It seems that some combination of Dan Loeb persistence, cancer, and possibly incorrectly filled out job application paperwork have brought down Scott Thompson at Yahoo, and that's not the only success activist investors have to report recently. From Bloomberg:
A generation ago such investors typically grabbed headlines under a different label: corporate raiders, robber barons, barbarians at the gate. In boardroom dramas, they were cast as the cold, calculating capitalists who ruthlessly used their power to slash jobs, liquidate assets, and destroy venerable brands. ...
No more. Today, Icahn is the elder statesman in a generation of activists as likely to be praised for holding management accountable as condemned for draining a company’s value. So how did the robber barons of yesteryear become the shareholder’s best friend? Why do they now seem more interested in running companies than stripping them? The answer comes down to a shift in rules, techniques, and investor attitudes. Leveraged buyouts and hostile takeovers have morphed into proxy battles, ad campaigns, and shareholder resolutions.
Part of me wants to read this as a symptom of broader economic changes. Gordon Gekko wanted to layoff unionized mechanics because in 198whatever the private sector employed unionized workers and they got paid a relative lot. Now the private sector employs outsourcing and the guy to get rid of is the CEO, because that's where the money is.
This part of me might point out that firing a CEO in 1985 only saved you as much money as firing 40 unionized workers, whereas in 2012 it gets you 5 times as much bang for the buck. The fact that Thompson, unlike CEOs who resign in disgrace without activist hounding, is actually foregoing some severance benefits would seem like some support for that. Sure, whatever, you replace one CEO and pay for another so the net savings aren't as big as that - but the increasing size of CEO pay surely proves that CEOs are increasingly valuable on average, which presumably means greater variance in their value and so more value that can be captured by kicking out the wrong one and replacing him with the right one.
There's also the fact that, if you paint yourself as a protector of shareholder democracy, it helps to have your opponents ... paint themselves as ignorers of shareholder democracy. A part of the Yahoo saga that I found pleasing in a dorky way was this:
NEW YORK, MAY 10, 2012 /PRNewswire/ -- Third Point LLC, Yahoo! Inc.'s (NASD: YHOO) largest outside shareholder, noted today that Yahoo! has set a record date of Thursday, May 17, 2012 for its upcoming 2012 Annual Meeting of Shareholders, thus making Monday, May 14, 2012 the last day that a shareholder may purchase shares and settle with record date ownership.
This information was not included in Yahoo!'s preliminary proxy statement filed with the SEC and has not been publicized by Yahoo, other than by meeting the minimum requirements of SEC rules by providing it to banks, brokers and other nominees.
It's kind of a weird quirk of shareholder voting that the shareholders who get to vote at a shareholder meeting aren't the people who hold shares at the time of the meeting, but rather the people who held those shares sometime in the past (the record date), and that the company doesn't need to tell you when that record date was until it's already happened. But they do need to tell the exchanges and nominees, and it filtered back to Third Point, who thought it was something that others might be interested in.
But ... why? Well, for one thing, if you were contemplating buying Yahoo shares to vote alongside Dan Loeb, now would be the time. (Today, I mean, though it's moot now.) That would be the case if you were just an outsider with no interest in Yahoo but an abiding interest in helping out Dan Loeb, or perhaps more relevantly if you were currently long YHOO in swap form to avoid dividend taxes* and/or reporting requirements:
Investors who are "long" Yahoo! through equity swaps do not have the right to vote shares at the Annual Meeting. In order to have the ability to vote in respect of a Yahoo! position held in swap, investors should begin the process of unwinding any swaps and moving into physical shares so that the transaction settles in advance of the May 17 record date.
There's some debate imaginable about how sympathetic you should be with hedge fund arbs who just come into the stock to vote in a proxy fight,** or activists who hold shares in swap form to stay under reporting thresholds. Lots of people think that companies are supposed to spend a lot of their time disenfranchising those sorts of shareholders, though those people are often paid by corporate boards. But even long-term retail shareholders of Yahoo could be screwed by the late record date disclosure, since if they have shares in a margin account they may not actually have the shares:
Third Point urges Yahoo! shareholders to take the necessary steps with their custodial banks and brokerage firms to ensure they have the ability to vote at Yahoo!'s upcoming Annual Meeting. Shares held in margin accounts may be loaned out by brokers without the knowledge or consent of the beneficial owner on the May 17, 2012 record date and, if subject to a stock loan, cannot be voted by the beneficial owner whose shares were loaned out. In order to ensure that Yahoo! shareholders have the ability to vote, they should move their shares into a cash account in advance of the May 17 record date or make other arrangements with their bank, broker or other nominee.
Yahoo denied it was doing anything nefarious, and y'know what, it was probably right. In 2011, with no proxy contest, it seems to have announced the record date for its annual meeting 50 days after it passed. It's not that Yahoo was trying to prevent its shareholders from supervising the company, it's just that it didn't care. Which doesn't exactly hurt Loeb's case.
* Ha, no, I'm just, like, making a general point about swaps. Obviously Yahoo will never pay a dividend!
** If you don't know about the Telus/Mason fight, because it's in Canada or whatever, I cannot recommend that linked article highly enough. Amazingly cool trade; we may have more to say about it sometime.