State Street Becomes Latest Large Asset Manager to Outline Concerns Over Board Responses to Activist Short-Termism: Focuses on Rapid Settlements of Activist Demands That May Not Protect Interests of Long-Term Investors; Urges Companies to Consult With Long-Term Shareholders on Activist Response

Sullivan & Cromwell LLP - October 17, 2016
Download

Over the past year or so, a number of the world’s largest institutional investors have expressed concern over the potential negative long-term effects of board responses to shareholder activism, particularly the risk that in response to activist pressure companies may take actions that favor short-term interests at the expense of longer-term results. Last week, State Street Global Advisors (SSGA) issued a market commentary that pointedly raises this concern in the context of settlement agreements between public companies and activists for board seats, including the concern that settlement agreements that are entered into quickly and without appropriate consultation with other shareholders deprive long-term shareholders of the opportunity to express their views.