Ryan Flugum and Matthew E. Souther

Is Stakeholder Value an Excuse for Underperfoming Managers?

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In August 2019, the Business Roundtable released a statement redefining the purpose of a corporation to maximize value “for the benefit of all stakeholders – customers, employees, suppliers, communities, and shareholders.” The statement was signed by 181 CEOs, including Jamie Dimon, chairman and CEO of JPMorgan Chase and chairman of the Business Roundtable, and came after several years of political pressure on behalf of stakeholder objectives, including by U.S. Senator Elizabeth Warren. In 2018, Warren introduced the Accountable Capitalism Act, which would require that directors of large corporations consider the interests of all stakeholders and that at least 40 percent … Read more

Shining a Light on Strategically Leaked Plans of Activist Investors

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On October 12, 2015, an activist hedge fund we’ll call John Doe Management filed a Form 13D, disclosing 5.5 percent ownership and an intent to pursue an activist campaign in a target firm we’ll call Industrial Corp (IC). The next day, IC’s stock rose 7 percent. John Doe Management’s last purchase of IC prior to filing the 13D occurred on October 3. The following day, an IP address owned by a different hedge fund, referred to here as AAA Group, suddenly became interested in IC, logging onto the Securities and Exchange Commission’s EDGAR database and downloading IC’s financial statements. This … Read more