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See related case examples of

Dell Inc.

appraisal rights for intrinsic value realization

and

Walgreen Co.

stock buyback policies

"Fair Access" Home Page

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For graphs of specific company and related industry returns, see

Returns on Corporate Capital

For graphs of specific company voting for the past 5 years, see

Shareholder Support Rankings

 

 

 

Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

See related case examples of

Dell Inc.

appraisal rights for intrinsic value realization

and

Walgreen Co.

stock buyback policies

"Fair Access" Home Page

"Fair Access" Program Reference

For graphs of specific company and related industry returns, see

Returns on Corporate Capital

For graphs of specific company voting for the past 5 years, see

Shareholder Support Rankings

 

 

 

Forum distribution:

Former proxy advisor and activist now offering defense advice

 

Source: IR Magazine, March 16, 2016 article and videos


IR advice from a shareholder activist


March 16, 2016 | By Neil Stewart

A conversation with Greg Taxin, Luma Asset Management

Greg Taxin has had a many-hued career that makes him uniquely suited to activist investing – and to giving advice to companies on the receiving end of it. Having started his career at Wachtell Lipton, the law firm known for fighting activists, Taxin went on to become an investment banker before co-founding proxy advisory firm Glass Lewis in 2003. Later he headed up activism for the Clinton Group, with IR Magazine calling him one of the ‘new guard in shareholder activism’.

His current firm, Luma Asset Management, raises money for special purpose vehicles to invest in specific targets of activist campaigns. In an odd twist, he has been engaged by some companies to help with activist vulnerability assessment and response preparedness.

In these segments of the video series ‘ON Message with Neil Stewart’, produced by Bloomberg and IR Magazine, Taxin dispenses tips for IROs who want to learn how to work with the new generation of constructive activists, not necessarily fight them.

Part 2: Vulnerability assessment
Companies often underestimate the amount of work activists do to prepare for campaigns. For example, Taxin and his firm recently spent a solid six months digging for every document about a target company that’s available publicly or semi-publicly (‘semi-publicly’ meaning things like LinkedIn profiles of directors and officers), while talking to dozens of people, from competitors to former executives.

‘[Activists] may still be wrong, but they’re not going to be uninformed or naďve. The challenge for the IR person is to make sure they too have looked at all the information, thought about how it could be perceived by shareholders, and talked truth to management about the vulnerabilities and things that should be done to create value at the company,’ he advises.

Part 3: Response plan
Taxin’s most important piece of advice about responding to an activist is to take the right tone, right away. Even though the environment has shifted in the last several years, some companies still respond, ‘You’re a short-termer, you don’t understand my business, I can’t learn anything from you, we’ve already thought of all the options.’ Says Taxin: ‘That kind of stiff-arm will really annoy not just the activist, but all your investors.’

He also advises companies to avoid ‘advisor bloat’ as they seek as many points of view as possible. ‘There’s a danger of appearing overly defensive, and spending shareholder money in excess to defend their privilege or incumbency, rather than thinking about the company,’ he says.

Part 4: Short-termism backlash
Critics say activists are out for the short-term buck and are damaging long-term investors. There’s even a political backlash, including Hillary Clinton warning of ‘hit-and-run activists whose goal is to force an immediate payout,’ in a speech in July 2015.

‘It’s a nice little sound bite, but like most sound bites, it’s really a canard,’ Taxin responds. While acknowledging that activists worry about their monthly or quarterly returns, he explains, ‘The fact is the best way to get a stock price to move in the short term is to get the business and the company on a better long-term footing. So if the company is going to pursue a more efficient use of capital over the long term, or be in better businesses or have better margins over the long term, that change gets price into today’s stock price very quickly.’

Part 5: White hats v black hats
If an activist situation ever turns into a proxy fight, Taxin says it’s crucial for IR professionals to understand that the people who vote are generally not the analysts who cover the stock. They don’t know the company or industry well and aren’t able to assess subtle points about capital allocation. Instead they’re people from the corporate governance department looking at bigger thematic points, like if the board can be trusted to do the right thing.

‘Proxy fights are really morality tales,’ Taxin says. ‘They’re about who’s the white hat and who’s the black hat, and they’re painted with fairly broad strokes rather than the minutia the IR professional is more accustomed to dealing with.’

 

 

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Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.

 

 

This Forum program is open, free of charge, to anyone concerned with investor interests in the development of marketplace standards for expanded access to information for securities valuation and shareholder voting decisions. As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

This Forum program was initiated to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to access@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.

Shareholder Forum™ is a trademark owned by The Shareholder Forum, Inc., for the programs conducted since 1999 to support investor access to decision-making information. It should be noted that we have no responsibility for the services that Broadridge Financial Solutions, Inc., introduced for review in the Forum's 2010 "E-Meetings" program and has since been offering with the “Shareholder Forum” name, and we have asked Broadridge to use a different name that does not suggest our support or endorsement.