Xerox CEO, 6 other board members to resign in agreement with shareholders

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Xerox Corp. announced late Tuesday that CEO Jeff Jacobson and six board members will resign as part of an agreement with shareholders Carl Icahn and Darwin Deason. The agreement will resolve the pending proxy contest in connection with the company’s 2018 annual meeting of shareholders as well as the litigation against Xerox and its board in relation to the company’s proposed deal with Fuji Xerox, the company said in a statement.

As part of the agreement, which must be approved by 8 p.m. Thursday:

• Jacobson will resign as CEO and as a member of the board of directors.
• Robert J. Keegan, Charles Prince, Ann N. Reese, William Curt Hunter, Sara Martinez Tucker and Stephen H. Rusckowski will also each resign from the Xerox board of directors.
• Xerox will appoint six new members to its board: Keith Cozza, Nicholas Graziano, Scott Letier, Jay Firestone, Randolph Read and John Visentin.

Cozza, the CEO of Icahn Enterprises L.P., is expected to become chairman of Xerox’s board. Visentin is expected to be named vice chairman of the board and CEO of Xerox. Gregory Brown, Joseph Echevarria and Cheryl Krongard will retain their seats on the Xerox board.

“Following the court’s decision last week to enjoin Xerox’s proposed combination with Fuji Xerox, the Board considered the significant risk and uncertainty of a prolonged litigation, during which the company would be prohibited from negotiating with Fujifilm, as well as the potential instability and business disruption during a proxy contest. As a result, the Xerox Board of Directors determined that an immediate resolution of the pending litigation and proxy contest is in the best interest of our company and all stakeholders,” the Xerox board of directors said in a statement. “This agreement will help ensure that Xerox and its employees will be able to continue to focus on serving customers and building on the company’s financial and operational performance.”

Xerox and Icahn will withdraw their nominations of any other candidates for election to the board as part of the agreement. Once the agreement becomes effective, the new board plans to meet immediately.

In testimony by several witnesses leading up to Friday’s court decision, it was discovered that Jacobson, after being told his job was on the line and to stop negotiations with Fuji, worked out a structured transaction, rather than an all-cash deal, in which Fuji would end up owning a 50.1 percent controlling interest in Xerox.

“I think the issue of Jeff Jacobson going around the board of directors, when it specifically told him to stop negotiations with Fuji, is the most egregious case of a rogue CEO I have seen in my memory,” Brighton Securities Inc. Chairman George Conboy said on Tuesday. “The board should have called him on the carpet that minute and fired him. And in the end, the biggest owners, Icahn and Deason, stood up and did what the board failed to do, which is fire Jeff Jacobson.”

Conboy said Jacobson’s ousting and the management transition that will take place are welcome in this instance “because rarely do we see imperial management or an imperial CEO get deposed by a group of shareholders.”

In his April 27 decision, Justice Ostrager wrote: “This transaction was largely negotiated by a massively conflicted CEO in breach of his fiduciary duties to further his self-interest and approved by a board, more than half of whome were perpetuating themselves in office for five years without properly supervising Xerox’s conflicted CEO.”

Ostrager’s decision to halt the transaction recognizes that courts can and will intervene to protect shareholders, said James Sabella, a director at Grant & Eisenhofer. Grant & Eisenhofer, together with Bernstein Litowitz and Kessler Topaz represented a group of institutional holders of Xerox stock. The three firms aligned with Deason in securing the injuction issued Friday to stop the Fuji deal.

In a preliminary proxy statement filed with the Securities and Exchange Commission in April, it was noted that Jacobson earned more than $9.5 million in total compensation last year, nearly double his 2016 earnings as executive vice president and president, Xerox Technology. In the filing,  Jacobson and Keegan urged shareholders to vote against Icahn’s four board nominees and in favor of the 10 director nominees, stating that support of the nominees was “integral to the success of our company and proposed transaction with Fujifilm.”

“We believe Friday’s decision and this agreement mark a watershed moment for corporate governance generally and for Xerox specifically,” Icahn said in a statement this week. “With new leadership in place, we believe Xerox will be much better positioned to take advantage of multiple potential value-enhancing opportunities, including restructuring its relationship with Fujifilm.”

Visentin was a senior adviser to the chairman of Exela Technologies and an operating partner for Advent International. He was executive chairman and CEO of Novitex Enterprise Solutions from October 2013 until July 2017, when Novitex closed on a business combination with SourceHOV, LLC and Quinpario Acquisition Corp. 2 to form Exela Technologies.

“The future for Xerox is extremely bright. With John Visentin at the helm, receiving support and guidance from Carl Icahn and me, I am confident the alternatives for Xerox and its shareholders will be fully and expeditiously maximized,” Deason said in a statement. “John is the right leader at the right time for Xerox.”

The agreement between Xerox, Icahn and Deason will be filed with the U.S. Securities and Exchange Commission.

Conboy said the ideal situation now would be to get Xerox back on a growth trajectory.

“The ideal thing in Xerox’s situation would be if new management, decent management, strong management would come in and get the company on a growth track again,” he said. “The best thing for the Rochester area would certainly be a revitalized, growing Xerox. Whether new management can deliver that, the jury is out. But we’ll have our fingers crossed.”