Boards’ defender-in-chief keeps fighting last war
By Reynolds Holding
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Corporate boardsâ defender-in-chief keeps fighting the last war. Lawyer Marty Lipton proved again at the New Orleans M&A confab that he can give as good as he gets. But prior panelistsâ emphasis on improving governance and shareholder value made his swipes at activists seem dated. The legal lionâs roars are sounding more stubborn than persuasive.
Aggressive investors shaking up dozy boards was the talk of this yearâs conference. Lawyers, bankers and other advisers stressed listening rather than resistance as the key to assuaging shareholder concerns. They were resigned, if not welcoming, to activists as a goad to underperforming corporations and counseled self-imposed governance and financial reforms as the best response.
Lipton would have none of it. After a playfully snarky introduction from Delaware Supreme Court Justice Leo Strine, the Wachtell, Lipton, Rosen & Katz partner made his case. Boards must âtranscend the immediate interests of shareholdersâ and also consider the long-term needs of employees, customers, suppliers and communities. And activists, he said, arenât much help – despite indications to the contrary.
Lipton and Harvard shareholder-rights advocate Lucian Bebchuk have long butted heads over uppity shareholdersâ motives, prompting the corporate attorney to demand evidence that activists invest for the long term. Bebchuk delivered it last August, but on Friday Lipton belittled the extensive study, saying it was based on statistics and âaveragesâ that canât tell individual company stories.
After saying he relies on some statistics, too – â100 percent of my clients agree with me,â he quipped – he conceded that probably no study would ever convince him.
The power of his âanecdotal evidenceâ and experience shouldnât be dismissed. His prescient championing of employees, customers and other corporate constituents has gained broad academic, business and legal support. He doesnât dislike all activists, either, naming Trian Fundâs Nelson Peltz as deserving respect for a long-term perspective while slamming Carl Icahn, Elliott Managementâs Paul Singer and Pershing Squareâs Bill Ackman.
Knee-jerk resistance in the face of evidence, though, undermines constructive debates about the best interests of companies and their owners. Lipton admits that he doesnât have solutions, saying managers should just realize that a long-term view best serves corporations. The problem is that activists are, in fact, offering solutions, or at least ideas that can work. Liptonâs spirited but familiar responses leave him looking out of step.