The long-term effects of hedge fund activism

Columbia Law Review

Volumn 115, Issue 5, 2015, Pages 1085-1156

  Bebchuk, Lucian A ^a   Brav, Alon ^b   Jiang, Wei ^c  

^a HARVARD LAW SCHOOL   (United States)

^b NATIONAL BUREAU OF ECONOMIC RESEARCH   (United States)

^c The Sanford C Bernstein Co Center for Leadership and Ethics   (United States)

Author keywords

[No Author keywords available]

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EID: 84924950938     PISSN: 00101958     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (167)

1. For recent media observations referring to the current era as the golden age of activist investing, see, e.g., Ken Squire, A Golden Age for Activist Investing, Barron's (Feb. 16, 2009), http://online.barrons.com/news/articles/SB123457667407886821 (on file with the Columbia Law Review)
2. Nathan Vardi, The Golden Age of Activist Investing, Forbes (Aug. 6, 2013, 8:25 AM), http://www.forbes.com/sites/nathanvardi/2013/08/06/thegolden- age-of-activist-investing/ (on file with the Columbia Law Review).
3. Bill George, Activists Seek Short-Term Gain, Not Long-Term Value, N.Y. Times: Dealbook (Aug. 26, 2013, 10:56 AM), http://dealbook.nytimes.com/2013/08/26/activistsseek- short-term-gain-not-long-term-value/ (on file with the Columbia Law Review).
4. Bill George, Activists Seek Short-Term Gain, Not Long-Term Value, N.Y. Times: Dealbook (Aug. 26, 2013, 10:56 AM), http://dealbook.nytimes.com/2013/08/26/activistsseek- short-term-gain-not-long-term-value/ (on file with the Columbia Law Review).
5. For writings expressing such concerns by a broad range of authors, see, e.g., Aspen Inst., Overcoming Short-Termism: A Call for a More Responsible Approach to Investment and Business Management 2-3 (Sept. 9, 2009) http://www.aspeninstitute.org/ sites/default/files/content/docs/business%20and%20society%20program/overcome_sho rt_state0909.pdf (on file with the Columbia Law Review)
6. See Jack B. Jacobs, "Patient Capital": Can Delaware Corporate Law Help Revive It?, 68 Wash. & Lee L. Rev. 1645, 1649, 1657-63 (2011) (expressing concerns about "decline . . . of patient capital and the substitution, in its place, of impatient capital, driven by parallel pressures from investors . . . to generate short-term profits")
7. Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1, 7-9, 26 (2010) [hereinafter Strine, Fundamental Question] ("[T]here is a danger that activist shareholders will make proposals motivated by interests other than maximizing the long-term, sustainable profitability of the corporation.").
8. See Facilitating Shareholder Director Nominations, 75 Fed. Reg. 56,668, 56,697- 99 (Sept. 16, 2010) [hereinafter Director Nominations] (discussing rationale behind adopting three-year holding requirement).
9. See Lucian A. Bebchuk, The Myth that Insulating Boards Serves Long-Term Value, 113 Colum. L. Rev. 1637, 1660-76 (2013) [hereinafter Bebchuk, Myth] (analyzing conceptual structure of myopic-activists claim and showing myopic-activists claim does not follow from assuming existence of inefficient capital markets and short activist horizons).
10. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
11. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
12. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
13. See Lucian Arye Bebchuk, Harvard Law Sch., http://www.law.harvard.edu/ faculty/bebchuk (on file with the Columbia Law Review) (last visited Jan. 29, 2015) (providing links to about fifty media pieces discussing this study, including pieces in publications listed above).
14. For three such memoranda criticizing our work issued by Wachtell Lipton, see Martin Lipton, Wachtell, Lipton, Rosen & Katz, The Bebchuk Syllogism, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Aug. 26, 2013, 12:32 PM), http://blogs.law.harvard.edu/corpgov/2013/08/26/the-bebchuk-syllogism/ [hereinafter Wachtell Memorandum, The Bebchuk Syllogism] (on file with the Columbia Law Review)
15. Martin Lipton & Steven A. Rosenblum, Wachtell, Lipton, Rosen & Katz, Do Activist Hedge Funds Really Create Long Term Value?, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (July 22, 2014, 3:55 PM), http://blogs.law.harvard.edu/ corpgov/2014/07/22/do-activist-hedge-funds-really-create-long-term-value/ (on file with the Columbia Law Review)
16. Martin Lipton, Wachtell, Lipton, Rosen & Katz, Empiricism and Experience; Activism and Short-Termism; the Real World of Business, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Oct. 28, 2013, 9:40 AM), http://blogs.law.harvard.edu/corpgov/2013/10/28/empiricism-and-experience-activismand- short-termism-the-real-world-of-business/ [hereinafter Wachtell Memorandum, Empiricism and Experience] (on file with the Columbia Law Review).
