I found the article "Just don't call him a raider" (People, Mar. 5) somewhat humorous. In it, writer Ronald Grover discusses in detail the large sums of money I have made as an activist investor. However, while his facts are accurate, he completely misses the essence of my argument concerning the need for activists. Early on, Grover states that I told him that private equity investors go after companies and their mounds of cash, rip them apart, and enjoy the spoils. "How different is that from Icahn?" Grover wonders. His answer: "Not much."
I vehemently disagree. The difference is enormous. Today's activist, by campaigning against management, greatly enhances the value of a company for the benefit of all shareholders, while private equity firms keep most of the spoils for themselves when they purchase a company. On Feb. 26, almost on cue, Temple-Inland Inc. (TIN) (a company I recently announced I would challenge in a proxy fight) announced it was splitting into four parts. The stock immediately jumped seven points. Since I announced my intention to mount a proxy fight with Temple-Inland on Jan. 22, the stock has increased 34%, creating $1.6 billion in value for all shareholders. When I congratulated Temple-Inland CEO Kenneth M. Jastrow II, we both agreed that if the company had entered into a transaction with private equity rather than doing the restructuring, most of this increased value would have gone to third parties rather than the shareholders. At times, there is a need for private equity, but today it has gotten completely out of hand.
What is troubling about the BusinessWeek article and other articles about activist investing is that journalists overlook or even deny how much activist investing helps the average investor (referred to by Grover as the "common man"). For example, the article states that my fund made $370 million on Kerr-McGee (KMG) but fails to note that as a result of my activism, the share price of KMG increased from 30.06 to 70.50 and that total shareholder value increased by almost 135%, or $10 billion. In the case of Time Warner (TWX), the article accurately points out that I made approximately $250 million but again fails to note that shareholder value increased by almost $15 billion since I first invested in the company.
A study of all of my public investments since November, 2004, shows an increase in total shareholder value in excess of $55 billion. If prodding boards and CEOs can attain such results, what does this tell us about the level of management in our country and how much value is being wasted? Grover states that I have been chasing "bogeymen for much of my life." I agree, but he goes on to state that the bogeyman I am now chasing is "private equity." That is inaccurate. The bogeyman I am now chasing is the structure of American corporations, which permit managements and boards to rule arbitrarily and too often receive egregious compensation even after doing a subpar job. Yet they remain accountable to no one.
If corporate democracy is not restored so that managements and boards can be removed when they prove to be inadequate, we will lose our ability to compete in global markets. This will prove disastrous for the value of the dollar, our credit markets, and our economy. Unfortunately, activism is the only means we now have to hold our boards and CEOs accountable because, sadly, corporate democracy is nonexistent.
Pork, as Max B. Sawicky [Economic Policy Institute economist] himself points out in "Minimum wage, maximum pork" (Outside Shot, Feb. 19), involves taxpayers' money going to specific representatives' districts for projects such as Ohio's National Packard Museum, Alabama's statue of Vulcan, and Alaska's bridge to nowhere. Tax breaks, unless they are targeted to large defense contractors that operate out of Pennsylvania, are not pork.
Sawicky equates letting people keep their money with giving them money. But letting people keep their money is not the same as giving tax revenue to contractors that line senators' pockets. Also, the tax cuts in question will benefit people in all 50 states. To me, this disqualifies these tax cuts as pork.
Wendell C. Arnold
Sawicky makes A good point in observing that tax relief for small business, which is holding up passage of the federal minimum wage increase, is bad policy. It confers benefits on businesses that may not employ any minimum wage workers. The same objection, however, can be made against the minimum wage increase itself. Most of the people it would help are not living in poverty. I would argue that the damage done by the small-business tax break is nothing compared with the damage done in the labor market by having politicians dictate wages. The minuscule loss in taxes just means that politicians have somewhat fewer dollars to squander, while the mandated increase in labor costs will throw some people out of work and make it much harder for low-skilled laborers to find jobs at all.
George C. Leef
I consider your "Question of the week" (Up Front, Feb. 19), asking skeptics of global warming their opinion of the U.N. report, completely disingenuous. The responses ignored the real implication of the report.
If the scientific consensus on the human impact on global warming is totally wrong and we spend billions of dollars reducing carbon dioxide emissions needlessly, the effect will probably be a modest slowdown in global economic growth. If we do nothing about CO2 emissions and the scientific consensus is correct, the result will be global catastrophe. Choosing the former over the latter isn't a hard choice to make. We do it every day in business. We call it insurance.
James A. Wirth
Certainly if we only look at recent trends like warm summers, severe storms, and melting glaciers, we could be looking at normal variability that was not caused by human actions. But the question we should ask ourselves is why the current concentration of atmospheric carbon dioxide is more than 20% higher than it ever was in the 600,000 years prior to the Industrial Age. Those data were contained in the U.N. report on global warming. Is that not a strong indicator of human causation?
It was certainly refreshing to read "Hot news in Nowheresville" (Media, Feb. 19). Lately, I have taken to checking my pulse after every "declining circulation and revenue" big-city newspaper story or MediaCentric column.
Yes, newspapers are evolving, and yes, the newspapers most in jeopardy are those that depend on big-money advertisers. But there are other stories, too. Eleven years ago my friends and I began a free hometown weekly, and distribution has increased from zero to 52,500 papers about 60 pages deep. We're successful, but we've never had the pleasure of meeting a 20% profit margin. We shake customers' hands more and wring our hands less. And there are hundreds, if not thousands, of us across the U.S.
For us, there is change in the wind, and tomorrow's newspapers will embrace it today. Please don't bury newspapers yet.
Thomas V. Ward, Publisher
The Valley Breeze