Every year, at about this time, many of America’s public companies gather their shareholders together for their annual general meetings.
The AGM is a usually carefully choreographed affair, with the board doing its best to provide a canned, self-congratulatory narrative about the company’s performance over the last 12 months, and issuing a bland-yet-optimistic forecast for the next year.
More and more often these days, however, the kabuki performances are interrupted and disrupted by activist investors. These gadflies like to show up and throw hand grenades about the place, trying to force the board of directors to do things that most of them don’t want to do: buy back shares; merge with other companies; ditch certain board members; the list goes on. If you don’t know what an activist investor is, watch this short video for an explanation:
We all want things. The difference between most of us and activist investors is that they are prepared to spend lots of money and cause lots of pain until they get what they want. Last year was a particularly successful year for activist investors: they ousted the CEO of Sotheby’s and got shareholders to overthrow the entire boards of both Darden Restaurants and CommonWealth REIT, now renamed Equity Commonwealth. This year they’re going after Tempur Sealy International, DuPont, MGM Resorts, Macerich and Shutterfly.
In his Dealbook column, Steven Davidoff Solomon, a professor of law at the University of California, Berkeley, says this year more sparks may fly than usual, because companies appear to be digging in their heels and pushing back. And it’s not just companies. The heads of several big institutions (investors in those companies) have said publicly that they believe the current vogue for share buybacks — a favorite of shareholder activists — is bad for the economy. That may give companies heart as they announce their opposition to the activist scourge.
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