Wachtell, the SEC, and Management

http://www.futureofcapitalism.com/2011/03/wachtell-the-sec-and-management

The New York Times catches the law firm Wachtell, Lipton, Rosen & Katz asking the Securities and Exchange Commission to use the force of government to protect the firm's entrenched management clients by, as the Times puts it, amending the takeover rules "to limit the ability of hedge funds to quickly acquire positions in companies." The Times writer explains:

The small reporting change being proposed could significantly chill hedge fund activism and further entrench management.

The battle is only one front in the larger war against hedge funds. Companies are trying to place increased burdens on hedge fund activism. For example, companies are increasingly using poison pills to block activism. Family Dollar recently adopted a shareholder rights plan to limit investors to a 10 percent stake over the next year.

Family Dollar's actions show that there is a private market solution. Companies could adopt a poison pill limiting acquisitions by activist hedge funds. But this would raise the ire of corporate governance activists. Amending the reporting requirements and pitching it as a shareholder-friendly maneuver has the virtue of having the government impose a solution that the private market may not desire.

I'm not sure "virtue" is the right word for having the government impose a solution that management wants but shareholders don't, but the point is made.

by Editor  |  Mar 15, 2011 at 9:30 pm Related Topics:  Capital Markets Regulation, SEC receive the latest by email: subscribe to the free futureofcapitalism.com mailing list