17. For posts that we issued in response to each of the three Wachtell Lipton critiques of our work, see Lucian Bebchuk, Alon Brav & Wei Jiang, Don't Run Away from the Evidence: A Reply to Wachtell Lipton, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Sept. 17, 2013, 9:00 AM), http://blogs.law.harvard.edu/ corpgov/2013/09/17/dont-run-away-from-the-evidence-a-reply-to-wachtell-lipton/ (on file with the Columbia Law Review)
18. Lucian Bebchuk, Alon Brav & Wei Jiang, Still Running Away from the Evidence: A Reply to Wachtell Lipton's Review of Empirical Work, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Mar. 5, 2014, 9:02 AM), http://blogs.law.harvard.edu/corpgov/2014/03/05/still-running-away-from-the-evidencea- reply-to-wachtell-liptons-review-of-empirical-work/ [hereinafter Bebchuk et al., Still Running Away from the Evidence] (on file with the Columbia Law Review)
19. Lucian Bebchuk, Wachtell Keeps Running Away from the Evidence, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (July 28, 2014, 9:15 AM), http://blogs.law. harvard.edu/corpgov/2014/07/28/wachtell-keeps-running-away-from-the-evidence/# more-64978 (on file with the Columbia Law Review).
20. For discussions of the range of operational changes sought by activists, see Alon Brav, Wei Jiang, Frank Partnoy & Randall Thomas, Hedge Fund Activism, Corporate Governance, and Firm Performance, 63 J. Fin. 1729, 1741-45 (2008) [hereinafter Brav et al., Hedge Fund Activism] (describing and classifying motives behind hedge fund activism).
21. For discussions of the activist intervention in the Apple case, see Steven M. Davidoff, Why Einhorn's Win May Be Apple's Gain, N.Y. Times: Dealbook (Feb. 26, 2013, 10:02 AM), http://dealbook.nytimes.com/2013/02/26/why-einhorns-win-may-be-applesgain/ (on file with the Columbia Law Review)
22. Michael J. De La Merced, Icahn Ends Call for Apple Stock Buyback, N.Y. Times: Dealbook (Feb. 10, 2014, 10:19 AM), http:// dealbook.nytimes.com/2014/02/10/icahn-backs-off-apple-buyback-proposal/ (on file with the Columbia Law Review).
23. See, e.g., Elliott Management Calls for Board Shake-Up at Hess, N.Y. Times: Dealbook (Jan. 29, 2013, 8:38 AM), http://dealbook.nytimes.com/2013/01/29/elliottmanagement- calls-for-board-shake-up-at-hess/ (on file with the Columbia Law Review) (noting that Elliott has announced wide-ranging strategy for Hess, which includes selling off pieces of business and spinning off assets).
24. See generally Marcel Kahan & Edward B. Rock, Hedge Funds in Corporate Governance and Corporate Control, 155 U. Pa. L. Rev. 1021, 1069-70, 1088-89 (2007) ("[I]ncentives for a fund to engage in activism depend on its stake in a portfolio company.").
25. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
26. For writings expressing such concerns by a broad range of authors, see, e.g., Aspen Inst., Overcoming Short-Termism: A Call for a More Responsible Approach to Investment and Business Management 2-3 (Sept. 9, 2009) http://www.aspeninstitute.org/ sites/default/files/content/docs/business%20and%20society%20program/overcome_sho rt_state0909.pdf (on file with the Columbia Law Review)
27. John Kay, The Kay Review of UK Equity Markets and Long-Term Decision Making, Final Report 9 (2012) (on file with the Columbia Law Review)
28. William W. Bratton & Michael L. Wachter, The Case Against Shareholder Empowerment, 158 U. Pa. L. Rev. 653, 653-54, 657-59 (2010)
29. Martin Lipton & Steven A. Rosenblum, A New System of Corporate Governance: The Quinquennial Election of Directors, 58 U. Chi. L. Rev. 187, 187-88, 203, 210-12 (1991) [hereinafter Lipton & Rosenblum, Quinquennial Election]
30. Justin Fox & Jay W. Lorsch, What Good Are Shareholders?, Harv. Bus. Rev., July 2012, available at https://hbr.org/2012/07/whatgood- are-shareholders (on file with the Columbia Law Review)
31. Joe Nocera, Op-Ed, What Is Business Waiting For?, N.Y. Times (Aug. 15, 2011), http://www.nytimes.com/2011/08/16/ opinion/nocera-what-is-business-waiting-for.html? (on file with the Columbia Law Review)
32. Andrew Ross Sorkin, 'Shareholder Democracy' Can Mask Abuses, N.Y. Times: Dealbook (Feb. 25, 2013, 9:30 PM), http://dealbook.nytimes.com/2013/02/25/shareholderdemocracy- can-mask-abuses/ (on file with the Columbia Law Review).
33. Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1, 7-9, 26 (2010) [hereinafter Strine, Fundamental Question] ("[T]here is a danger that activist shareholders will make proposals motivated by interests other than maximizing the long-term, sustainable profitability of the corporation.").
34. Bill George, Activists Seek Short-Term Gain, Not Long-Term Value, N.Y. Times: Dealbook (Aug. 26, 2013, 10:56 AM), http://dealbook.nytimes.com/2013/08/26/activistsseek- short-term-gain-not-long-term-value/ (on file with the Columbia Law Review).
