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NEW YORK — U.S. medical device maker Masimo Corp changed its bylaws on Monday to stop requiring hedge funds to detail top secret data, ending, for now, a debate over how far corporate America will go to defend against agitating investors.

The decision removes bylaw amendments adopted in September that required anyone nominating directors to identify their own clients and to say if they planned to nominate directors at other companies. Investors had criticized the move, which Masimo adopted after an activist investor built a stake.

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This information is considered strictly confidential at hedge funds and the Masimo bylaws sparked outrage among seasoned activist investors who feared the rules would severely curtail their strategies for pushing for changes and making money.

Few companies followed Masimo’s lead but hundreds of corporations contacted their lawyers to ask whether they too should adopt such bylaws, attorneys said.

Masimo’s stock price was largely unchanged on Monday at $170.14.

On Monday, Masimo reversed course and announced in a regulatory filing that it “adopted amended and restated bylaws which revert to the Second Amended and Restated Bylaws of the Corporation, dated as of October 24, 2019.”

Masimo said it still believes more transparency will benefit shareholders and that there will be a push for more disclosure in coming years. It took its step “to eliminate any suggestion that (it) is seeking to preclude shareholders from nominating directors,” the company said in a statement.

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Masimo updated its bylaws late last year after Quentin Koffey’s Politan Capital Management, which owns an 8.9% stake in Masimo, hinted at plans to seek board seats. Politan sued Masimo, which has a market capitalization of $9 billion, in October in Delaware Chancery Court. Investors will have an opportunity to nominate director candidates later this year.

“We are glad to see Masimo repeal its widely criticized and illegal bylaw amendments,” a Politan spokesperson said.

BYLAW REVERSAL

The reversal on the bylaws comes as the Delaware court was getting ready to hear the case and protest about it grew louder. Last week, the hedge fund industry association MFA joined Politan’s call to reverse “draconian” amendments by filing an amicus curiae, or friend of the court brief.

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Corporate America was closely watching the case as activist investors increasingly push companies, such as Walt Disney and Salesforce, for changes.

“Masimo apparently capitulated and completely undid its bylaw amendments to ‘moot’ the lawsuit, said Kai Liekefett, who defends corporations against activist investors as co-chair of law firm Sidley Austin’s shareholder activism and corporate defense practice.

Bryan Corbett, chief executive of the hedge fund trade group MFA added: “The message to the markets is clear, publicly traded companies that attempt to put entrenched corporate management ahead of the health of the business will be challenged and defeated.”

But the lawsuit continues, with the two sides squaring off over Masimo chief executive Joe Kiani’s contract that would permit him to walk away with millions of dollars in compensation if there were a change of control and one third of the board is changed within 24 months.

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Last week, Masimo lost its motion to dismiss claims challenging certain aspects of Kiani’s employment agreement.

“It is disappointing that this action only comes after the Company lost its motion defending its CEO’s egregious change of control agreement – which would pay Kiani more than 5% of Masimo’s value, or approximately $500 million, if shareholders voted to elect a minority slate of directors to the Board, or even if the Board simply selected a lead independent director,” said the Politan spokesperson.

“In our view, Masimo’s decision to abandon the bylaws it so vociferously claimed were in the best interests of the Company and its stockholders, in order to focus on protecting its CEO’s compensation agreement, speaks volumes.” (Reporting by Svea Herbst-Bayliss Editing by Bernadette Baum and Josie Kao)