Starboard Ends Proxy Fight at Kenvue Following Cooperation Agreement

by | Mar 5, 2025

On March 5, 2025, Kenvue Inc. (NYSE: KVUE) and Starboard Value reached a cooperation agreement, effectively ending the activist investor’s proxy contest. The agreement comes after months of engagement between Starboard and Kenvue’s leadership, with Starboard initially launching a campaign citing concerns over financial underperformance, governance, and strategic execution.

The Proxy Fight: Starboard’s Case for Change

Starboard Value, led by Jeffrey C. Smith, initiated a proxy battle against Kenvue in late 2024, citing several key concerns:

  • Underperformance: Kenvue’s total shareholder returns lagged behind peers and market indices.
  • Valuation Discount: Despite owning strong consumer health brands, Kenvue traded at a discount to its competitors.
  • Financial Deterioration: Since its May 2023 IPO, Kenvue missed commitments, experienced slowing growth, and struggled with execution.
  • Market Share Losses: The company ceded ground in its Skin Health & Beauty and Essential Health segments from 2019 to 2022.
  • Governance Issues: Starboard criticized the Board for weak oversight, lack of accountability, and complacency toward management.

Starboard’s Proposed Changes

To address these issues, Starboard nominated four directors and pushed for a board refresh:

  • Michelle Millstone-Shroff, Cara Robinson, Bindu Shah, and Jeffrey C. Smith were put forth as nominees to enhance oversight and governance.
  • Starboard advocated for a results-driven culture and stronger accountability from management.
  • The firm pushed for proactive measures to unlock shareholder value and improve strategic execution.

Engagement Timeline

Starboard’s push for change began in October 2024, with direct outreach to Kenvue’s leadership:

  • October – December 2024: Multiple meetings between Starboard and Kenvue’s CEO, CFO, and Board.
  • December 10, 2024: Starboard formally nominated five directors (later reduced to four) and presented its concerns to the Board.
  • February 5, 2025: Starboard filed a preliminary proxy statement with the SEC.
  • March 5, 2025: Starboard and Kenvue reached a cooperation agreement, resolving the proxy contest.

The Cooperation Agreement: A Compromise

Under the agreement, Kenvue will make several governance changes:

  • Board Expansion: Temporarily increasing the Board size from 11 to 14 members.
  • New Directors: Appointing Sarah Hofstetter, Erica Lilith Mann, and Jeffrey C. Smith to the Board, effective immediately.
  • 2025 Annual Meeting Slate: Kenvue will nominate the three new directors alongside ten incumbents.
  • Board Size Cap: Following the 2025 Annual Meeting, Kenvue cannot expand the Board beyond 13 members without Starboard’s consent.

Starboard’s Commitments

In return, Starboard agreed to:

  • Withdraw its proxy contest and director nominations.
  • Support Kenvue’s nominees and vote its shares in line with the Board’s recommendations, with limited exceptions.
  • Abide by a standstill period through early 2026, restricting further activist actions.

Committee Assignments and Other Provisions

  • Committee Appointments:
    • Jeffrey C. Smith joins the Compensation & Human Capital Committee.
    • Sarah Hofstetter joins the Audit Committee.
    • Erica Lilith Mann joins the Nominating, Governance & Sustainability Committee.
  • The agreement also includes provisions on non-disparagement, expense reimbursement, and director replacement procedures.

Looking Ahead

This agreement marks a significant shift for Kenvue, as the company integrates Starboard-backed directors and addresses the activist’s concerns. With Starboard securing Board representation and Kenvue avoiding a prolonged proxy fight, investors will be watching closely to see if these governance changes lead to improved performance and shareholder value creation.

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