McGraw-Hill replaces S&P chief amid Canadian pension fund engagement

Investors’ meeting with management as S&P President steps down

The C$107.5bn (€79.2bn) Ontario Teachers’ Pension Plan’s disclosure of its meeting with management and directors of media conglomerate McGraw-Hill Companies has coincided with the announcement that the President of S&P’s highest profile division, ratings agency Standard & Poor’s is stepping down.
The OTPP, the largest single profession pension fund in Canada, announced in a filing yesterday that it and its activist partner JANA had met with McGraw-Hill’s board of directors and management.
On the agenda were “possible steps to address such challenges and increase shareholder value, including recommendations for divestment” of some of McGraw-Hill’s businesses. The investors identified “sources of operational and structural underperformance, inefficient capital allocation and lack of synergies” the filing added.
JANA made a wide-ranging 26-page PowerPoint presentation to the company calling on it to appoint a “well-known independent oversight figure” to help manage S&P Ratings in the “increasingly complex global regulatory landscape and improve dialogue with investors, regulators and the public”.“JANA and OTPP each look forward to providing an independent shareholder perspective to McGraw-Hill’s management and Board of Directors as they conduct the current portfolio review,” JANA said.
Hard on the heels of the investor filings was the news from McGraw-Hill that Deven Sharma was to step down as President of S&P to be replaced by Douglas Peterson, who is currently chief operating officer of Citibank N.A.
Teachers and JANA announced earlier this month that they had teamed up to drive change at the New York based media firm, building up a combined stake of almost 6%.
The Financial Times quoted unnamed sources as saying Sharma’s departure was unrelated to S&P’s controversial US credit downgrade or reports that S&P is being investigated by the US authorities in relation to its ratings of mortgage securities in the run up to the financial crisis. It added the McGraw-Hill board decided to oust Sharma at a meeting on Monday.