DuPont activist battle
spreads from Wall Street to academia
April 21, 2015, 9:18 AM EDT
Left to right: Jeff Sonnenfeld and
Courtesy of Jeff Sonnenfeld;
Photograph by Getty Images
The fight over the future of the
chemical giant has brewed up a spat between a Yale University
professor and activist investor Nelson Peltz.
Call it the battle of the big
In the past week, the fight over the
future of chemical giant DuPont has brewed up a spat between a Yale
University professor and the activist trying to force his way onto
DuPont’s board. Yale management guru Jeffrey Sonnenfeld has told
former corporate raider and hedge fund manager Nelson Peltz to stop
telling members of the media to write articles questioning
Sonnenfeld’s integrity. Peltz has countered that Sonnenfeld has been
spreading misleading information about his fund’s performance.
The brawl has led to CNBC interviews
from both sides, dueling letters to the editor in the Wall Street
Journal, an article in the New York Post accusing Sonnenfeld of having
financial ties to the CEOs he publicly defends, and coverage in Jewish
Business News. High-voltage Fox Business correspondent Charlie
Gasparino weighed in on the
“fat cat, cat fight” as well.
The dispute began on April 1, when the
Wall Street Journal published an op-ed by Sonnenfeld pointing out
the poor performance of shareholder activist hedge funds. The
article’s headline suggested it was a critique of activist funds in
general, but a good portion of the article—five out of the 12
paragraphs—focused on Nelson Peltz and his hedge fund, Trian Partners.
Sonnenfeld criticized Trian’s investing performance over the past four
years, saying it underperformed both the market and DuPont, which
Peltz has been criticizing.
Sonnenfeld said that several companies
appear to have performed worse once a Trian representative joined
their board. One company,
Chemtura, ended up in bankruptcy. Another company, financial firm
State Street, rejected Trian’s demands that they receive a board seat
and that the company be broken up, and it has gone on to do just fine,
Sonnenfeld wrote, outperforming the market during the past four years.
Peltz and Trian have proposed
similar measures at DuPont.
“Clearly, this undermines Mr. Peltz’s
argument that DuPont’s board needs Trian and Mr. Peltz to drive better
returns,” wrote Sonnenfeld. The Yale professor, who is also a
columnist for Fortune, called Peltz’s campaign against DuPont
“costly,” “distracting,” and focused on “short-term gains.”
The next day, both Sonnenfeld and Peltz
appeared on CNBC in separate interviews. Peltz said that the
“professor should do some more digging” and get his facts straight.
The investor also called Sonnenfeld’s numbers “cherry-picked” and
wrong. Peltz said his investment firm had returned 137% since its
founding in late 2005, which far outperformed the market during the
same time. He also said on air that Trian’s performance was 34
percentage points better than the S&P 500 during that same period, a
figure that Peltz had to later restate to the SEC in a filing. Trian’s
performance was only 29 percentage points better than the S&P 500.
The squabble didn’t end there. Last
New York Post published an article suggesting that Sonnenfeld
regularly comes to the public defense of CEOs or companies that have
financial ties to his Chief Executive Leadership Institute, a Yale
non-profit that gives out awards and hosts conferences for top
executives. The article claimed that Sonnenfeld doesn’t disclose those
ties. The Jewish Business News, a website,
followed with a report titled “Murdoch Outlet Coming To Aid Of
Nelson Peltz In His War Against Prof. Jeffrey Sonnenfeld,” though the
article admitted it had no evidence that Peltz had any connection to
the NY Post piece.
The NY Post cited DuPont as an example
in which Sonnenfeld had defended a company and its CEO for which he
had ties. But DuPont has never given money to Sonnenfeld’s institute.
In December 2013, Yale’s Chief Executive Leadership Institute gave
DuPont CEO Ellen Kullman a leadership award. Coming to the defense of
an executive who Sonnenfeld’s institute has already deemed a top
leader doesn’t seem like a conflict.
Sonnenfeld says dozens of companies have
sponsored his institute over the years. He says that he has publicly
supported the CEOs of some of the companies that have sponsored his
events when they are under scrutiny in the news. And Sonnenfeld says
he has “walked out on a limb” for a number of CEOs who have never had
any ties to his institute.
For instance, Sonnenfeld said he has
been critical of Hewlett-Packard, giving Carly Fiorina low grades as a
CEO and calling the pay package for her successor Mark Hurd “a
‘damning indictment’ of CEO hiring contracts,” in the Seattle Times in
2010. Hewlett-Packard has been a sponsor of Sonnenfeld’s non-profit in
the past. Although Sonnenfeld did come to HP’s defense when its board
suddenly decided to fire Hurd after allegations that he had had an
inappropriate relationship with an “adult” actress HP had hired to act
as a hostess at client events.
“There is no correlation between the
people I will speak out in defense of and of those that I criticize
with a participation in our institute,” says Sonnenfeld.
Sonnenfeld says he has written numerous
articles criticizing activist hedge fund managers, including Peltz, in
the past. He says he had no contact with DuPont or Kullman about the
WSJ op-ed before it was published. But, weeks before, Fortune received
a spreadsheet from a source close to DuPont with some of the data that
Sonnenfeld cited in his WSJ article. Sonnenfeld says the data was
prepared by one of his own researchers and that he had been
circulating it for months before he used it in the op-ed. The
spreadsheet Fortune received did not cite Sonnenfeld as the source.
and Peltz declined to comment for this story.
Sonnenfeld says that Peltz had targeted
him privately even before he wrote the editorial. Starting earlier
this year, Sonnenfeld says he had received messages from friends and
colleagues that Peltz was looking to have a meeting with Sonnenfeld to
seek his support in Peltz’s proxy fight with DuPont. Peltz is trying
to get four representatives elected to the chemical company’s board,
including himself, as part of an effort to break up the company.
DuPont has resisted.
and Sonnenfeld had scheduled a lunch before Sonnenfeld published the
WSJ op-ed. Peltz cancelled the lunch after the op-ed came out. Since
the op-ed, Sonnenfeld says he has heard from acquaintances that Peltz
is looking for a way to “neutralize” Sonnenfeld. Sonnenfeld jokes that
his wife has had him starting the car on his own recently. But
Sonnenfeld admits Peltz was likely speaking metaphorically.
Next week, proxy advisory firms Glass Lewis and ISS are likely to
advise shareholders on whether shareholders should vote with DuPont
for its board of directors, or whether shareholders should elect
Trian’s four proposed dissonant directors, giving partial control of
the company’s board to Peltz’s fund. DuPont’s annual shareholder
meeting, where the vote will take place, is scheduled for May 13.
Expect more fireworks before then.