Hillary Clinton sharpened her criticism against what she sees as Wall Street excess by targeting investors who demand short-term corporate measures like share buybacks and dividends to pump up a company’s stock price.
“We need a new generation of committed, long-term investors to provide a counter-weight to the hit-and-run activists,” the Democratic presidential candidate said Friday in a speech at New York University’s Stern School of Business. She contrasted her favored approach with investors who agitate for immediate change “no matter how much it discourages and distracts management from pursuing strategies that would add the most long-term value.”
Clinton has made economic inequality a centerpiece of her campaign, and has previously said that the nation’s top 25 hedge fund managers earn more than all of U.S. kindergarten teachers combined. Still, she’s received donations from big-name fund managers such as Paul Tudor Jones, the billionaire founder of Tudor Investment Corp., and Jamie Dinan, who started York Capital.
The former secretary of state and U.S. senator didn’t single out any fund managers for criticism by name, nor did she cite specific confrontations that hurt companies’ prospects. She did say that businesses and the economy would have more sustainable growth if the focus turned to reinvesting capital.
“Real value comes from long-term growth, not short-term profits,” said Clinton, 67. “It comes from building companies, not stripping them; from creating good jobs, not eliminating them; from seeing workers as assets to cultivate, not costs to be cut.”
Third Point’s Dan Loeb and Paul Singer, who runs Elliott Management, are among money managers who pursue activist tactics and have donated to Republicans seeking that party’s presidential nomination. Loeb supported former Florida Governor Jeb Bush. Singer has hosted events for Bush, Senator Marco Rubio of Florida and Governors John Kasich of Ohio, Scott Walker of Wisconsin and New Jersey’s Chris Christie.
Clinton is proposing that the top 43.4 percent tax rate on short-term capital gains be extended to apply to assets held for less than two years, compared with the current one-year threshold. Beyond that, she would implement a sliding scale of long-term capital gains rates, and taxpayers in the top bracket would have to keep holdings for at least six years to get today’s rate of 23.8 percent, which would remain the lowest available.
She also faulted executive pay packages containing options and restricted shares, which she said contribute to “quarterly capitalism.”
Many stock-heavy pay packages “have created a perverse incentive for executives to seek the big payouts that could come from a temporary rise in share prices,” she said.