WALL STREET JOURNAL.
Activist Investors Are Shaking Up Business Schools, Too
Investors like William Ackman and Daniel Loeb are amassing
influence—and fans—in M.B.A. programs
Christopher Crawford, a Columbia Business School student,
follows activist investor William Ackman’s campaigns. ‘Activism
has changed so much about business,’ said Mr. Crawford.
PHOTO: ANDY MCMILLAN FOR THE WALL STREET JOURNAL
Lindsay Gellman And
Aug. 5, 2015 5:33 a.m. ET
As a teenager, Christopher Crawford
Warren Buffett, poring over the
Berkshire Hathaway Inc.
leader’s shareholder letters.
Mr. Crawford’s current
hero might be more feared than loved. In 2012, the then-25-year-old
bought a ticket to the Ira Sohn Investment Conference in New York,
where he watched activist investor
William Ackman deliver a
three-hour presentation arguing that
Herbalife Ltd., a maker of
weight-loss shakes and vitamin supplements, was massively overvalued.
Mr. Crawford was hooked.
He began following Mr. Ackman’s campaigns, ”reading everything I could
get my hands on” and setting up Google alerts on the activist
investor, he said. Mr. Crawford later enrolled at Columbia Business
School, where he has taken courses such as Applied Securities Analysis
and learned to hone investment pitches. He hopes to join a hedge fund
when he graduates next year.
“Activism has changed so
much about business,” Mr. Crawford said. “Whether you think it’s
constructive or not”—and he’s quick to say there are good activists
and bad ones—“it’s not going away.”
The swift rise of activist
investors such as Mr. Ackman’s Pershing Square Capital Management LP
Daniel Loeb’s Third Point LLC has
shaken up American businesses, forcing companies to cut fat
or change course. Activist ideas are also shaking up business schools,
upending class discussions and attracting a new crop of future
investors eager to make a name for themselves.
Even students on the
corporate track have shifted their career expectations, preparing for
a changed landscape where executives are keenly
attuned to shareholders’ demands
and wary of their muscle, professors and students said.
Rising student interest
has professors at Harvard Business School, Columbia Business School
and Northwestern University’s Kellogg School of Management, among
others, churning out new case studies based on activist campaigns or
inviting the major players to campus. And while professors aim to
present both management and activist viewpoints, they say more
students now embrace the activist outlook.
In 2006, when Harvard
Business School professor Robin Greenwood first taught a case study on
a 2005 campaign by activists Barry Rosenstein and
Carl Icahn against oil-and-gas
firm Kerr-McGee Corp., “the overwhelming sentiment in the room was
that activist investors were harassing the company and they’re just in
it to make a short-term buck,” Mr. Greenwood said.
Now, he said, “a larger
portion of students come in with the perspective of the activist,”
with students quickly pointing out mismanagement, such as
misallocation of resources or underused assets. Subsequent classes
have taught case studies about Mr. Icahn and Southeastern Asset
Management’s campaign at Dell Inc. and Pershing Square’s
And more students—who
might have otherwise pursued more traditional finance roles—are
considering careers in activism. As dollars under management by
activists have mushroomed to $127.5 billion, according to research
firm HRF, so have funds—there are now 73, up from 52 in 2007, with
subsequent growth in hiring.
“There are students at
Columbia with the singular goal of getting hired by Pershing Square,”
said Robert Jackson, a professor at Columbia’s business and law
‘There are students at Columbia with the singular goal of
getting hired by Pershing Square.’
Jackson, a professor at Columbia’s business and law schools
The fund, whose longtime
partner Paul Hilal received his M.B.A. from Columbia in 1992 and sits
on the business school’s board, is among the highest-profile
activists, with recent wins at Allergan Inc. and Zoetis Inc. It
recruits from the school and sponsors an annual contest challenging
Columbia students to come up with an activist thesis to improve
operations at a public company.
The 2015 winners got a
private dinner with Mr. Ackman in May. In the backroom at Maysville, a
Southern-inspired restaurant in Manhattan, the students peppered him
with questions, and he peppered them back.
excitement around these guys and what they do,” said Lance Cannon, who
graduated from UCLA Anderson School of Management in June. The
33-year-old organized a student outing to Red Mountain Capital
Partners LLC, a local small-cap activist hedge fund, in May, during
which students asked associates about their career trajectories and
how the firm picks its targets. In part, he said, students are lured
by the chance to have more of an impact by investing directly in
They are part of a broader
shift of young Wall Streeters away from careers in banking and toward
areas that offer higher pay and more freedom. New regulations have
hampered big banks’ ability to sink their own money into investments—a
boon to hedge funds, private-equity shops and venture capitalists
looking for talent.
Partly to meet student
demand, b-school administrators say they’re inviting more activists to
speak on campus. Columbia and Stanford have hosted Mr. Loeb and
David Einhorn of Greenlight
Capital Inc., respectively. In January, Sally Blount, Kellogg’s dean,
hosted Jeff Ubben, chief executive of ValueAct Capital LP and a
Kellogg alum, for an interview in front of a packed hall of students.
Critics of activism say
these investors chase quick profits and steer companies away from
making the necessary investments for the future. In welcoming
activists and their ideas, schools are glamorizing what can be a
destructive process, said Lynn Stout, professor of corporate and
business law at Cornell Law School.
“There’s plenty of
evidence to support the view that activism does far more harm than
good,” she said.
Still, it appears likely
to remain a fixture of corporate life. The number of activist
campaigns year-to-date has risen 63% since 2009, according to FactSet,
and an influx of investor dollars have enabled activists to take on
Activist ideas—chiefly, a
focus on maximizing shareholder profits—have found supporters even
among students bound for careers as corporate managers.
Matthew Preston, a rising
junior at Indiana University’s Kelley School of Business undergraduate
program, said he hopes to work at one of the major Wall Street banks,
which cater mostly to corporate clients. These firms are increasingly
advising companies to be their own activists by staying lean, rooting
out waste and taking stock-boosting measures—and prioritizing the
bottom line above all else.
“ ‘If I invest in this
company, how can I make the biggest returns?’ Whatever career I end up
going into, I’ll always have that in the back of my mind,” he said.
Harry Kraemer, professor
of strategy at Kellogg, said business schools must prepare aspiring
executives to keep a clear head when an activist calls. “There’s
nothing to be emotional about,” he said. “Activists are just one more
group of constituents you deal with in leading a company.”
Lindsay Gellman at
Lindsay.Gellman@wsj.com and Liz