Be Alert: Watch Your Investors

The Conference Board Research Working Group on Hedge Fund Activism has released a report detailing its recommendations for large public companies and institutional investors in responding to and anticipating shareholder activism movements. The Working Group, composed of corporate and investor representatives in cooperation with members of The Conference Board, has formulated a four-pronged strategy for keeping tabs on, and diffusing unrest among, hedge fund activists.

The report’s central recommendations are as follows: monitor securities holdings to ensure that activists aren’t consolidating their strength through equity swaps; maintain communication with investors and respond to requests for change; ensure a fair and transparent proxy vote; and oversee the management of hedge funds and work to understand its motivations.

Recent unrest at public companies like Yahoo, CSX, and Motorola was cited as inspiration for the report. “There is so much fear, loathing and misinformation in the marketplace that it has made constructive engagement between companies and hedge funds difficult,” said Jon Lukomnik, co-chair of the group. “This Report demystifies hedge fund activism and, by so doing, should improve the communication between companies and hedge funds.”

Among the companies participating in the Working Group were Alcoa, Coca-Cola, and Pfizer. Two institutional investors contributing to the report were Barclays and Managed Funds Association.

The report’s recommendations were endorsed by the National Investor Relations Institute (NIRI), the largest U.S. association of investor relations officers. The report was authored by research director Matteo Tonello.