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Responding to Hedge Fund Activism

By Harvard Law School Program on Corporate Governance

(Editor’s note: This post is by Matteo Tonello of The Conference Board Governance Center.)

The Conference Board’s Working Group on Hedge Fund Activism, established in May 2007, recently released a set of proposed recommendations for those public companies and institutional investors who might find themselves involved in an activism campaign mounted by hedge funds. The proposed recommendations are supported by a white paper discussing the Working Group’s findings. The paper is available here.

The Working Group focused on the following areas:

1. What corporations can do to better monitor securities holdings and learn about those accumulations of stock or extraordinary trading patterns that may reveal a hedge fund’s activism tactic.

2. What measures corporations can adopt to avoid becoming a target.

3. How boards and senior executives can react to an activism campaign and how they should respond to requests for change made by hedge funds.

4. How companies and large institutional investors can ensure integrity of the voting process in those situations where hedge funds borrow shares for the sole purpose of influencing a shareholders’ vote.

5. What considerations institutional investors should be mindful of when allocating some of their assets to hedge funds pursuing activism strategies.

Any interested party is invited to comment on the white paper and proposed recommendations. Comments and requests for information should be addressed to the author, Matteo Tonello, at 212-339-0335 or matteo.tonello@conference-board.org. The comment period will run until April 30, 2008.

Full post as published by The Harvard Law School Corporate Governance Blog on April 22, 2008 (boomark / email).