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Four years after a splashy launch around the G7, the CEO-powered climate drive says it’s gearing up to accelerate action. But it has lost high-profile members and so far delivered little more than a handful of pilot projects.

KEY INSIGHTS

• The CEO-powered Fashion Pact was designed to bring together the industry’s decision makers to tackle an increasingly urgent and shared challenge: fashion’s negative environmental footprint.
• So far, its impact rests on a handful of pilot projects. High-profile signatories, including Hermès, Selfridges and Stella McCartney have quietly left.
• The initiative says fluctuations in membership are normal and after spending the last three years laying the foundations, it’s gearing up for swifter action.

Three times a year, the chief executives of some of fashion’s most powerful companies gather to discuss a shared, and increasingly urgent, challenge: how to cut down the pollution the industry spews into the world’s air, oceans and soil.

The regular high-level gatherings are the work of the Fashion Pact, a voluntary CEO-powered initiative launched around the G7 in 2019 at the urging of French President Emmanuel Macron. Its members are said to represent the decision-making power of roughly a third of the industry by volume and include luxury giants Kering, Chanel and Prada, sportswear titans Nike and Adidas and fast fashion behemoths H&M Group and Inditex.

That political and executive clout was meant to separate the Fashion Pact from myriad other splashy, but ultimately low-impact, corporate commitments.

Four years in, its track record is murky.

High-profile signatories including Hermès, Selfridges and Stella McCartney have quietly left, and action has largely been limited to a handful of pilot projects and scoping programmes.

Selfridges and Stella McCartney confirmed they had left the organisation. Hermès did not respond to requests for comment.

Fluctuations in membership are normal for industry initiatives, Fashion Pact executive director and secretary general Eva von Alvensleben said in an emailed statement. Typically companies may leave a programme for a variety of reasons, including cost, team capacity or differing priorities and pace of action. The Fashion Pact has also eliminated one member for a lack of engagement this year, von Alvensleben said. Meanwhile, new members, including Asics, Chloe and J. Crew Group, continue to join.

Members of the initiative’s leadership said it’d spent the last three years laying the groundwork for swifter action. The group is focused on long-term projects that require buy-in from multiple stakeholders and will take time to show impact on the ground, they said. And though it’s been shy about trumpeting updates while still setting its foundations, it’s tracking members’ efforts internally.

“If you look at what it takes, in reality, to get people on the same page, educate people, develop these plans, align around that. I think, in all fairness, that the industry can be pleased,” said Fashion Pact co-chair Paul Polman.

Exactly how the group is performing against core goals to reduce emissions, plastic packaging and the impact of raw materials is difficult to track. Members are meant to report their progress annually but do so selectively, and in some cases, not at all. Many have yet to meet the basics of the Fashion Pact commitment. For instance, signatories are meant to set verified, science-based targets to cut their emissions, but nearly 40 percent have not officially committed to do so.

Increasing this proportion is a priority for the Fashion Pact, and many members are working on the process, von Alvensleben said in an emailed statement, adding that the initiative is designed to accommodate companies at different stages of their sustainability journey.

The Fashion Pact counts among its achievements increased focus on fashion’s impact on nature, still an emerging topic when the organisation made biodiversity one of three core environmental issues in its 2020 action plan. More than 40 percent of members have now set one or more biodiversity-related targets with the support of tools and research developed by the initiative. The number with specific biodiversity strategies in place has grown from 10 percent to 21 percent in the last two years, it said.

How this increased engagement actually translates into action to reduce impact and advance the group’s collective goal to support zero deforestation by 2025 remains to be seen.

In December, members kicked off a programme to collectively finance renewable energy projects in Europe in exchange for clean power credits. The project represents the most advanced example so far of the kind of industry-level action the Fashion Pact was designed to unlock, bringing together competitors to negotiate complicated, long-term transactions. It aims to add 100,000 megawatts a year of new renewable electricity generation to the grid, a scale that wouldn’t have been possible for most companies to negotiate on their own, said Polman. The initial project includes 12 companies, but is intended as a test case for further action.

