Policy & Regulation

Reps of activist investor Carl Icahn can serve on AEP board, FERC says

While only owning 1% of voting shares, Icahn now controls two of the utility’s board seats.

Reps of activist investor Carl Icahn can serve on AEP board, FERC says
(Courtesy: AEP)

Representatives of activist investor Carl Icahn can serve on the board of directors of American Electric Power following a review by federal regulators.

AEP announced in February that the utility had agreed with Icahn’s investing group to appoint one of his lieutenants, Hunter Gary, to its board of directors along with an independent representative, tapped by the Icahn firm, Hank Linginfelter. Both appointments required approval from FERC under the Federal Power Act.

“We look forward to working with Julie Sloat and the Board of Directors to optimize the value and performance of AEP’s high quality regulated electric utility business for the benefit of all of AEP’s stakeholders,” Icahn, who owns 1% of AEP, said at the time.

Despite Icahn’s public confidence in Sloat, she was removed without cause as the utility’s CEO a few weeks after the board changes. She served as the company’s first female chief executive for just over a year.

The progressive consumer advocacy group Public Citizen had asked FERC to use its authority to block the Icahn board appointments, noting that “typical investors” with only 1% voting shares would not wield outsized control over such a large corporation.

“Mr. Icahn is not a typical investor. He is an activist investor—earning the colloquial moniker ‘corporate raider’— specializing in engaging in protracted, hostile shareholder fights to gain control of target corporations for the sole purpose of moving the company’s stock price to a pre-determined target that bestows considerable profit for Mr. Icahn,” Public Citizen said in a filing with FERC.

In his concurrence with the FERC authorization, Commissioner Mark Christie said the Icahn board appointments were “found to be consistent with the public interest” but also emphasized that public utilities are “not typical for-profit, shareholder-owned companies,” and added that it’s “essential for regulators to make sure that the interests of investors do not conflict with the public service obligations that a utility has.”

Christie signaled the potential for further examination of investor influence on public utilities by FERC.

“(FERC) must have a comprehensive understanding of the investors that ultimately own or control public utilities,” Christie wrote. “Investor influence on public utilities and public utility holding companies continues to grow, and in ways that may conflict with public utility service obligations.”