Upping the Ante in a Play for a Stronger Board

Steven M. Davidoff, New York Times, 2nd April 2013

Would you pay a director tens of millions for fantastic performance? Welcome to the newest trend in activist investing: hedge funds paying their nominees to a company’s board as if they were chief executives.

The latest examples can be found in two prominent proxy fights. In the first, Paul Singer’s Elliott Management has acquired about $800 million in stock of the Hess Corporation, the integrated oil company. The hedge fund has nominated five directors to the 14-member Hess board and is agitating for change, arguing that the company has substantially underperformed its peers by 460 percent over the last 17 years.

In the second, Barry Rosenstein’s Jana Partners is storming the ramparts of Agrium, acquiring about 7.5 percent of the company, an agriculture supply retailer and wholesaler based in Calgary, Alberta. Jana, which contends Agrium has underperformed its peers by 160 percent over the last five years, has nominated five directors to the company’s 12-member board.

Agitating for changes and waging proxy fights are familiar pages from the activist investor playbook. What’s different here is that each hedge fund is promising to pay its director candidates what are essentially bonuses that could run into millions of dollars, if not more…Continue reading

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