Lipton’s Latest on Activism: Maybe You
The dean of activist defense is warning companies that it might be be better
to settle with activists than fight, given what’s going on at
In a memo to clients, influential Wall Street lawyer Martin Lipton said this
week’s recommendation by proxy advisory firm Institutional Investor Services
should be voted onto DuPont’s board
is another sign of the difficulty of companies winning fights.
Companies should give “careful consideration” to adopting activist ideas
that “are not unreasonable” and putting a respected activist on the board in
a settlement, along with agreements that tie the activists’ hands, Mr.
“In some cases even winning a drawn out proxy battle can be more damaging to
a corporation than a reasonable settlement with acceptable board
representation,” Mr. Lipton said.
Quiet settlements and constructive discussions
are already becoming the norm in
activist fights, but Mr. Lipton is viewed as the stalwart of
those still fighting.
To many in the activists, the decision to hire Mr. Lipton’s firm, Wachtell
Lipton Rosen & Katz, is a signal that company is willing to duke it out.
While Wachtell clients do sometimes settle, the firm has advised companies
in several recent proxy fights that went all the way to a shareholder vote,
including a high profile loss at
Darden Restaurants Inc.
Mr. Lipton’s memo created a buzz Wednesday among bankers, lawyers and
activists, who considered it a change of tone for Mr. Lipton.
Last year, Mr. Lipton got attention for allowing, somewhat begrudgingly,
that there were activists he could respect.
Now he’s taking a step further and suggesting companies actually listen to
Mr. Peltz and Trian are on that list. Mr. Lipton reiterated in the memo that
they “have clearly established credibility and acceptability” and “have
become respected members of the financial community.”
Wachtell last year advised more companies against activists than
any other law firm, according to the
WSJ-FactSet Activism Scorecard. The
firm is not involved in DuPont, where Trian is attempting to get four board
seats in a vote scheduled for May 13.
Still, the memo doesn’t go as far as to say DuPont should settle with Trian
or that activists should all be heard. It doesn’t represent a repudiation of
his career bashing activists, either.
Instead, the memo takes aim at ISS for flipping the calculus on activist
fights against “generally well managed major corporations, even those with
an outstanding CEO and board of directors.”
Mr. Lipton said ISS, through decisions like DuPont, has put the burden of
proof on companies instead of activists. That makes it harder to win ISS’s
recommendation and therefore harder to win the broader fight.
ISS in a statement said that it hasn’t changed its rules.“Per ISS’
longstanding policy, the burden remains on the dissident to make a
compelling case for change,” said Chris Cernich, Managing Director and Head
of Special Situations Research at ISS. “It has and continues to be the
central question guiding our analyses and represents the first of two
hurdles dissidents must surmount.”