35. Martin Lipton & Steven A. Rosenblum, A New System of Corporate Governance: The Quinquennial Election of Directors, 58 U. Chi. L. Rev. 187, 187-88, 203, 210-12 (1991) [hereinafter Lipton & Rosenblum, Quinquennial Election]
36. Ira M. Millstein, Re-Examining Board Priorities in an Era of Activism, N.Y. Times: Dealbook (Mar. 8, 2013, 3:52 PM), http://dealbook.nytimes.com/2013/03/08/reexamining- board-priorities-in-an-era-of-activism/ (on file with the Columbia Law Review).
37. See Lucian A. Bebchuk, The Myth that Insulating Boards Serves Long-Term Value, 113 Colum. L. Rev. 1637, 1660-76 (2013) [hereinafter Bebchuk, Myth] (analyzing conceptual structure of myopic-activists claim and showing myopic-activists claim does not follow from assuming existence of inefficient capital markets and short activist horizons).
38. A subsequent study by Nickolay Gantchev, Oleg Gredil, and Chotibhak Jotikasthira provides empirical evidence that, by increasing the threat of activism vis-a-vis firms similar to the targets of activist interventions, the disclosures are accompanied by positive abnormal returns to such similar firms. See Gantchev et al., Governance Under the Gun: Spillover Effects of Hedge Fund Activism 26- 28, 49 tbl. 7 (Jan. 2015) (unpublished manuscript), available at http://ssrn.com/abstract= 2356544 (on file with the Columbia Law Review) (showing that announcements of activist stakes are accompanied by positive abnormal returns to companies similar to target).
39. Martin Lipton, Wachtell, Lipton, Rosen & Katz, Important Questions About Activist Hedge Funds, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Mar. 9, 2013, 10:10 AM), http://blogs.law.harvard.edu/corpgov/2013/03/09/ important-questions-about-activist-hedge-funds [hereinafter Wachtell Memorandum, Important Questions] (on file with the Columbia Law Review).
40. Martin Lipton, Theodore N. Mirvis & Jay W. Lorsch, The Proposed "Shareholder Bill of Rights Act of 2009," Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (May 12, 2009, 4:56 PM), http://blogs.law.harvard.edu/corpgov/2009/05/ 12/the-proposed-%E2%80%9Cshareholder-bill-of-rights-act-of-2009%E2%80%9D/ (on file with the Columbia Law Review)
41. see also Lynne L. Dallas, Short-Termism, the Financial Crisis, and Corporate Governance, 37 J. Corp. L. 265, 268 (2012) (arguing that shorttermism contributed to recent financial crisis).
42. Leo E. Strine, Jr., Why Excessive Risk-Taking Is Not Unexpected, N.Y. Times: Dealbook (Oct. 5, 2009, 1:30 PM), http://dealbook. nytimes.com/2009/10/05/dealbook-dialogue-leo-strine/ (on file with the Columbia Law Review) ("[T]o the extent that the [2008 financial] crisis is related to the relationship between stockholders and boards, the real concern seems to be that boards were warmly receptive to investor calls for them to pursue high returns through activities involving great risk and high leverage.").
43. William W. Bratton & Michael L. Wachter, The Case Against Shareholder Empowerment, 158 U. Pa. L. Rev. 653, 653-54, 657-59 (2010)
44. Martin Lipton & Steven A. Rosenblum, A New System of Corporate Governance: The Quinquennial Election of Directors, 58 U. Chi. L. Rev. 187, 187-88, 203, 210-12 (1991) [hereinafter Lipton & Rosenblum, Quinquennial Election]
45. Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1, 7-9, 26 (2010) [hereinafter Strine, Fundamental Question] ("[T]here is a danger that activist shareholders will make proposals motivated by interests other than maximizing the long-term, sustainable profitability of the corporation.").
46. See Lucian A. Bebchuk, The Myth that Insulating Boards Serves Long-Term Value, 113 Colum. L. Rev. 1637, 1660-76 (2013) [hereinafter Bebchuk, Myth] (analyzing conceptual structure of myopic-activists claim and showing myopic-activists claim does not follow from assuming existence of inefficient capital markets and short activist horizons).
47. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
48. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
49. See Yvan Allaire & Francois Dauphin, Inst. for Governance of Private & Pub. Orgs., "Activist" Hedge Funds: Creators of Lasting Wealth? What Do the Empirical Studies Really Say? 4, 17 (2014), available at http://igopp.org/wp-content/uploads/2014/07/ IGOPP_Article_Template2014_Activism_EN_v6.pdf [hereinafter Allaire & Dauphin, Lasting Wealth?] (on file with the Columbia Law Review) (criticizing our study).
50. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
51. Alon Brav, Wei Jiang, Frank Partnoy & Randall S. Thomas, The Returns to Hedge Fund Activism, 64 Fin. Analysts J. 45, 46-47 (2008) [hereinafter Brav et al., The Returns to Hedge Fund Activism] (discussing data used).
52. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
53. Alon Brav, Wei Jiang & Hyunseob Kim, The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Industry Concentration 5-7 (May 23, 2013) (unpublished manuscript), available at http://www.columbia.edu/~wj2006/HF_Real Effects.pdf [hereinafter Brav et al., The Real Effects of Hedge Fund Activism] (on file with the Columbia Law Review) (discussing data used).
