Carl C. Icahn recently criticized Oshkosh Corp. (OSK) for continuing to "overpromise and under deliver." After the activist investor asked Oshkosh shareholders to sell their holdings to him or replace the truck maker's board with directors that his team nominated, the existing board recommended rejecting his offer on Friday on grounds that it undervalues Oshkosh. As it happens, Mr. Icahn's own company could improve its corporate governance, too.
Icahn Enterprises L.P. (IEP) is a diversified holding company that owns subsidiaries engaged in businesses ranging from gaming to home fashion. As of December 2011 it consisted of 20 people who are involved in tasks such as identifying and acquiring undervalued assets and businesses. Icahn's affiliates own around 92.6% of the company's outstanding depositary shares, raising questions about the extent to which the needs of his few investors get prioritized.
To be sure, the board could potentially balance the powers of Icahn Enterprise managers and deter them from hurting investors, but this one does not have sufficient independence, committee membership, or oversight. The board, which consists of only seven people, lacks heft. A significant portion of the seven directors on the board are closely allied with Mr. Icahn; SungHwan Cho, Keith Cozza, and Daniel A. Ninivaggi all work at firms linked to him, while he himself acts as board chairman.
The other three directors have collaborated with Icahn for more than a decade; while experience has its merits, long familiarity can interfere with one's ability to supervise objectively. William A. Leidesdorf has served as a director of Icahn Enterprises' general partner since March 1991, James L. Nelson since June 2001, and Jack G. Wasserman since December 1993.
Given the state of its supervision, it is no surprise that Icahn Enterprises' financial statements reflect an AGR ® score of 16, indicating higher accounting and governance risk than 84% of companies.
Icahn says in his letter to Oshkosh's investors that the truck maker's share price decline represents the clearest indication to him that its management has failed. Indeed, OshKosh stock prices sank by around 49% in the past five years to trade at around $29.74 per share on October 25. But Icahn Enterprises has dropped even further in price - more than 63% -- to trade at around $41.30 per share in the same time period. Meanwhile the S&P 500 has lost only around 5.8%.
If a company that Icahn invested in had such problems, he would probably be lobbying for a new manager by this time.
Region: North America
Country: United States
Industry: Construction / Agricultural Machinery
Market Cap: $ 4,350.7 mm (Mid Cap)
AGR Rating: 16
ESG Rating: C