Hold Friendly Shareholders Close, Activist Hedge Funds Closer
Companies hoping to stave off activist hedge fund managers such as Carl Icahn would do well to be more proactive by keeping close tabs on who is accumulating their shares and initiating contact early on to gauge the hedge fund’s intentions.
That’s just one of dozens of recommendations for corporate directors and institutional investors in a Conference Board report aimed at creating strong guidelines for dealing with the growing number of activist hedge funds.
The report is based on a study by a working group of high-level corporate and investor representatives convened by the Conference Board Governance Center in May, 2007. That was about the time that Icahn, whose hedge fund had accumulated a 6-percent stake in Motorola Inc. (MOT), launched a proxy fight for a seat on the company’s board of directors while also calling for the ouster of then-CEO Ed Zander.
The Conference Board report also urges institutional investors to do a better job of controlling the shares of companies they own, especially during proxy fights.
Institutional investors’ trustees should explicitly prohibit the practice of lending shares to those borrowers whose intention is to influence meetings of shareholders by voting.
The Conference Board report follows a set of hedge fund recommendations earlier this year by the President’s Working Group on Financial Regulation and featured in an April, 2008 Research Recap post.
For details, see “The Conference Board Working Group on Hedge Fund Activism’s Final Recommendations.”
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