success gaining board seats at U.S. companies
Mar 11, 2014
In another sign of the increasing
influence of activist investors, the pace of activist campaigns
resulting in board seats is running at a five-year high. In the first
two months of 2014, activist investors were granted one or more board
seats at 16 U.S. companies, the most since 2009 where 22 campaigns at
21 distinct companies resulted in board seats. Among the campaigns
that resulted in board seats in January and February were those waged
by prominent activists Elliott Management Corporation at Juniper
Networks, Inc. and Compuware Corporation, GAMCO Asset Management Inc.
at Ampco-Pittsburgh Corporation, JANA Partners LLC at QEP Resources,
Inc., and Trian Fund Management, L.P. at Mondelez International, Inc.
The full year campaign total resulting in board seats in 2013 was also
a multi-year high.
The data includes all campaigns where
activist investors attained board seats via a vote at a proxy fight,
to settle a proxy fight, granted as part of other activist campaigns,
or granted to prominent activists that are Schedule 13D filers but
have not publicly agitated at the company, and is based on the date
that the seat was granted or won. In 2013, the number of campaigns
where the activist was granted a board seat without having to go to a
shareholder vote increased by 9% from 2012 levels and 41% versus
calendar 2011. Carl Icahn commented in a recent interview that even he
was "surprised" by how often he is being invited to join company
boards without having to launch a proxy fight.
While several factors may be contributing
to this recent concessionary approach of U.S. companies, the wide
spread support activists are getting from mainstream institutional
investors is undoubtedly a key driver of the increased willingness of
companies to offer up board representation. Sixty-percent of the proxy
fights for board seats that went to an actual vote in 2013 resulted in
a partial or outright victory for the activist. That's the highest win
rate in the 13 years we have been tracking this data. By comparison,
in 2003 the activist win rate was only 39%.
What makes the 60% win rate even more
noteworthy is the fact that this statistic is artificially low.
Companies and their advisers typically keep close tabs on preliminary
vote tallies during a proxy fight and will often offer to settle if it
appears that they may be on the losing side of the vote. For example,
we saw Hess Corporation settle with Elliott Management the very
morning of Hess' 2013 annual meeting.
These favorable conditions aren't being
lost on activist investors as proxy fights for board seats announced
at this point in the year is at a five-year high. As of March 7, 49
proxy fights for board seats have been announced. In the same periods
in 2013 and 2012 44 and 41 proxy fights had respectively been