54. Lucian A. Bebchuk, Alon Brav, Robert J. Jackson Jr. & Wei Jiang, Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy, 39 J. Corp. L. 1, 7-14 (2013) [hereinafter Bebchuk et al., Pre-Disclosure Accumulations] (discussing data used).
55. See SEC, Form of Schedule 13D, 17 C.F.R. § 240.13d-101 (2014) (requiring investors to file with SEC within ten days of acquiring more than 5% of any class of securities of a publicly traded company if they have interest in influencing company's management under section 13(d) of 1934 Securities Exchange Act).
56. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
57. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
58. Hadiye Aslan & Praveen Kumar, The Product Market Effects of Hedge Fund Activism 1-2 (n.d.) (unpublished manuscript) (on file with the Columbia Law Review) (describing authors' dataset of activist interventions)
59. A subsequent study by Nickolay Gantchev, Oleg Gredil, and Chotibhak Jotikasthira provides empirical evidence that, by increasing the threat of activism vis-a-vis firms similar to the targets of activist interventions, the disclosures are accompanied by positive abnormal returns to such similar firms. See Gantchev et al., Governance Under the Gun: Spillover Effects of Hedge Fund Activism 26- 28, 49 tbl. 7 (Jan. 2015) (unpublished manuscript), available at http://ssrn.com/abstract= 2356544 (on file with the Columbia Law Review) (showing that announcements of activist stakes are accompanied by positive abnormal returns to companies similar to target).
60. Krishnan et al., Top Hedge Funds and Shareholder Activism 11-12 (Vanderbilt University Law Sch. Law & Econ. Working Paper 15-9, 2015), available at www.ssrn.com/abstract-2589992 (on file with the Columbia Law Review) (same).
61. The 2013 version of this Article was based on a dataset that did not include the 2012 Compustat data, which were not available when this dataset was put together. Thus, the dataset that we now analyze includes data, which were initially missing, on the operating performance of 2007 targets in their fifth year of operation after the intervention.
62. For studies that use Tobin's Q for analyzing the efficiency of governance arrangements, ownership structures, or investor protection rules, see, e.g., Robert Daines, Does Delaware Law Improve Firm Value?, 62 J. Fin. Econ. 525, 527 (2001)
63. Paul Gompers, Joy Ishii & Andrew Metrick, Corporate Governance and Equity Prices, 118 Q. J. Econ. 107, 109-10 (2003) [hereinafter Gompers et al., Corporate Governance and Equity Prices]
64. Larry H.P. Lang & Rene M. Stulz, Tobin's Q, Corporate Diversification, and Firm Performance, 102 J. Pol. Econ. 1248, 1250 (1994)
65. John J. McConnell & Henri Servaes, Additional Evidence on Equity Ownership and Corporate Value, 27 J. Fin. Econ. 595, 596 (1990)
66. Randall Morck, Andrei Shleifer & Robert W. Vishny, Management Ownership and Market Valuation: An Empirical Analysis, 20 J. Fin. Econ. 293, 294 (1988)
67. David Yermack, Higher Market Valuation for Firms with a Small Board of Directors, 40 J. Fin. Econ. 185, 186-87 (1996).
68. Tobin's Q is measured as the ratio of market value of equity and book value of debt to the book value of equity and book value of debt. For a discussion of Tobin's Q and its definition, see Gary Smith, Tobin's Q, in 8 The New Palgrave Dictionary of Economics 316, 316-17 (Steven N. Durlauf & Lawrence E. Blume eds., 2d ed. 2008).
69. For studies that use ROA as a metric of operating performance, see, e.g., Lucian A. Bebchuk, Alma Cohen & Charles C.Y. Wang, Learning and the Disappearing Association Between Governance and Returns, 108 J. Fin. Econ. 323, 341 (2013)
70. Paul Gompers, Joy Ishii & Andrew Metrick, Corporate Governance and Equity Prices, 118 Q. J. Econ. 107, 109-10 (2003) [hereinafter Gompers et al., Corporate Governance and Equity Prices]
71. A memorandum issued by Wachtell Lipton criticizes the analysis of this section on the grounds that Tobin's Q and ROA are imperfect metrics for measuring operating performance. Wachtell Memorandum, The Bebchuk Syllogism, supra note 14. While no metric of operating performance is viewed by financial economists as perfect, we chose these two methods because their use as operating performance metrics is standard among financial economists working on corporate governance issues. Indeed, Wachtell does not advocate any particular alternative metric or argue that we failed to make the best possible choices in a world with imperfect metrics for operating performance. Interestingly, Wachtell Lipton seems to have no problem with studies that rely on Tobin's Q to reach conclusions Wachtell Lipton favors; it commended as "impressive empirical work" a recent study by Cremers et al. that relies on Tobin's Q to argue that staggered boards are desirable. See Martin Lipton, Wachtell, Lipton, Rosen & Katz, New Empirical Studies Support Director-Centric Governance (Dec. 8, 2013), available at www.wlrk.com/webdocs/wlrknew/WLRKMemos/WLRK/WLRK.22995.13.pdf (on file with the Columbia Law Review) (commending study by Cremers et al.)