“We know that we haven’t moved up in the industry as fast as we should, but there are definitely several companies that have shown progress in different ways,” said H&M Group CEO and in-coming Fashion Pact co-chair Helena Helmersson.

The group is better positioned to accelerate its efforts because of the work of the last few years, while an incoming wave of sustainability regulations is helping to generate more momentum, she added. “The fact the regulations are coming, it’s putting a whole different sense of urgency … The approach from CEOs and our organisation is really to get to action quickly.”

Time is running short. At this point, global temperatures are “more likely than not” to breach 1.5C above pre-industrial levels within the next five years, the globally agreed threshold beyond which it will become difficult to avoid the worst effects of global warming, according to research from the World Meteorological Organisation published last week.

The fashion industry is already feeling the fallout from extreme weather in raw material supply chains and consumer shopping habits. Meanwhile, a wide-ranging greenwashing crackdown over the last 18 months has ratcheted up criticism of splashy, but voluntary, corporate climate commitments and amped up the pressure on companies to deliver real results.

As Helmersson takes over from outgoing co-chair Kering CEO François-Henri Pinault, the Fashion Pact has its work cut out for it.

Going forward, it plans to increase focus on tackling emissions in the industry’s supply chain, where most environmental impact takes place. Its efforts rest on a combination of resource and knowledge building and joint projects to test-drive potential solutions.

In addition to the renewable energy power purchasing project the initiative recently launched, it’s working on a pilot programme to explore ways to incentivise lower-impact cotton cultivation. But the strategy to turn these into impactful collaborations at scale remains vague.

Helmersson acknowledged work is still ongoing to dig into the financial and technical support brands could offer their suppliers to decarbonise or pursue fuel efficiency projects, but she remained upbeat about the organisation’s potential to drive change.

“It’s very rare to see such a big part of the industry coming together like this and also doing it on the CEO level,” said Helmersson. “Over the next few years, it has the potential to be game-changing. I truly, truly hope and think it is possible that this large coalition will be able to show really big steps when it comes to the climate agenda.”

An alliance with Teract as it has been imagined since January seems increasingly unlikely. The Casino group is now moving towards negotiations with its creditors, in close collaboration with Daniel Kretinsky. The time of the industrial project will come just after, which does not prevent its development behind the scenes.

Casino's creditors have until Tuesday evening, 5 p.m., to agree to enter into conciliation proceedings without asking to apply the company's case of default. If all the bankers, hedge funds and other non-net debt specialists agree, it will be a first victory for Jean-Charles Naouri's breathless group. The conciliation will then begin (decided by the company's board of directors), then a hard phase of negotiations to erase part of the group's debt.

Only Daniel Kretinsky's project has highlighted this obligation to erase the group's slates. The project initiated in January with Teract still recently consisted of stuffing most of the debt into a new holding company to keep only 2 billion euros out of 6 billion, in an entity where all the good assets such as Monoprix would be nestled. and Franprix. This option seems so unrealistic that Fitch Ratings, which downgraded Casino's rating again last week, chose to ignore it in its analysis.

Cash or shares

As in a good divorce, the phase which should open on Wednesday will therefore consist of Casino and its creditors agreeing on the terms of their "separation", under the supervision of the commercial court represented by the agent Marc Sénéchal. The creditors in question are those called "unsecured", who hold 3.6 billion euros in debt. Facing them, Jean-Charles Naouri will no longer be alone at the helm. Because it is the contribution of the 1.1 billion euros of fresh money proposed by Daniel Kretinsky and Marc Ladreit de Lacharrière which reassures these creditors. The company and its two major shareholders will therefore have to speak with one voice.

The team is working very discreetly via its lawyers (LLA of 05/16/23) to offer a nice discount. They offer creditors to crush their debt in exchange for 35 to 40% of their starting stake, instead of the 20% available on the market today. They will be offered a "mix and match", that is to say the choice to convert their debt into shares or cash, or even to opt for a mixture of the two.

