlook on management effectiveness.

2. Increased Scrutiny:

• The involvement of ISS will likely lead to heightened scrutiny of Air Products' management decisions and strategic direction. Analysts and investors may start to question the company’s governance and operational efficiency, potentially leading to further selling pressure.

3. Potential Activist Investor Interest:

• The backing from ISS may attract more activist investors to the company, potentially leading to additional challenges for the current management team.

Historical Context

A relevant example can be found in the proxy battle at *Hewlett-Packard* in 2011, where ISS supported dissident candidates. Following ISS’s announcement, HP’s shares experienced a notable decline, reflecting investor concerns over management effectiveness.

Long-Term Impact on Air Products (APD)

In the long run, the endorsement of dissident candidates by ISS could have several impacts on Air Products:

1. Change in Governance:

• If the dissidents are elected, they may push for changes in corporate strategy, which could lead to restructuring efforts. This could either unlock shareholder value or lead to instability, depending on the effectiveness of the new board members.

2. Market Perception:

• Air Products may face a long-term reputational impact, especially if the proxy fight results in significant changes. Investors may view the company as being in turmoil, which could affect its valuation multiples.

3. Operational Changes:

• Depending on the new board’s approach, Air Products may pivot its focus towards different operational strategies, impacting profitability and growth projections.

Similar Historical Events

On April 30, 2019, *General Electric* faced a proxy battle where ISS backed dissident candidates. The aftermath saw GE's stock decline significantly as the market reacted to fears over leadership changes and operational uncertainty.

Affected Indices, Stocks, and Futures

• Stock: Air Products and Chemicals, Inc. (APD)
• Indices: S&P 500 (SPX), Dow Jones Industrial Average (DJI)
• Related Companies: Other industrial gas companies may also be affected due to perceived governance risks.

Conclusion

The backing of dissident director candidates by ISS in the Air Products proxy fight is a pivotal event that could lead to immediate volatility in APD’s stock and reshape the company’s governance in the long term. Investors should keep a close eye on the developments in this matter, as the outcomes may serve as a bellwether for corporate governance trends across the industry.

In the realm of financial markets, understanding the implications of corporate governance changes is crucial for making informed investment decisions. As this situation unfolds, it will be interesting to see how it influences both Air Products and the broader market landscape.