State Street’s O’Hanley Urges Boards to Slow Down Activist Dealsby
Says settlements don’t include views of long-term investors
O’Hanley’s comments a response to growth in activist deals
State Street Corp.’s asset management head Ron O’ Hanley is calling on directors of public companies to resist the short-term interests of activist investors as they win a growing number of board seats.
O’Hanley said in a statement Monday that corporate boards are hastily giving more seats to activists without offering long-term shareholders a chance for input on questions such as strategy and compensation. He said activists should be required to hold stock for long periods from the settlement date to better align them with the interests of other shareholders.
“We recognize there are different ways for activists to engage with companies and that some activists can drive positive change,” O’Hanley said in the statement. “But we are wary of activist situations that favor short-term gains at the expense of long-term investor interests.”
O’Hanley’s comments come in response to research from Lazard’s Corporate Preparedness Group, which shows that more companies are reaching quick settlements with activists. As of August, 49 companies had conceded 104 board seats to activists in settlements this year, compared with 106 seats given by 54 companies for 2015, according to the press release.
The biggest names in finance have also been vocal about the need for better corporate governance. Billionaire Warren Buffett, BlackRock Inc.’s Laurence D. Fink and JPMorgan Chase & Co.’s Jamie Dimon released a letter this year making recommendations on how public companies can improve governance and relations with shareholders.
O’Hanley said boards should extend the duration of the settlement agreements to address the concerns of long-term shareholders. He also recommended that agreements set minimum ownership levels for longer periods in exchange for board representation.
“Our main goal as a near-permanent source of capital for companies listed in the indices is to maximize the probability of long-term value creation on behalf of our clients,” said O’Hanley.