U.S. Chamber Forms Coalition to Fend Off Activist Hedge Funds

Corporations are turning to the nation’s biggest business lobby to help fend off activist investors such as Dan Loeb and Bill Ackman.

The U.S. Chamber of Commerce is forming a coalition to make sure “long-term value creation” drives public companies’ decisions, according to a letter it sent Thursday to Securities and Exchange Commission Chair Mary Jo White. The group plans to weigh in on regulations that affect corporate governance, the letter said.

“Our members have experienced an exponential rise in the frequency of special-interest activism of all types,” said the letter, which was signed by trade groups including those for fuel manufacturers, insurers, real estate investment trusts and wholesaler-distributors. “These campaigns often involve idiosyncratic agendas that are wholly unrelated to increasing long-term value for shareholders.”

Since the days of the corporate raiders of the 80s, activist hedge funds have evolved into a formidable force, with an estimated $200 billion to invest. Carl Icahn has rebranded himself as an outspoken shareholder advocate. Latter-day activists including Loeb, Ackman and Jeff Smith often write poison-pen letters to seek changes to corporate strategy and criticize portfolio companies on business television.

Insulating Management

Last week, White said the SEC plans to recommend rules that would allow shareholders to vote for both management and dissident-supported directors in proxy fights. Current rules allow companies to exclude names of investors’ director candidates from ballots cast in advance of annual meetings.

The chamber’s new group will be overseen by Tom Quaadman, vice president of its center for capital markets competitiveness, said spokeswoman Erica Flint. The group has 13 members, including the American Bankers Association, the Securities Industry and Financial Markets Association and the National Association of Manufacturers.

If the chamber’s coalition wants to “facilitate long-term value creation, they should support reforms that strengthen shareholder rights and oppose arrangements that insulate managements from shareholders,” said Lucian Bebchuk, a professor at Harvard Law School.