Discordant communication

Faced with these very prosaic financial realities, the so-called "industrial" project carried out by the team of InVivo and the trio Xavier Niel, Matthieu Pigasse and Moez-Alexandre Zouari has appeared to be more and more complicated to implement in recent weeks. . The creation of their two companies - one with the stores, which would be controlled by Casino, and the other, called Teract Farm, controlled by Teract to ensure the supply - is difficult to convince without the contribution of substantial fresh money . However, next to the two indebted Matthieu Pigasse and Moez-Alexandre Zouari, Xavier Niel is still very discreet about his desire to align the millions. The real financier of Teract is for the moment Thierry Blandinières, the general manager of InVivo. But after the takeover of the cereal producer Soufflet for more than 2 billion euros in 2021, the European agricultural products giant no longer has its pockets filled.

The discordant communication of this quartet did not reassure observers either, starting with Jean-Charles Naouri himself. The exclusive discussions between the bankers, Rothschild for Casino and Centerview Partners for Teract, aspired to get into the hard last week. According to our information, they related to the choice of the Casino group's hundred or so stores in which the concept of Grand Marché-Frais d'ici, dear to Moez-Alexandre Zouari, could be deployed (LLA of 07/04/22). But representatives from Casino and Teract didn't seem to be able to agree on the list.

The industrial project is of course essential to the long-term survival of the company. However, it seems increasingly premature in the face of the wall of debt. As a reminder, if the Casino/Kretinsky team succeeds in seducing at least two thirds of the unsecured creditors, the Casino company could then open an accelerated safeguard (two months renewable once) to implement the agreement reached with this majority of creditors. The backup plan should then mix financial restructuring and an industrial recovery plan.

Debt again and again

It is therefore not before this summer, or even the start of the school year in September, that discussions on the industrial project will really begin. However, the vultures are already circling more or less discreetly around Casino. Auchan, Carrefour, Couche-Tard... a lot of action

Une alliance avec Teract telle qu'elle a été imaginée depuis janvier semble de plus en plus improbable. Le groupe Casino s'oriente désormais vers une négociation avec ses créanciers, en étroite collaboration avec Daniel Kretinsky. Le temps du projet industriel viendra juste après, ce qui n'empêche pas son élaboration en coulisse.

Les créanciers de Casino ont jusqu'à ce mardi soir, 17 heures, pour accepter d'entrer en procédure de conciliation sans demander à appliquer le cas de défaut de l'entreprise. Si tous les banquiers, hedge funds et autres spécialistes de dette pas nette donnent leur accord, ce sera une première victoire pour le groupe à bout de souffle de Jean-Charles Naouri. S'engagera alors la conciliation (décidée en conseil d'administration par l'entreprise), puis une phase dure de négociations pour effacer une partie de la dette du groupe.

Seul le projet de Daniel Kretinsky a mis en avant cette obligation d'effacement des ardoises du groupe. Le projet initié en janvier avec Teract consistait encore récemment à fourrer l'essentiel de la dette dans une nouvelle holding pour n'en garder que 2 milliards d'euros sur 6 milliards, dans une entité où seraient nichés tous les bons actifs tels que Monoprix et Franprix. Cette option semble si peu réaliste que l'agence Fitch Ratings, qui vient encore de dégrader la note de Casino la semaine dernière, a choisi de l'ignorer dans son analyse.

Cash ou actions

Comme dans un bon divorce, la phase qui devrait s'ouvrir mercredi consistera donc pour Casino et ses créanciers à se mettre d'accord sur les termes de leur "séparation", sous la surveillance du tribunal de commerce représenté par le mandataire Marc Sénéchal. Les créanciers en question sont ceux dits "non sécurisés", qui détiennent 3,6 milliards d'euros de dette. Face à eux, Jean-Charles Naouri ne sera plus seul aux manettes. Car c'est l'apport des 1,1 milliard d'euros d'argent frais proposé par Daniel Kretinsky et Marc Ladreit de Lacharrière qui rassure ces créanciers. La société et ses deux actionnaires de poids devront donc parler d'une seule voix.