72. K.J. Martijn Cremers, Lubomir P. Litov & Simone M. Sepe, Staggered Boards and Firm Value, Revisited 32-34 (July 2014) (unpublished manuscript), available at http://ssrn.com/abstract=2364165 (on file with the Columbia Law Review) (using Tobin's Q to assess desirability of staggered boards). In criticizing the use of Q, Wachtell Lipton notes an unpublished paper by Philip Dybvig and Mitch Warachka. Wachtell Memorandum, The Bebchuk Syllogism, supra note 14
73. see Philip H. Dybvig & Mitch Warachka, Tobin's Q Does Not Measure Firm Performance: Theory, Empirics, and Alternatives 3 (Jan. 7, 2015) (unpublished manuscript), available at http://ssrn.com/abstract=1562444 (on file with the Columbia Law Review) (criticizing standard use of Tobin's Q). These authors discuss potential imperfections in the use of Tobin's Q and suggest two alternative metrics of operating performance that, to the best of our knowledge, have not yet been used by any other empirical study that has been published or made available on SSRN since the Dybvig- Warachka paper was first placed on SSRN in 2010.
74. Paul Gompers, Joy Ishii & Andrew Metrick, Corporate Governance and Equity Prices, 118 Q. J. Econ. 107, 109-10 (2003) [hereinafter Gompers et al., Corporate Governance and Equity Prices]
75. In Table 2, the pattern of improvement is sharper when one examines averages rather than medians. Wachtell Lipton incorrectly criticizes us for failing to stress the difference in Table 2 between results using means and results using medians. Wachtell Memorandum, The Bebchuk Syllogism, supra note 14 (noting that "averages can be skewed by extreme results"). However, Table 2 merely presents summary statistics of "raw" levels, and we do not stress or rely on any of its results for our conclusions. As we explain below, the standard approach by financial economists is to control by industry. In our subsequent Table 3, which presents summary statistics using industry-adjusted levels, the results are in fact similar using both means and medians; in both cases, industry-adjusted operating performance, measured by either Tobin's Q or ROA, is higher in each of the five years following the intervention year than during the intervention year. Furthermore, and most importantly, our conclusions are primarily based on a regression analysis, not on the summary statistics of Tables 2 and 3, and our regression analysis.
76. As is standard, in order to reduce the influence of outliers, our analysis of operating performance winsorizes-that is, limits extreme values in-operating performance results. We winsorize at the 1% and 99% extremes, using the full sample of all Compustat firms from 1991 to 2012 to define extremes.
77. Paul Gompers, Joy Ishii & Andrew Metrick, Corporate Governance and Equity Prices, 118 Q. J. Econ. 107, 109-10 (2003) [hereinafter Gompers et al., Corporate Governance and Equity Prices]
78. Industry average levels differ somewhat from industry median levels because both Q and ROA are skewed. Because Q is significantly skewed to the right, industry average tends to be higher than the median. Because ROA is significantly skewed to the left, industry average tends to be lower than the median.
79. In addition, note that the median industry-adjusted Q and the median industryadjusted ROA are also both negative.
80. See Yvan Allaire & Francois Dauphin, Inst. for Governance of Private & Pub. Orgs., "Activist" Hedge Funds: Creators of Lasting Wealth? What Do the Empirical Studies Really Say? 4, 17 (2014), available at http://igopp.org/wp-content/uploads/2014/07/ IGOPP_Article_Template2014_Activism_EN_v6.pdf [hereinafter Allaire & Dauphin, Lasting Wealth?] (on file with the Columbia Law Review) (criticizing our study).
81. For a widely cited article recommending such clustering, see Mitchell A. Petersen, Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches, 22 Rev. Fin. Stud. 435 (2009).
82. For studies suggesting that performance is related to company age, see Rajshree Agarwal & Michael Gort, Firm Product Life Cycles and Firm Survival, 92 Am. Econ. Rev. (Papers & Proc.) 184, 190 (2002)
83. Steven Klepper, Entry, Exit, Growth, and Innovation over the Product Life Cycle, 86 Am. Econ. Rev. 562, 562-63 (1996). Company size is a standard control. We include age and size, but not characteristics that are a function of management choice such as leverage or capital expenses, because these are the policies that activists might seek to change and thus we should not make inferences premised on their being constant.
84. Consistent with Q at the end of the year of the intervention already reflecting the expectations for subsequent improvements in operating performance, the comparison to the (t-1) coefficients yields higher positive differences than the comparison to the t coefficients.
85. Paulo Guimaraes & Pedro Portugal, A Simple Feasible Procedure to Fit Models with High-Dimensional Fixed Effects, 10 Stata J. 628, 628-40 (2010) (using simple, feasible procedure to fit models with high-dimensional fixed effects).
86. Todd A. Gormley & David A. Matsa, Common Errors: How to (and Not to) Control for Unobserved Heterogeneity, 27 Rev. Fin. Stud. 617, 646-51 (2014).
87. See John C. Coffee, Jr. & Darius Palia, The Impact of Hedge Fund Activism: Evidence and Implications 5-6 (European Corporate Governance Inst., Working Paper No. 266, 2014), available at http://ssrn.com/abstract=2496518 (on file with the Columbia Law Review) (discussing usefulness of taking into account initial underperformance of activists' targets).
88. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
89. We classify the industry at the SIC three-digit level if there are at least eight firms in the industry during the year-so that the quartile is well defined-and use the SIC twodigit classification if the SIC three-digit level includes fewer than eight firms.
90. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
91. For a review of some of these studies, see generally Alon Brav, Wei Jiang & Hyunseob Kim, Hedge Fund Activism: A Review, 4 Found. & Trends Fin. 185 (2009) [hereinafter Brav et al., Hedge Fund Activism: A Review].
92. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
93. Alon Brav, Wei Jiang & Hyunseob Kim, The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Industry Concentration 5-7 (May 23, 2013) (unpublished manuscript), available at http://www.columbia.edu/~wj2006/HF_Real Effects.pdf [hereinafter Brav et al., The Real Effects of Hedge Fund Activism] (on file with the Columbia Law Review) (discussing data used).
94. See, e.g., Alma Cohen & Charles C.Y. Wang, How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment, 110 J. Fin. Econ. 627, 628-29 (2013) (stressing difficulties involved in resolving questions of causality).
95. For discussions of the range of operational changes sought by activists, see Alon Brav, Wei Jiang, Frank Partnoy & Randall Thomas, Hedge Fund Activism, Corporate Governance, and Firm Performance, 63 J. Fin. 1729, 1741-45 (2008) [hereinafter Brav et al., Hedge Fund Activism] (describing and classifying motives behind hedge fund activism).
96. April Klein & Emanuel Zur, Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors, 64 J. Fin. 187, 207-11, 225-26 (2009) (finding positive abnormal stock returns during thirty-day event windows surrounding initial Schedule 13D filings).
97. For subsequent studies confirming the positive stock-price reactions to 13D filings, see Christopher P. Clifford, Value Creation or Destruction? Hedge Funds as Shareholder Activists, 14 J. Corp. Fin. 323, 328-33 (2008)
98. Robin Greenwood & Michael Schor, Investor Activism and Takeovers, 92 J. Fin. Econ. 362, 362-75 (2009)
99. Nicole M. Boyson & Robert M. Mooradian, Intense Hedge Fund Activists 21-30 (Oct. 12, 2009) (unpublished manuscript), available at http://ssrn.com/abstract=1492641 (on file with the Columbia Law Review). A related study examined activist engagement by the Hermes U.K. Focus Fund and found that positive and significant abnormal short-term returns (about 5% in a seven-day event window) accompanied the announcement of changes produced by such engagement. See Marco Becht, Julian Franks, Colin Mayer & Stefano Rossi, Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund, 22 Rev. Fin. St. 3093, 3113-17 (2009).
100. See Becht et al., The Returns to Hedge Fund Activism: An International Study 55 (European Corporate Governance Inst., Working Paper No. 402/2014, 2015) available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2376271 (on file with the Columbia Law Review).
101. Krishnan et al., Top Hedge Funds and Shareholder Activism 11-12 (Vanderbilt University Law Sch. Law & Econ. Working Paper 15-9, 2015), available at www.ssrn.com/abstract-2589992 (on file with the Columbia Law Review) (same).
102. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
103. For an account of the Capital Asset Pricing Model, see Richard A. Brealey, Stewart C. Myers & Franklin Allen, Principles of Corporate Finance 197-205 (11th ed. 2014).
104. For the classic studies introducing this model, see Mark M. Carhart, On Persistence in Mutual Fund Performance, 52 J. Fin. 57 (1997)
105. Eugene F. Fama & Kenneth R. French, Common Risk Factors in the Returns on Stocks and Bonds, 33 J. Fin. Econ. 3 (1993).
106. Specifically, we estimate for each firm (i) an alpha using the regression: rit - rf,t = αi +βiRMRFt + εit
107. See sources cited supra note 80 (introducing this model). Specifically, we estimate for each firm (i) an alpha using the regression: rit - rf,t = αi + βi1RMRFt + βi2SMBt + βi3HMLt + βi4MOMt + εit We obtain the factor returns and monthly risk-free rates from Ken French's website at the Tuck School of Business at Dartmouth College, see Kenneth R. French, Data Library, Tuck at Dartmouth, http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_ library.html (on file with the Columbia Law Review) (last visited Mar. 28, 2015).
108. We do such estimation for all firms that have a minimum of twenty-four monthly returns following the intervention (i.e., all firms that remained public for at least twentyfour months following the month of the intervention) so that there is a significant number of monthly returns on which a regression can be based. We note that, for the few events in our sample in which the hedge fund did not file a Schedule 13D, we use the month in which the activism was made public via news searches as the month of intervention.
109. For a discussion of this problem, see, e.g., Eugene F. Fama, Market Efficiency, Long-Term Returns, and Behavioral Finance, 49 J. Fin. Econ. 283, 295-96 (1998) [hereinafter Fama, Market Efficiency].
110. For a well-known study using such an approach, see generally Brad M. Barber & John D. Lyon, Detecting Long-Run Abnormal Stock Returns: The Empirical Power and Specification of Test Statistics, 43 J. Fin. Econ. 341 (1997).
