Hurray for efficient free markets! Professor Jeffrey Sonnenfeld writes about the failures of recent activists. They were unable to persuade shareholders that they had a better idea than management and the board. Maybe when the stock market is at a record high it is not great timing for activist campaigns, especially those that fail to present a compelling analysis and alternative. (Thanks to Professor Sonnenfeld for his kind comments about VEA Chair Bob Monks and Vice Chair Nell Minow.)
As this year’s proxy season draws to a close, defeat after defeat for activist investors in proxy fights this year – most prominently at Disney and Norfolk Southern – raises the question: Are activist investors increasingly getting de-activated, losing their credibility and power? These self-styled “activist investors” are distinct from the original activists who helped catalyze needed governance reforms two decades back.
Whether today’s activist investors contribute any genuine economic value is open for debate. Their own track records suggest the answer has been a resounding “no.” We revealed previously during a misguided campaign against Salesforce, that practically every major activist fund dramatically trails the returns of passive stock market indexes such as the S&P 500 and the Dow Jones Industrial Average, over virtually every and any time period while Salesforce’s value soared.
It is no wonder investors are becoming increasingly wary in allocating toward activist funds, if not withdrawing their money altogether. Assets under management have slid in recent years, reversing a decades-long growth trend…Many of today’s activist investors are a far cry from the original, heroic crusaders for shareholder value who pioneered the activism space decades ago. The genuine, original activist investors include Ralph Whitworth of Relational Investors, John Biggs of TIAA, John Bogle of Vanguard, Ira Millstein of Weil Gotshal, as well as Institutional Shareholder Services’ co-founders Nell Minow and Bob Monks. They were at the forefront of a virtuous and necessary movement in corporate governance, bringing accountability, transparency and shareholder value to the forefront while exposing and ending rampant corporate misconduct, cronyism and excess.
Op-ed: How activist investors are deactivating with proxy battle losses – NBC New York
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