No matter what room you walk into, the term “activist investor” is likely to generate a reaction.
For example, last year, Dan Loeb, CEO of Third Point, made headlines when he entered a proxy fight with Sotheby’s, which ended in Loeb getting three seats on the board - Bloomberg. In fact, one report indicates that activists launched an average of 240 campaigns each year over the past three years, more than double compared to a decade ago – McKinsey & Company. The Economist has gone so far to say that activist shareholders will save U.S. companies - The Economist. A January report by JPMorgan lends some ammunition to this viewpoint, noting that assets under management at activist hedge funds have grown at a compound annual rate of 26.8% over the last five years - JPMorgan.
But not everyone agrees. Corporate boards have criticized activist investors for short-term thinking and sacrificing the interests of long-term investors - Forbes. The CEO of the world’s largest asset manager, Laurence Fink of BlackRock, has called upon companies to refuse to give in to activist shareholder demands if the focus is on short-term returns - Bloomberg. Others, like the CEO of the Canadian Pension Plan Investment Board, see this criticism as a “red herring”—instead, calling on institutional investors who own a far larger percentage of company stock to do a better job of engaging with the companies - Forbes
Regardless of their viewpoint on these activists, public companies now more than ever need to engage shareholders—particularly large shareholders—in proactive dialogue about management’s plans and track record.
S.P. Slaughter
Follow me on Twitter: @SP_Slaughter
For example, last year, Dan Loeb, CEO of Third Point, made headlines when he entered a proxy fight with Sotheby’s, which ended in Loeb getting three seats on the board - Bloomberg. In fact, one report indicates that activists launched an average of 240 campaigns each year over the past three years, more than double compared to a decade ago – McKinsey & Company. The Economist has gone so far to say that activist shareholders will save U.S. companies - The Economist. A January report by JPMorgan lends some ammunition to this viewpoint, noting that assets under management at activist hedge funds have grown at a compound annual rate of 26.8% over the last five years - JPMorgan.
But not everyone agrees. Corporate boards have criticized activist investors for short-term thinking and sacrificing the interests of long-term investors - Forbes. The CEO of the world’s largest asset manager, Laurence Fink of BlackRock, has called upon companies to refuse to give in to activist shareholder demands if the focus is on short-term returns - Bloomberg. Others, like the CEO of the Canadian Pension Plan Investment Board, see this criticism as a “red herring”—instead, calling on institutional investors who own a far larger percentage of company stock to do a better job of engaging with the companies - Forbes
Regardless of their viewpoint on these activists, public companies now more than ever need to engage shareholders—particularly large shareholders—in proactive dialogue about management’s plans and track record.
S.P. Slaughter
Follow me on Twitter: @SP_Slaughter
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