L'attelage travaille très discrètement via ses avocats (LLA du 16/05/23) à proposer une belle décote. Ils offrent aux créanciers d'écraser leur dette en échange de 35 à 40 % de leur mise de départ, au lieu des 20 % disponibles sur le marché actuellement. Il leur sera proposé un "mix and match", c'est-à-dire le choix de convertir leur dette en actions ou en cash, ou encore d'opter pour un mélange des deux.

Communication discordante

Face à ces réalités financières bien prosaïques, le projet dit "industriel" porté par l'attelage d'InVivo et du trio Xavier Niel, Matthieu Pigasse et Moez-Alexandre Zouari est apparu comme de plus en plus compliqué à mettre en œuvre ces dernières semaines. La création de leurs deux entreprises - l'une avec les magasins, qui serait contrôlée par Casino, et l'autre, baptisée Teract Farm, contrôlée par Teract pour assurer l'approvisionnement - peine à convaincre sans l'apport d'argent frais conséquent. Or, à côté des deux endettés Matthieu Pigasse et Moez-Alexandre Zouari, Xavier Niel reste encore très discret sur sa volonté d'aligner les millions. Le vrai argentier de Teract est pour le moment Thierry Blandinières, le directeur général d'InVivo. Mais après le rachat du céréalier Soufflet pour plus de 2 milliards d'euros en 2021, le géant européen des produits agricoles n'a plus les poches remplies.

La communication discordante de ce quatuor n'a pas non plus rassuré les observateurs, à commencer par Jean-Charles Naouri lui-même. Les discussions exclusives entre les banquiers, Rothschild pour Casino et Centerview Partners pour Teract, ambitionnaient d'entrer dans le dur la semaine dernière. Selon nos informations, elles portaient sur le choix de la centaine de magasins du groupe Casino dans lesquels le concept de Grand Marché-Frais d'ici, cher à Moez-Alexandre Zouari, pourrait être déployé (LLA du 07/04/22). Mais les représentants de Casino et Teract ne semblaient pas réussir à se mettre d'accord sur la liste.

Le projet industriel est bien entendu essentiel à la survie à terme de l'entreprise. Il paraît pourtant de plus en plus prématuré face au mur de la dette. Pour rappel, si l'équipage Casino/Kretinsky réussissait à séduire au moins deux tiers des créanciers non sécurisés, la société Casino pourrait alors ouvrir une sauvegarde accélérée (deux mois reconductibles une fois) pour mettre en œuvre l'accord trouvé avec cette majorité de créanciers. Le plan de sauvegarde devrait alors mixer restructuration financière et plan de relance industrielle.

La dette encore et toujours

Ce n'est donc pas avant cet été, voire la rentrée de septembre, que s'ouvriront véritablement les discussions sur le projet industriel. Pour autant, les vautours tournent déjà plus ou moins discrètement autour de Casino. Auchan, Carrefour, Couche-Tard... beaucoup d'acteurs regardent de très près les actifs du groupe et prennent déjà langue avec Daniel Kretinsky. Moez-Alexandre Zouari, qui détient en tant que master franchisé quelque 200 Franprix et Monoprix, restera un acteur incontournable. Intermarché se félicite, de son côté, d'avoir déjà fait sa liste de courses en ayant négocié directement avec Casino 130 points de vente parmi les 8 000 que compte le groupe.

Il restera néanmoins encore un bon paquet de dettes dans le groupe. En additionnant les 2,05 milliards d'euros de lignes de crédit largement tirées auprès des grandes banques françaises (LLA du 09/05/23), les 1,4 milliard d'euros de prêt à terme et les 600 millions d'obligations dites "Quatrim", c'est plus de 4 milliards d'euros qui resteront dans la corbeille du futur acquéreur. On a vu plus jolie mariée !

Businesses face proposals on abortion, guns and climate change as groups with various viewpoints strive to get their agendas heard at this year’s annual meetings

A backlash against companies taking on issues ranging from climate change to abortion rights is helping to push shareholder proposals to record numbers this year.

