Shareholder activism in board dynamics

Three new directors were elected onto the Board that had been accused of lacking the gumption to remove an aging, non-performing CEO and the shift in the Board dynamics led to the removal of Ghasemi a few weeks later in February 2025.

The coup d’etat was orchestrated by Paul Hilal, founder of Mantle Ridge which is an investment fund that had quietly invested $1.3 billion in the company over the course of 2024.

The twist in the story is that in 2014, a decade earlier, Mr Hilal while working as a senior partner with another investment fund Pershing Square Capital Management, had also orchestrated the appointment of Ghasemi as the new CEO of Air Products, after getting him elected as a director of the Board first.

From the “Refreshing Air Products” website created by Mantle Ridge in 2024 to inform shareholders on the reason for the removal of Ghasemi and other board members, Mr Hilal reminded the public about what he did in 2014:

“Among his projects there, he played a leading role in Pershing Square’s successful effort to catalyse Board and CEO change at Air Products, from the project’s conception until his departure from Pershing Square in 2016. This included development of a detailed value creation plan, and identifying and recruiting current Air Products CEO Ghasemi to the project.

Over the fall of 2013 and into early 2014, after an extended CEO search conducted in close consultation with Pershing Square, the Board appointed Mr Ghasemi to the role of chairman and CEO and continued to execute a plan that led to the Company’s transformation and a multiplication of its value.

Over the early years of his tenure, Mr Ghasemi addressed critical issues identified by Pershing Square.

The total return to shareholders over these early years, including share appreciation, dividends and the value of spun assets, was far in excess of that of the Company’s peers. It is only in more recent years that the Company (under the leadership of the now 80-year-old Mr Ghasemi) has fallen behind its peers.”

Age is nothing but a number. At least that was the implied position in 2014 when Mr Hilal orchestrated the appointment of Mr Ghasemi as CEO, who was about 71 years old at the time.

Mantle Ridge is known as a shareholder activist investor, an investor who uses their ownership stake in a company to influence management and company strategy, typically with the goal of increasing shareholder returns.

They often engage in campaigns to improve governance, change leadership or push for specific operational or strategic changes. Essentially shareholder activist investors put their mouth where their money is.

Talking about why he enjoys serving as a board director in an accompanying video on the Refreshing Air Products website, Mr Hilal states that he looks forward to guiding boards to provide “…shareholder driven refreshment and reconstitution, helping them [the boards] find harmony and helping them find a better groove.”

The sense from reading what Mr Hilal has done in the past with other companies is that his flavour of shareholder activism removes the emotional attachment or fear that board members may have towards incumbent CEOs.

Mr Ghasemi’s 2014 appointment at 71 years of age was borne of the need to drive value for an underperforming company and he was viewed, at the time, to have the experience to drive the change that was needed. Which change Mr Ghasemi did. Until he didn’t. Mantle Ridge explained it thus:

“Deficiencies in Mr Ghasemi’s judgment, coupled with his failure to maintain execution discipline, have elevated Air Products’ risk profile to unacceptable levels, generated inadequate returns, and destroyed substantial shareholder value.

Mr Ghasemi and the current Board have misallocated a significant amount of shareholder capital to inferior, non-core projects with high risk profiles that offer inadequate or speculative returns.

These include poorly executed “mega projects” which have been plagued by wide-ranging problems and ballooning budgets – adding unnecessary risk to, and diminishing the value of, Air Products’ otherwise low-risk core business.

As a result, Air Products’ margins have been meaningfully depressed by excessive costs directly tied to the expanded scope of its multiple non-core projects.

Before Mantle Ridge surfaced, the Company traded at an historically deep valuation multiple discount to its peers — this revealed how poorly the market views the Company’s leadership divergent strategy, poor capital allocation, project execution, and depleted management ranks.”

Mantle Ridge did what they felt the Air Products Board was unable to do, which was to remove an entrenched non-performing CEO. It really begs the question: if the company had been performing optimally would the age card have been played? Perhaps not.

The writer is a former banker and is currently a corporate governance specialist. X:@carolmusyoka