Investors and boards all over corporate America are tired of getting kicked around by activist hedge fund managers who buy up shares in their companies and starting shaking things up.
So they’re fighting back against that influence, reports David Gelles at The New York Times.
An alliance of board members from companies like Hertz and Coca-Cola, big investors like BlackRock and Vanguard, and corporate advisers have formed what they’re calling the Shareholder-Director Exchange (SDE).
The aim of the group is to give companies the tools they need to take on activist fund managers and win. If all works as planned, the SDE will have created the model for how it’s done.
Over the last year it has worked on developing a contingency plan for institutional investors and board members to start a dialogue in activist situations.
“When Carl Icahn shows up in Apple and sends a tweet, Apple stock goes into turmoil,” said Declan Kelly, chief executive of Teneo, a consulting firm that helped organise the exchange. “That means shareholders are disconnected enough from the board’s message that they are responding to a 140-character message and not trusting Apple’s directors. It’s not healthy for the financial system.”
With this set of protocols (that a board can voluntarily adopt or not), investors and board members can discuss issues like governance, long term plans/strategy and more. It can also be a forum for negotiation between board members and shareholders.
Or — in the event that a certain hedge fund manager(s) takes an interest in your company — a way for board members and shareholders to talk about presenting a united front.