More advocacy groups are using these resolutions to try to inject their voices into the corporate agenda, questioning companies’ adoption of policies that some view as being overly political. One group, for example, put forward a resolution requesting that Eli Lilly report on the risks of supporting abortion. Last year, the drugmaker expressed its opposition to Indiana’s near-comprehensive abortion ban.

Such proposals questioning companies’ stances on social and environmental issues have come in record numbers, surging to 74 for annual meetings held before May 31, up from 43 last year, according to data from ISS Corporate Solutions, a unit of proxy-advisory firm ISS.

“The incredible dissension in the political arena is spilling over into the capital markets,” said Heidi Welsh, executive director of the Sustainable Investments Institute, a U.S.-based nonprofit that says it provides nonpartisan analysis of sustainability issues. “Companies are getting dragged into partisan fights that they don’t want to be in, but they can’t avoid it anymore.”

Companies are facing proposals from both sides of the political spectrum, dragging them into the increasingly fractious conversations over environmental, social and governance issues. In total, 682 shareholder proposals were filed for annual meetings being held through May 31, according to ISS Corporate Solutions.

“This is becoming a focal point of our society as a whole,” said Jun Frank, an ISS Corporate Solutions managing director and lead author of a paper on the topic scheduled to be published this week.

As Republican politicians including Florida Gov. Ron DeSantis continue to push back on ESG, conservative-leaning shareholders have put forward proposals questioning, for example, the prudence of corporate diversity policies and the feasibility of decarbonization. Businesses should focus on the bottom line, they say.

“Companies are abandoning their fiduciary duties to shareholders to adopt the hard left position,” said Scott Shepard, a fellow at the National Center for Public Policy Research, a Washington-based conservative think tank that has put forward a number of anti-ESG proposals. “We’re just trying to get them back to sanity and neutrality.”

A left-leaning counterpart, California-based foundation As You Sow, said it wants to promote “environmental and social corporate responsibility” through shareholder advocacy. Proposals by liberal advocates aim to drive companies to scrutinize their carbon emissions or audit the racial makeup of their workforce, among other things.

A 2021 Securities and Exchange Commission policy change that has made it harder for companies to limit these proposals is also helping drive their growth.

Proxy season, a chance for shareholders to help shape corporate agendas, runs in the spring, when most companies have their annual meetings. Although shareholder resolutions are generally nonbinding, and most don’t pass, even a 30% vote in favor of an issue is often viewed by proponents as a strong message that the company needs to seriously consider it.

This season, American Express spoke out against an abortion-related proposal that would ask the company to report on the risks of cooperating with law-enforcement officials investigating abortions in states where the procedure is illegal. Amex’s board said the company is required to comply with law-enforcement requests. Shareholders agreed with Amex and voted down the proposal.

Alphabet, the parent company of Google, recommended that shareholders vote down a similar abortion-related proposal, saying the tech company routinely pushes back on “overbroad” demands. Shareholders are scheduled to vote on it in June.

Many boards try to avoid alienating customers and shareholders and thus tend not to take sides, advising that every proposal be voted down. In some cases, they negotiate with shareholders to withdraw proposals before a vote happens. But studying these proposals eats up board time and exposes the companies to potentially unwelcome media attention.

Mastercard is facing shareholder pressure on the possible tracking of gun-related transactions. The credit-card company said that although it has committed to working with officials on addressing gun violence, it paused efforts to implement a separate merchant category code for gun stores after several states introduced legislation on the category codes issue. The proposal targeting Mastercard is up for a vote in June.

“They’re in the business of doing business. Most companies would probably rather stay out of the political discourse,” said Michael Littenberg, a partner at law firm Ropes & Gray who advises companies on ESG issues. “There’s an increasing amount of proposal fatigue. The more proposals that companies get, the more proposals they have to spend time thinking about at the board level.”

Maria Ghazal, counsel at Business Roundtable, an association for company chief executives, said, the SEC policy change also has “lowered the bar” and has led to a “broken system forcing companies to divert resources and attention to addressing an influx of proposals that are often unrelated to their governance and long-term success.”

