US companies, alarmed by the number of activist investors on the prowl, are hiring surveillance firms to find out who their shareholders are and which ones might cause trouble.
Concern in the boardroom is said to be at its highest since the 1980s, the era of greenmailing, buy-out raids and Barbarians at the Gate, a book that chronicled the battle for RJR Nabisco.
Tim Vaeth at Shareholder Intelligence, a division of Georgeson proxy advisers, said: “Companies want to know who owns their stock, what their investors’ intentions are and what their voting history is. They want to know if there are activists there and they want to get a better idea of the modus operandi of any activists, as well as what other shareholders might tie into their plans.”
In the 1980s companies subscribed to a newsletter, Sharkwatch, which tracked 13D filings, which reveal when a shareholder owned more than 5 per cent of a company. Mr Vaeth said: “It was the arbs [arbitrageurs] then and now it is mostly the hedge funds that they want to watch.”
Lex: Shareholder activism
Bruce Goldfarb, a managing director at Georgeson, said: “We have seen the emergence of hedge funds as agents of change in the past year.” Some names from the 1980s, such as Carl Icahn, were emerging again.
Georgeson’s annual review of this year’s season of annual company meetings said activist investors had “taken critical steps towards increasing their influence in the boardroom this year – perhaps more than any other year in recent memory.”
Although proxy contests showed a fall – to 24 in 2005, compared with 27 last year – there had been many more threatened proxy fights, reflecting the higher levels of shareholder pressure on companies.
Georgeson, the world’s largest proxy adviser, has also received a rising number of requests recently from Canada, Asia and Japan.
Unlike their counterparts in most countries, US companies have no direct way of knowing who owns their shares, and can be surprised by unfriendly or activist shareholders.
About 80 per cent of shares are registered in the name of the broker or dealers through whom the shares were bought. A full surveillance report, showing the names and investing history of shareholders, can cost a company from $40,000 to several million dollars.
John Vogt, executive vice-president for Thomson Financial’s capital markets intelligence group, said: “Throughout the course of the year we have seen demand continue to rise” for shareholder surveillance. However, he was less certain that hedge funds and other activists were driving demand.
