Time was, before the financial crisis hit, corporate boards treated multi-billion dollar hedge fund managers like Jehovah’s Witnesses pounding on their doors and flashing bibles.
But no more.
There has been an “incredible change in attitudes of board members,” said Clifton Robbins, CEO of Blue Harbour, a multi-billion dollar activist investor, speaking at the SALT Conference in Las Vegas on Wednesday. “Directors are much more wary of their need to listen to stockholders.”
Barry Rosenstein, founder of Jana Partners, another mega-hedge fund, shone a little more light on how big investors once got treated as afterthoughts by big companies and corporate boards.
“Maybe I’d get a call from his lawyer,” after reaching out to a CEO, he said. “Maybe they’d call the SEC.”
Now? He says that a CEO will interrupt his golf game for a chat on the links, or, a visit from top executives the following day.
Robbins chalked the increasing receptiveness of boards and executives to post-crisis examinations of companies that failed to manage risk.
It has allowed top investors to put pressure on companies like Walgreen and Qualcomm, and, in the minds of the investors, is positioning decades-old companies to continue thriving as some face growing competition.
Some might say it’s also because companies’ board members are scared to lose their jobs.
Jeff Smith, CEO and CIO at Starboard Value, has pushed the boards of companies including Darden Restaurants and AOL to weigh changes, pointed out that he’s replaced more than 150 directors at 50 companies over the last decade.
So those fears would be pretty well-founded.
Others, might point to cheap money and swelling hedge fund AUMs that allow billion-dollar funds to throw their weight around come proxy season.
But, don’t expect any of these relationships to start off with a Dan Loeb-style expletive-and-insult written letter, or, even so much as a whisper to media.
Both Rosenstein, and Sandell Asset Management’s Tom Sandell, each said they prefer to “work behind the scenes with management.”