Many proposals ultimately fail to resonate with most shareholders: Last proxy season, about 12% of ESG-related proposals targeting S&P 1500 companies that went up for a vote won support from a majority of shareholders, according to data from accounting firm Ernst & Young.

Still, the Sierra Club, an environmental group, said investors sent a message in April when 28% of Bank of America shareholders voted for a proposal requesting that the bank disclose details on how it would meet its 2030 climate transition target. The bank’s board advised shareholders to vote no, saying the bank disclosed 2030 targets related to manufacturing, energy and power generation, and intended to provide more disclosures next year.

“Any material vote from the more substantial, longer-term investors in companies will usually trigger some kind of reaction from the board,” said Nathan Fabian, chief responsible investment officer at Principles for Responsible Investment, a United Nations-affiliated advocacy organization whose signatories include BlackRock, Vanguard Group and other institutional investors.

The current political climate means companies can expect more proposals next year.

“These proposals are not going away,” Ropes & Gray’s Littenberg said. “I can guarantee you that next year we will have another record number.”

Off-label use of Novo Nordisk’s drug can help people shed excess pounds

A drug approved by the Food and Drug Administration to treat people with Type 2 diabetes has ignited a craze among social-media influencers, the rich and famous and everyday people alike. Ozempic, made by Novo Nordisk A/S, has gained popularity for its off-label use, helping users drop excess pounds within a matter of months.

Demand has soared for Ozempic as well its sister drug, Wegovy, and Eli Lilly & Co.’s Mounjaro. Ozempic’s main ingredient, known as semaglutide, is in Wegovy, which was approved by the FDA in 2021 to treat obesity.

Lilly’s Mounjaro, whose main ingredient is tirzepatide, was approved by the FDA in 2022 to treat diabetes, though it has also been used for weight loss.

Supply for the drugs hasn’t always kept up with demand. Wegovy was in short supply during much of 2022 because of a manufacturing problem, which fueled the demand for alternatives such as Ozempic and Mounjaro, leading to shortages at times for those drugs, too. The shortages have sometimes deprived people with diabetes of their prescription refills. The companies are adding manufacturing capacity but supply constraints have continued.

Here’s what to know about Ozempic and other drugs like it:

How does Ozempic work?

Ozempic is in a category of medications that work by mimicking the effects of a naturally occurring gut hormone called glucagon-like peptide-1, or GLP-1. Receptors to GLP-1 are found in the pancreas, the brain and elsewhere in the body. The drug enhances these receptors, which help the pancreas make more insulin, in turn helping to reduce blood-sugar levels that can become elevated in people with diabetes.

The drugs limit the amount of sugar that the liver releases into the bloodstream, and slow down how long food stays in the stomach. GLP-1 drugs contribute to weight loss by suppressing appetite and making you feel full sooner when you eat. Mounjaro also promotes a second gut hormone known as glucose-dependent insulinotropic polypeptide, or GIP, which is believed to enhance these effects to treat diabetes and obesity. Ozempic, Wegovy and Mounjaro are injected once weekly.

Who should take Ozempic and drugs like it?

Ozempic and Mounjaro are approved for people with Type 2 diabetes, but doctors have discretion to prescribe them off-label for obesity because clinical studies showed they induced weight loss. Doctors generally should reserve such off-label prescriptions for people who meet criteria for being overweight or obese, but in some cases patients who meet neither of those criteria are still getting their hands on Ozempic to lose weight. Lilly is seeking FDA approval to market Mounjaro specifically for weight loss, in addition to its approved use in diabetes.

Wegovy is approved for weight management in people with a body-mass index of at least 30—the criteria for obesity—or at least 27 in people who also have a weight-related condition such as high blood pressure. A BMI of 30 is equivalent to a 5-foot, 9-inch person who weighs at least 203 pounds. In studies, Wegovy helped people lose up to about 17% of their body weight, while Mounjaro helped people lose up to about 22.5% of their weight, on average. The studies for Ozempic weren’t designed to assess weight-management outcomes.

How much do these drugs cost?

