The interests of activist investors are usually aligned with those of other shareholders, but they often act with a short-term agenda that can erode value over the longer term. Yahoo! investors who had welcomed Mr Loeb’s input were left severely rattled when, a year later, he sold most of his shares, pocketing $520m, and abruptly left the board.
A handful of chief executives manage to ward off the attacks by these billionaires: Michael Dell took his eponymous computer company private despite the best efforts of Mr Icahn, while Sotheby’s struck a compromise agreement with Mr Loeb, by stacking its board with executives from his Third Point hedge fund without firing the existing management.
But for the fast majority, tackling these determined billionaires is a losing battle. They are relentless in their campaigns, ruthless in their ambition to turn a profit, and wealthy enough to call the shots.
The conflicts can be slow to unfold, meted out in letters and Twitter messages over the course of months – but the sense of inevitability is often startling.
Mr Donahoe is a good example. Over the past nine months, he has repeatedly told investors that eBay and PayPal are “better together”. On Tuesday morning the same executive declared that eBay and PayPal would be going their separate ways next year. It was little surprise that he confirmed in the same breath that he would be stepping down as soon as the split happens.
The hymn sheet is always the same: The company in question claims that they decided to restructure, appoint a new boss, or return more cash to shareholders – whatever it is - of their own accord. It was never anything to do with the vocal billionaire that was lobbying them for change.
One can forgive the attempt at face saving. After all, managers have a tough enough task without ceding all their authority to a handful of billionaires aiming to get rich as they pull the strings. What’s more, no company is above becoming a target. Apple, one of the most successful businesses in the world, was subject to a sustained campaign by Mr Icahn, who urged the business to return more of its vast cash reserves to shareholders. Earlier this year, it did just that, announcing the largest share buyback in corporate history.
Activist investors are becoming increasingly powerful, and more and more used to getting their own way. There is no reliable strategy for thwarting their campaigns. The best any chief executives can hope for is to fly under the radar and simply escape their attention.
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