The
creme de la creme of corporate lawyers, Martin Lipton, founding partner
of Wachtell, Lipton, Rosen & Katz and inventor of the poison pill,
crammed a different kind of poison pill down activist hedge funds'
throats as he lashed out at what he believes is a short-term and
potentially short-sighted investment style.
Lipton along with Roel
Campos, partner in charge of Cooley Godward Kronish LLP's Washington office, keynoted a conference on Tuesday held by the New York Bar
Association entitled "Counseling the Board of Directors During the New
Age of Activist Shareholders."
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Shortly after a cordial
introduction by conference host Jared Landaw, senior managing director
and general counsel of activist hedge fund Barington Capital Group
LP, Lipton began to bite the hand that introduced him. He said that
one of the most significant problems caused by activists is their
method of attempting to force companies to focus on short-term stock
gains rather than long-term value, which could entail pushing for share
buybacks or possible special dividends to create a quick profit for
shareholders.
Activists can interrupt a company's operations before
even targeting a company if that company operates in a sector that has
been attacked by activists, Lipton said. "The near possibility of
activist investors' attacks on a company" has significant impact on its
operations, he added.
However, not all activists are bad in
Lipton's views -- just the hedge funds. Lipton said there are responsible activist investors, but added that these are "not
necessarily hedge funds." One responsible activist he cited was Ralph
Whitworth's Relational Investors LLC, which he said doesn't press for quick
changes.
All the while Landaw sat next to Lipton and just grinned
and bore it as any gracious host would. His diplomatic efforts and
reverence for Lipton extended beyond the panelist dais. Landaw was
overheard saying to an attendee during a break that Lipton respectfully
stated his opinions.
Landaw could only hold his tongue for so
long, however. During the concluding session entitled "Shareholder
Activism and the Responsibility of the Board from the Hedge Funds
Perspective," he defended his fund and his peers in saying that
activist investing is not a matter of short-term versus long-term.
"It's a question," he said, "of alternatives." He did specifically address Lipton
in his retort. He added that comments that activist hedge funds are
short term-focused tend to be made by CEOs that have mismanaged
companies for quite some time. Landaw said that Barington tends to
employ a longer-term private equity-like two-to-five-year investment
strategy. - Michael Rudnick
