The Conference Board Launches Shareholder Activism Resources

Report and Web Portal Offer Practical Guides for Public Companies, Active-Value Asset Managers, and Advisers

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Apr 08, 2010, 10:00 ET

NEW YORK, April 8 /PRNewswire/ -- The expanding hedge fund industry and the momentum gained by the shareholder rights movement have made investor activism a critical force in corporate governance, often influencing the emergence of new standards, says a report issued today by The Conference Board Governance Center.

In the current proxy season, activists are filing unprecedented numbers of shareholder proposals on subjects from board structure and composition to removal of anti-takeover mechanisms, enhanced disclosures on risk and leadership succession, and shareholder advisory votes on executive compensation.

The Conference Board Governance Center has published The Shareholder Activism Report and Resource Portal, a comprehensive set of resources to strategically and tactically help board members and their advisers engage with investors, assess their demands, and adequately respond.

"Improved macroeconomic indicators and a robust rebound of the M&A environment are expected to fuel shareholder activism throughout 2010," says Matteo Tonello, director of corporate governance research at The Conference Board and co-author of the report with Damien Park. "So far this year, activists have already publicly requested board representation, corporate governance improvements or operating changes at nearly 100 companies in the United States alone."

"We produced this report in response to Governance Center members' requests for education and guidance on addressing shareholder activism," says Paul DeNicola, director of The Conference Board Governance Center and Directors' Institute. "It is the latest addition to the many resources the Center offers to help corporate directors and senior executives meet the highest standards of governance and risk oversight. Over the years, an increasing number of members of The Conference Board have been joining the Center to actively participate in our process and be at the forefront of corporate governance developments."

"Before the financial crisis, activist funds typically pressured companies to, for example, effect cash redistributions to owners or raise additional debt and use the cash to boost stock performance," Tonello adds. "Over the last two years, the capital squeeze has diminished the activist case for redistributing cash to shareholders, and activists have begun to focus primarily on strategic, operational, and organizational adjustments that may be rewarded by the stock market through a share value increase."

According to The Shareholder Activism Report and Resource Portal, some 55 percent of activist demands in the first few months of the 2010 proxy season relate to corporate governance (such as board declassification, removal of poison pills, say-on-pay, or anti-gross up policies), while 26 percent concern strategic matters like influencing M&A transactions or pursuing alternative markets. Only 6 percent of demands aim to effect cash distributions or relate to other financial issues, down from 17 percent in 2009.

Meanwhile, it has become more difficult for a company to justify the expense of a proxy fight, Tonello adds.

"The stigma attached to shareholder activism is dissipating, while activists are becoming increasingly sophisticated at putting pressure on undervalued targets to make the corporate changes they believe will unlock hidden potential," says Tonello. "Our report and portal provide extensive benchmarking data and practical instructions to help companies reduce their exposure to expensive proxy battles or litigation."

Damien Park, managing partner of Hedge Fund Solutions, LLC and the report's other co-author, adds, "With the economic crisis deflating corporate valuations and unprecedented regulatory interventions aimed at restoring public confidence, the balance of power has undeniably shifted toward investors seeking to engage with corporate boards to promote strategic, operational and governance-related improvements. This complete set of newly released materials is designed to reduce instances of shareholder activism by promoting rational and constructive dialogue around long-term value enhancement initiatives."

In more than 400 pages, The Shareholder Activism Report features sections on economic environment and new regulatory reforms. It also reviews every proxy campaign during 2009 and contains practical recommendations for understanding shareholders, assessing vulnerabilities to activism, and, when necessary, responding to requests for change.

The accompanying portal is a live online database including a directory of more than 400 activist investors with extensive profiles of the top 50, and hundreds of sample documents such as director nomination proposals, shareholder letters, investor presentations and settlement agreements. The portal is regularly updated with voting policies by influential investment groups and proxy advisory firms, published articles, and other useful documents and tools to help navigate the complexities of shareholder activism.

This project is supported by funding and knowledge input from the following firms—representing a variety of fields including legal, public relations, proxy solicitation and executive search—which have provided counsel on the majority of activist investing campaigns over the past few years: Debevoise & Plimpton LLP, Egon Zehnder International, Georgeson Inc., Hedge Fund Solutions, LLC, Innisfree M&A Incorporated, Joele Frank, Wilkinson Brimmer Katcher, MacKenzie Partners, Inc., Sard Verbinnen & Co, Sullivan & Cromwell LLP, and Wachtell, Lipton, Rosen & Katz.

To purchase The Shareholder Activism Report and access to the Portal, please contact Timothy Concannon at 212-339-0207 or [email protected]

For additional information or media inquiries, contact Frank Tortorici at 212-339-0231 or [email protected]

About The Conference Board Governance Center

The Conference Board Governance Center brings together a distinguished group of senior corporate executives from leading world-class companies and influential institutional investors in a non-adversarial setting. In small groups of prominent senior executives, all discussions are confidential, enabling a free-flowing exchange of ideas and effective networking. This highly unique forum allows industry leaders to debate, develop, and advance innovative governance practices, and to drive landmark research in corporate governance.

About The Conference Board

The Conference Board is a global, independent business membership and research association working in the public interest. Our mission is unique: To provide the world's leading organizations with the practical knowledge they need to improve their performance and better serve society. The Conference Board is a non-advocacy, not-for-profit entity holding 501 (c) (3) tax-exempt status in the United States.

SOURCE The Conference Board