111. We report the cross-sectional standard deviation of abnormal returns in the column marked "St. Dev." However, because long-horizon abnormal returns are likely to be positively correlated, our use of the cross-sectional standard deviation assuming independence underestimates the true standard error. This factor further reinforces the conclusion that the positive returns in three specifications are not statistically significant.
112. In our setting, such an approach is especially warranted because the number of observations fluctuates considerably during the years we consider. We also ran our tests without using such weighted least squares and again did not find any evidence for negative and statistically significant abnormal returns during the five years following the initial spike.
113. For discussions of the range of operational changes sought by activists, see Alon Brav, Wei Jiang, Frank Partnoy & Randall Thomas, Hedge Fund Activism, Corporate Governance, and Firm Performance, 63 J. Fin. 1729, 1741-45 (2008) [hereinafter Brav et al., Hedge Fund Activism] (describing and classifying motives behind hedge fund activism).
114. Nicole M. Boyson & Robert M. Mooradian, Intense Hedge Fund Activists 21-30 (Oct. 12, 2009) (unpublished manuscript), available at http://ssrn.com/abstract=1492641 (on file with the Columbia Law Review). A related study examined activist engagement by the Hermes U.K. Focus Fund and found that positive and significant abnormal short-term returns (about 5% in a seven-day event window) accompanied the announcement of changes produced by such engagement. See Marco Becht, Julian Franks, Colin Mayer & Stefano Rossi, Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund, 22 Rev. Fin. St. 3093, 3113-17 (2009).
115. See Becht et al., The Returns to Hedge Fund Activism: An International Study 55 (European Corporate Governance Inst., Working Paper No. 402/2014, 2015) available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2376271 (on file with the Columbia Law Review).
116. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
117. We note that the time difference between the initial 13D filing and the departure date in our database of activist interventions has a median of 539 days (about 1.5 years) and an average of 811 days (over two years).
118. Similarly to what we did in Part V.B.1, we make such an estimation for all firms that have a minimum of twenty-four monthly returns following the departure so that there is a significant number of monthly returns on which a regression can be based.
119. For a discussion of this problem, see, e.g., Eugene F. Fama, Market Efficiency, Long-Term Returns, and Behavioral Finance, 49 J. Fin. Econ. 283, 295-96 (1998) [hereinafter Fama, Market Efficiency].
120. Martin Lipton & Steven A. Rosenblum, A New System of Corporate Governance: The Quinquennial Election of Directors, 58 U. Chi. L. Rev. 187, 187-88, 203, 210-12 (1991) [hereinafter Lipton & Rosenblum, Quinquennial Election]
121. Ira M. Millstein, Re-Examining Board Priorities in an Era of Activism, N.Y. Times: Dealbook (Mar. 8, 2013, 3:52 PM), http://dealbook.nytimes.com/2013/03/08/reexamining- board-priorities-in-an-era-of-activism/ (on file with the Columbia Law Review).
122. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
123. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
124. See Sanford J. Grossman & Oliver D. Hart, Corporate Financial Structure and Managerial Incentives, in The Economics of Information and Uncertainty 107, 109 (John J. McCall ed., 1982), available at http://www.nber.org/chapters/c4434.pdf (on file with the Columbia Law Review) (explaining managers have interest in increasing resources under their firm's control)
125. Oliver Hart & John Moore, Debt and Seniority: An Analysis of the Role of Hard Claims in Constraining Management, 85 Am. Econ. Rev. 567, 568-69 (1995) (analyzing management's preference for empire building and free cash flow)
126. Michael C. Jensen, Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, 76 Am. Econ. Rev. 323, 323 (1986) (explaining that debt might be necessary to motivate management because payouts to shareholders reduce resources under managers' control).
127. Change in leverage is calculated as (Debtr - Debtb)/(Debtb + Equityb), all using book value. The subscript (b) stands for "base year" while the subscript (r) stands for the "report year" extending from the event year (t) through event year (t+2). By this criterion, 6.3% of the events fall into the top 5%.
128. Change in payout yield is calculated as [(Dividendr + Repurchaser) - (Dividendb + Repurchaseb)]/MVb. By this criterion, 9.2% of the events fall into the top 5%.
129. Change in investment is calculated as [(Capexr + R&Dr) - (Capexb + R&Db)]/Assetsb. Missing R&D values are imputed as zeros. By this criterion, 5.9% of the events fall into the bottom 5%.
130. See Lucian A. Bebchuk, The Myth that Insulating Boards Serves Long-Term Value, 113 Colum. L. Rev. 1637, 1660-76 (2013) [hereinafter Bebchuk, Myth] (analyzing conceptual structure of myopic-activists claim and showing myopic-activists claim does not follow from assuming existence of inefficient capital markets and short activist horizons).
131. Ira M. Millstein, Re-Examining Board Priorities in an Era of Activism, N.Y. Times: Dealbook (Mar. 8, 2013, 3:52 PM), http://dealbook.nytimes.com/2013/03/08/reexamining- board-priorities-in-an-era-of-activism/ (on file with the Columbia Law Review).