The drugs are expensive, ranging from $935 for an Ozempic injection pen that lasts a month, to $1,349 per 28-day supply of Wegovy pens in the U.S. Many insurers cover Ozempic and Mounjaro for diabetes, but coverage is spotty for their use in weight loss.

Commercial insurance and Medicaid coverage for Wegovy have been expanding, according to its manufacturer, Novo Nordisk, though insurers often require prior authorization before paying for the drug.

Scholars differ on whether the Constitution lets the president pay debts, whatever Congress says

The debt-ceiling standoff has renewed debate over the Constitution’s 14th Amendment. Some lawyers argue it lets President Biden unilaterally pay the nation’s debts without heeding Republicans’ demands; others say that idea fundamentally misreads the Constitution. Here’s an overview of the so-called 14th-Amendment strategy and why it looms large in negotiations between the White House and House Republicans.

Ratified in 1868, the 14th Amendment is best known for extending citizenship to former slaves and guaranteeing “equal protection of the laws.” But it also contains a more obscure, less-litigated section that requires the government to repay its debts. That clause, Section 4, states: “The validity of the public debt of the United States, authorized by law, …shall not be questioned.”

Section 4 was added to address debts incurred in fighting the Civil War. It punished the Confederacy’s creditors while protecting lenders that helped finance the Union war effort.

Some Democrats say the 14th Amendment lets Biden bypass the effort by Republican lawmakers to lay down conditions for paying off debts already incurred. They argue that because he as president has a duty to ensure repayment of the government’s debts, he is within his power to keep borrowing money to do so—even if Congress disapproves.

The Supreme Court has never addressed the 14th-Amendment theory, which only in the last decade or so has gone from “fringe” to “mainstream,” according to the legal historian Garrett Epps, an early proponent of the strategy.

Treasury Secretary Janet Yellen said she doubted that the 14th Amendment was an effective solution to the current debt standoff. “What I would say, it’s legally questionable whether or not that’s a viable strategy,” Yellen said.

Some experts say invoking the 14th Amendment to exceed the debt ceiling would be downright unconstitutional. In the U.S. constitutional system, Congress holds the power of the purse and controls government spending. Allowing the executive branch to incur debt without the approval of Congress violates this separation of powers, these scholars maintain.

“It’s pretty central to our system of government that Congress has to be the one figuring these things out,” said Philip Wallach, a senior fellow who focuses on regulatory-policy issues at the American Enterprise Institute, a center-right think tank based in Washington, D.C. “The Biden administration even flirting with these ideas really suggests that the administration’s fidelity to the Constitution is questionable or opportunistic.”

Other scholars say Biden wouldn’t be overstepping his authority, but simply ensuring that Congress’s own spending commitments are honored.

“Yes, Congress has the power of the purse,” said Georgetown law professor Anna Gelpern. “But there are constitutional limits on the way in which Congress exercises its power, and exercising it to undo its own commitments is not permissible.”

The president has voiced support for the 14th-Amendment strategy and concerns about its practicality.

“I’m looking at the 14th Amendment as to whether or not we have the authority—I think we have the authority,” Biden told reporters Sunday. “The question is, could it be done and invoked in time that it would not be appealed, and as a consequence past the date in question and still default on the debt. That is a question that I think is unresolved.”

If the president were to invoke the Amendment and exceed the ceiling, Republicans would surely sue. It is unlikely such legal challenges would get resolved before June 1, when Yellen has said the U.S. government could become unable to pay all its bills.

Putting aside who has the better legal arguments, the 14th-Amendment strategy comes with clear risks and downsides, said David Kamin, who served as deputy director of the White House National Economic Council earlier in the Biden administration.

“Even though I think there’s strong arguments around the 14th Amendment, it’s not one that provides a clean solution relative to Congress doing what it should and actually raising the debt limit,” said Kamin, now a professor at New York University’s law school.

No president has ever used the 14th Amendment to address the debt ceiling, which wasn’t instituted by Congress until 1939 and for many decades rarely triggered a political battle. The 14th-Amendment strategy gained attention in 2011, when Barack Obama was president and House Republicans used debt-ceiling talks to force spending cuts. Former President Bill Clinton said at the time that he would invoke it “and force the courts to stop me.” Obama demurred.

