THE WALL STREET
Deals & Deal
iiWisdom Aims to Give 'Quiet
Majority' of Investors a Voice
iiWisdom Hopes to Use Data to Spot Shareholder Unrest Early
June 17, 2014 7:10 p.m. ET
Pepsi's Indra Nooyi at the Journal's CFO Network conference
Monday. Paul Morse for The Wall Street Journal
activist investors continue to drive change at the companies they
target, efforts are under way to head them off at the pass.
communication gap between companies and their shareholders, new firms
are cropping up to bring boards and investors closer together. The
latest launches this week, pairing a Wall Street veteran and financial
BlackRock Inc., the world's
largest asset manager.
iiWisdom and founded by David Weil, a former mergers-and-acquisitions
banker at Credit Suisse Group AG and Merrill Lynch, the firm plans to
use data analytics to spot shareholder unrest before it boils over.
is to reach past outspoken activists to what Mr. Weil called "the
quiet majority"—money managers who rarely weigh in publicly on
corporate matters but whose simmering displeasure can propel activists
executives and boards, meanwhile, have expressed growing concern about
distracting battles with activists. Investors such as
have shown no company is immune by taking on giants like
now, boards, they tend to hear mostly from the guys who shout the
loudest," Mr. Weil said. "We're trying to give all investors the
chance to be heard, and give directors the collective wisdom of their
efforts come as some executives are lamenting the challenge of
managing companies under increasing pressure from shareholders. In
comments Monday at The Wall Street Journal's CFO Network conference in
Washington, PepsiCo Chairman and CEO
said U.S. investors are too fixated on short-term results.
U.S. "it's always about: How is the quarter looking?" she said. "I
think we need to bring that balance back into the dialogue today."
A bevy of
advisers are lining up to help bridge the gap between companies and
their shareholders—a gap some say has contributed to the rising
success of activist investors.
Partners LLC—founded in 2012 by Frank Yeary, a former M&A banker at
Citigroup Inc., and Abe
Friedman, a former corporate-governance chief at BlackRock—provides
tailored advice to companies in the throes of, or seeking to head off,
a proxy fight.
an alliance of lawyers, board members and money managers calling
itself the Shareholder-Director Exchange published a set of guidelines
to facilitate meetings between investors and companies. And earlier
this year, a task force assembled by the Conference Board, a research
and advisory firm, published its own set of recommendations for
strengthening those relationships.
driving force behind the new ventures is the idea investors and
companies often talk past each other, when they are talking at all.
Smaller shareholders can struggle to get the attention of directors
and management, while larger ones sometimes pull their punches,
fearful of losing access, experts say.
the best intentions can be hampered by logistics. Companies have
hundreds of institutional shareholders but only a handful of directors
to meet with them. Similarly, big asset managers are invested in
thousands of companies but may lack the ability to talk to all of
been this disconnect in the way these groups are communicating," said
Brian Rogers, chairman of
T. Rowe Price Group Inc. and a
member of the Conference Board task force. "That breeds frustration."
frustration is playing out at the ballot box, where institutional
investors are more willing than in the past to support dissidents or
vote against management proposals.
Price, for example, backed 52% of activist board nominees between July
2009 and July 2013, according to proxy-solicitation firm D.F. King &
Co. Fidelity Management & Research did so 44% of the time. Historical
data is hard to come by, but experts say the trend has accelerated
over the past few years, turning once-reliable management allies into
potential supporters of dissidents.
this year, an activist succeeded in ousting the entire board of
CommonWealth REIT, backed by
several large institutional investors,
according to people familiar with the vote. Last year, steel-parts
maker Timken Co. agreed to split in two after activist Ralph
Whitworth, supported by a major California pension fund, rallied
widespread shareholder support for the move.
shake-ups may be inevitable at underperforming companies. But often,
activists seize on dissatisfaction bred by more mundane gripes, which
could be eased by more-regular feedback, advisers say.
iiWisdom will poll institutional investors about governance practices
at individual companies and analyze the data for a fee. By quantifying
investor sentiment on board diversity, management oversight and other
issues, the firm hopes to give directors a push toward needed fixes.
will initially poll shareholders of 50 large companies, including
J.P. Morgan Chase & Co. and
companies will get the insights for free, though iiWisdom plans to
eventually expand and charge for its reports.
years, there's been a gaping hole in terms of how investors
communicate with directors," said Robert C.S. Monks, a former chairman
of proxy adviser Institutional Shareholder Services Inc. who is an
investor in iiWisdom. "We're trying to fill it."
Liz Hoffman at