CalSTRS has agreed to join a lawsuit alongside existing plaintiff activist hedge fund Politan Capital Management challenging Masimo Corp's Chairman and CEO Joe Kiani's employment agreement, said Rebecca Forée, CalSTRS spokeswoman, in an email.
On Monday, Politan filed a motion asking the court's permission to add the $311.5 billion California State Teachers' Retirement System, West Sacramento, to its lawsuit," according to a March 6 SEC filing by Masimo.
Politan's proposed second amended complaint alleges, among other things, that Mr. Kiani's employment contract with Masimo unlawfully strips Masimo's board of directors of its authority, entrenches Mr. Kiani and Masimo's incumbent board of directors in office and impedes stockholders' exercise of their voting rights, the SEC filing states.
"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," said Aeisha Mastagni, CalSTRS portfolio manager of Sustainable Investment and Stewardship Strategies, in a written statement. "Ultimately, good governance drives greater value and that is why we are joining this lawsuit."
The $311.5 billion California State Teachers' Retirement System, West Sacramento, owned 83,154 shares of the medical technology company's stock as of Dec. 31, the pension plan disclosed in a Feb. 14 SEC filing.
Mr. Kiani's employment provides a "special payment" of 5% of the company's outstanding shares of restricted stock units plus $35 million in cash if, among other things, more than one-third of Masimo's classified, five-member board is voted out over a two-year period; the board appoints a lead independent director; or Mr. Kiani ceases to serve as both chairman and CEO. He would also be entitled to accelerated salary, bonus, unvested stock options and equity awards — for a total payment of about $600 million, a Friday news release from CalSTRS said.
"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," Ms. Mastagni said.
The case, Politan Capital Management LP et al. vs. Kiani et al.,which is filed in the Court of Chancery of the State of Delaware, is scheduled for trial for September.