TCS Capital has 4%-plus stake in Yelp, asks recommendation site to consider merger with Angi

Activist investor TCS Capital Management has built a stake in Yelp YELP -0.67%decrease; red down pointing triangle and is calling on the service-recommendation site to explore strategic alternatives including a sale, according to people familiar with the matter.

TCS Capital owns more than 4% of the shares outstanding of Yelp’s common stock, making it one of the company’s five biggest shareholders, the people said. TCS Capital has been an investor in Yelp for most of the past five years, but the stake hasn’t been revealed publicly before.

TCS Capital believes that Yelp could be sold to another technology or media company or private-equity buyer, for at least $70 a share—or more than double the current stock price, according to a letter the fund’s founder and president, Eric Semler, plans to deliver to Yelp’s board Tuesday. The letter was seen by The Wall Street Journal.

Shares of Yelp, which has a market capitalization of about $2.2 billion, closed Monday at $32.52, off about 17% from a 52-week high of $39.26. The shares are down from a high of nearly $100 in 2014.

Semler also plans to tell Yelp’s board that his investment firm is prepared to make its own bid to acquire Yelp, with a group that includes an executive who has served as chief executive officer of a public company in the same business, the letter says, without naming the executive.

Alternatively, Yelp could explore a tax-free merger with online-services company Angi, formerly known as Angie’s List, Semler plans to say in the letter.

Semler, who founded TCS Capital in 2001, won a board seat at Angie’s List in 2016 after his firm called on the business-review platform to explore strategic alternatives, including a sale to IAC’s consumer-review site HomeAdvisor. IAC in 2015 had made an unsolicited buyout offer for Angie’s List, but the proposal was rebuffed.

IAC ultimately acquired Angie’s List and combined it with HomeAdvisor to form a new publicly traded company, Angi, in 2017.

Angi went on to acquire Handy Technologies, an on-demand platform that helps match people looking for household services with professionals, in 2018. Angi has a market capitalization of about $1.6 billion as of Monday.

Semler believes a combination of Yelp and Angi would yield “enormous revenue synergies and cost savings that could ultimately double the value of Yelp’s shares” and create a powerhouse player in what he describes as a booming market for home services.

Yelp’s longstanding chief executive, Jeremy Stoppelman, co-founded the business in 2004 and has served as CEO for nearly two decades.

Semler believes that Stoppelman has received “unconscionable compensation packages” and that Yelp’s board of directors lacks industry experience, according to the letter.

“Yelp maintains an active dialogue with our shareholders and values constructive feedback on our business and ways to create value,” a Yelp spokesperson said.

Despite ongoing pressures in the broader advertising market, Yelp has managed to keep increasing sales. The company reported first-quarter revenue of $312 million, up 13% from the same period a year earlier. It booked year-over-year growth of roughly 25% in its biggest and fastest-growing category by revenue, Home Services.

The first quarter of 2023 brought fewer so-called proxy battles than many had expected coming into this year, as activists agreed to more truces and companies got proactive in making changes such as cost cuts and executive shake-ups.

Overall, the number of activist campaigns in the U.S. dropped 30% in the first quarter from a year earlier, according to an analysis by bankers at Barclays, making it the slowest start to the year in the past five years.

But in recent weeks, activity has started to pick back up, hinting at what could end up being a busy summer season.

The Journal reported that Engaged Capital was planning to run a proxy fight for three board seats at Shake Shack before the activist investor reached an agreement with the burger chain almost immediately thereafter.

Meantime, Elliott Investment Management earlier this month published a letter asking Goodyear Tire & Rubber to appoint five new independent directors and find ways to untap value in its retail-store network. Elliott also recently revealed a stake in NRG Energy and is asking for a strategic review of the power company’s home-services unit, Vivint.

And a boardroom brawl between Carl Icahn and biotech giant Illumina is also expected to head to a shareholder vote later this week.