Forum Home Page [see Broadridge note below]

 The Shareholder ForumTM`

Fair Investor Access

This public program was initiated in collaboration with The Conference Board Task Force on Corporate/Investor Engagement and with Thomson Reuters support of communication technologies. The Forum is providing continuing reports of the issues that concern this program's participants, as summarized  in the January 5, 2015 Forum Report of Conclusions.

"Fair Access" Home Page

"Fair Access" Program Reference


Related Projects 2012-2019

For graphed analyses of company and related industry returns, see

Returns on Corporate Capital

See also analyses of

Shareholder Support Rankings



For the Forum project addressing investor decisions relating to activist proposals for short term value realization, including those of activists cited in the article below, see the December 21, 2012 Forum Report: Candidates for an Activist “Golden Goose” Analysis.


Source: Reuters, April 9, 2013 article


Activist investors find allies in mutual, pension funds

Activist shareholder William Ackman of Pershing Square Capital Management speaks during the Canadian Pacific Railway Ltd. shareholders and analysts meeting in Toronto in this February 6, 2012 file photograph. REUTERS/Mike Cassese/Files

Activist shareholder William Ackman of Pershing Square Capital Management speaks during the Canadian Pacific Railway Ltd. shareholders and analysts meeting in Toronto in this February 6, 2012 file photograph.

Credit: Reuters/Mike Cassese/Files

NEW YORK | Tue Apr 9, 2013 7:08am EDT

NEW YORK (Reuters) - Institutional investors, who used to shun activist investors and side with a company's management on most controversial issues, are starting to change their tune.

Aggressive shareholders such as Carl Icahn and Bill Ackman, who agitate for change at companies they believe to be sub-par, are increasingly getting a hearing with institutions ranging from the most staid mutual fund to the state-run pension fund.

Philip Larrieu, an investment officer at the California State Teachers Retirement System (CalSTRS), said activist investors have won more respect as their research has improved and their campaigns succeeded.

"There are some that are very aggressive and people don't like them because they are so aggressive, but then it turns out they might have a point," Larrieu said in an interview, declining to give specifics.

Last November, CalSTRS teamed up with Ralph Whitworth's Relational Investors LLC to urge for a breakup of diversified manufacturer Timken Co, the first time the California pension plan has participated in this kind of activism.

In February, T. Rowe Price Group Inc opposed a $24 billion buyout bid for Dell Inc, one of only a handful of times in the past decade that the Baltimore-based money manager has publicly rejected a financial strategy endorsed by management.

Activist investors, proxy advisers and fund managers say institutional support has emboldened some corporate gadflies to take on more and larger companies than they would have in the past - to the extent that even the likes of Apple Inc and Procter & Gamble Co have come under attack.

There were 241 activist campaigns in 2012 targeting a change in company strategy or board, up from 187 in 2009, according to FactSet SharkWatch. More than 20 percent of the campaigns last year targeted companies with at least $1 billion in market value, up from 7 percent in 2009.

Data on institutional support for shareholder activism is hard to come by, but mutual fund managers say their interest is driven in part by the performance that activists have demonstrated in recent years. Increased focus on corporate governance is another driving factor.

Dimensional Fund Advisors, the eighth largest U.S. mutual fund company with $262 billion in assets at the end of 2012, said it rarely engaged with activists before 2007 but formed a corporate governance group that year and started meeting with activist investors a few years ago.

"We felt that we should be more proactive in gathering information and being informed so we could vote our proxies better," said Joseph Chi, co-head of portfolio management at the Austin, Texas-based DFA. "As a very large shareholder in companies that are engaged in proxy contests, this is a good opportunity to have our voice heard."


Activist investors focus on companies they believe can provide better shareholder returns through a change in strategy or management. With the U.S. economy in recovery mode, shareholders are putting more pressure on underperformers - especially companies with cash on the balance sheet that investors think can be put to better use, such as at Apple.

"Three or four years ago everyone was in crisis and everyone had to be conservative and preserve cash but now you can see which companies aren't recovering," said Donna Anderson, a corporate governance specialist at T. Rowe Price.

"I think more investors have been successful with achieving their objectives, whether it is to get a board seat or ultimately to lay out M&A," Anderson said.

The financial crisis also jolted some passive investors into placing more emphasis on corporate governance.

"The climate has changed and people are very focused on changing corporate conduct or more broadly around financial performance. If you are an activist hedge fund, you have the wind at your back," said Chris Cernich, executive director of mergers and acquisitions and proxy contest research at influential proxy advisor ISS.

"I think the financial crisis has contributed to this climate and I think it's here to stay," Cernich said.

Relational's Whitworth, who pressured industrial conglomerate ITT Corp to break up and last week was named interim chairman of Hewlett Packard Co, said institutional investors have evolved from "accepting" to "inviting" shareholder activism.

"We do get a lot of calls from institutional investors," Whitworth said. "Institutional investors see the activity as beneficial and they're much more likely to be supportive."

To be sure, some fund managers and index funds remain wary of engaging too closely with activist investors.

"Our question is what is the long-term case. We are going to be permanent holders of the stock and it is not in our interest to support an initiative that will result in a short-term pop in stock price that isn't sustainable," said Glenn Booraem, controller of funds at the Vanguard Group.


U.S. mutual funds and public pension plans together own 42 percent of all U.S. stocks, according to Bogle Financial Markets Research Center. Their willingness to listen to activist investors has emboldened some activists to buy stakes as small as 1 percent in their targets, and seek support to drive change.

"More activists are spending more time with shareholders and research analysts, and they are spending less time with the company," said one industry banker, who wished to remain anonymous because he is not allowed to speak to the media.

Over the past three years, activist hedge funds have outperformed more traditional hedge funds, according to Chicago-based Hedge Fund Research. Its activist index has returned 3.80 percent on an annualized basis, compared to its global hedge fund index, which has returned only 0.25 percent.

That has drawn the attention of investors. Activist funds' assets under management doubled to more than $65 billion in 2012, from $32 billion in 2008, according to HFR.

"Activism is a new asset class that people track," said Chris Young, head of contested situations at Credit Suisse Group. "Right now the view from pension funds is that we can get outsized returns."

Last year, hedge fund TPG-Axon Capital urged oil and gas company SandRidge Energy to consider selling itself and asked Chief Executive Tom Ward to step down, marking only the second time the New York-based fund has filed an activist proposal.

In March, TPG struck a deal with SandRidge that placed four of the hedge fund's nominees on the board.

"You've got funds that were not activists but that have been increasingly willing to use that tool," Young said. "It is like a Pandora's box, once you opened it and used that tool, you realize you can use the tool again."

(Reporting By Jessica Toonkel and Soyoung Kim in New York; Editing by Tiffany Wu and Tim Dobbyn)

©2013 Thomson Reuters.


This Forum program was 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 purpose of this public Forum's program was 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 was 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 in 2012 in collaboration with The Conference Board and with Thomson Reuters support of communication technologies to address issues and objectives defined by participants in the 2010 "E-Meetings" program relevant to broad public interests in marketplace practices. The website is being maintained to provide continuing reports of the issues addressed in the program, as summarized in the January 5, 2015 Forum Report of Conclusions.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to

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.