132. See, e.g., Martin Lipton, Wachtell, Lipton, Rosen & Katz, Bite the Apple; Poison the Apple; Paralyze the Company; Wreck the Economy, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2013, 9:22 AM), http://blogs.law. harvard.edu/corpgov/2013/02/26/bite-the-apple-poison-the-apple-paralyze-the-companywreck- the-economy/ [hereinafter Wachtell Memorandum, Bite the Apple] (on file with the Columbia Law Review) (Martin Lipton stating that short-termism concerns are based "on the decades of [his and his] firm's experience in advising corporations" without suggesting any empirical backing for his belief).
133. For discussions of the range of operational changes sought by activists, see Alon Brav, Wei Jiang, Frank Partnoy & Randall Thomas, Hedge Fund Activism, Corporate Governance, and Firm Performance, 63 J. Fin. 1729, 1741-45 (2008) [hereinafter Brav et al., Hedge Fund Activism] (describing and classifying motives behind hedge fund activism).
134. This argument was raised, for example, by corporate lawyers participating in a Harvard Law School event in which our findings were discussed.
135. Although we examine this issue for completeness of analysis, we would like to note that, in our view, a finding of increased vulnerability in some states of the world would not justify opposition to hedge fund activism. As we noted earlier, most shareholders of public companies hold diversified portfolios and what matters for them is the impact of activism on an expected-value, risk-adjusted basis.
136. E.g., Press Release, Senator Chuck Schumer, Schumer, Cantwell Announce 'Shareholder Bill of Rights' to Impose Greater Accountability on Corporate America (May 19, 2009), available at http://votesmart.org/public-statement/427143/schumer-cantwellannounce- shareholder-bill-of-rights-to-impose-greater-accountability-on-corporate-america (on file with the Columbia Law Review) (describing proposed legislation's objectives and major components). Senator Schumer's proposed bill intended to implement, by federal mandate, a series of measures to strengthen shareholder rights, including facilitating stockholders' proxy access, ending staggered boards at all companies, and requiring that all directors receive a majority of votes cast to be elected. Shareholder Bill of Rights Act of 2009, S. 1074, 111th Cong. (2009) (proposing changes to Securities Exchange Act of 1934).
137. Martin Lipton, Theodore N. Mirvis & Jay W. Lorsch, The Proposed "Shareholder Bill of Rights Act of 2009," Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (May 12, 2009, 4:56 PM), http://blogs.law.harvard.edu/corpgov/2009/05/ 12/the-proposed-%E2%80%9Cshareholder-bill-of-rights-act-of-2009%E2%80%9D/ (on file with the Columbia Law Review)
138. See Jack B. Jacobs, "Patient Capital": Can Delaware Corporate Law Help Revive It?, 68 Wash. & Lee L. Rev. 1645, 1649, 1657-63 (2011) (expressing concerns about "decline . . . of patient capital and the substitution, in its place, of impatient capital, driven by parallel pressures from investors . . . to generate short-term profits")
139. Leo E. Strine, Jr., Toward Common Sense and Common Ground? Reflections on the Shared Interests of Managers and Labor in a More Rational System of Corporate Governance, 33 J. Corp. L. 1, 7 (2007) (expressing concern stockholder empowerment "does not empower end-user investors so much as it empowers intermediaries").
140. For an analysis of how staggered boards insulate directors from removal, see Lucian Arye Bebchuk, John C. Coates IV & Guhan Subramanian, The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 Stan. L. Rev. 887, 900-39 (2002).
141. See Lucian Bebchuk, Scott Hirst & June Rhee, Towards the Declassification of S&P 500 Boards, 3 Harv. Bus. L. Rev. 157, 162-64, 167-73 (2013) (discussing data on shareholder support of declassification proposals from 2012 Shareholder Rights Project)
142. see also Shareholder Rights Project Report for the 2012 and 2013 Proxy Seasons 5-6, 16- 17 (2014), available at http://srp.law.harvard.edu/releases/SRP-2012-2013-Annual- Report-Final.pdf (on file with the Columbia Law Review) (providing additional information on shareholder support of declassification proposals).
143. Martin Lipton & Daniel A. Neff, Wachtell, Lipton, Rosen & Katz, Harvard's Shareholder Rights Project Is Still Wrong, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Nov. 30, 2012, 8:55 AM), http://blogs.law.harvard.edu/ corpgov/2012/11/30/harvards-shareholder-rights-project-is-still-wrong (on file with the Columbia Law Review) (characterizing work contributing to eliminating staggered boards as an "exercise in corporate deconstruction . . . detrimental to the economy and society at large")
144. Martin Lipton & Theodore N. Mirvis, Wachtell, Lipton, Rosen & Katz, Harvard's Shareholder Rights Project Is Wrong, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (March 23, 2012, 10:38 AM), http://blogs.law.harvard.edu/corpgov/ 2012/03/23/harvards-shareholder-rights-project-is-wrong [hereinafter Lipton & Mirvis, Harvard's Shareholder Rights Project Is Wrong] (on file with the Columbia Law Review) (criticizing Shareholder Rights Project work contributing to dismantling staggered boards as "unwise," "unwarranted," and "inappropriate").
145. Martin Lipton & Daniel A. Neff, Wachtell, Lipton, Rosen & Katz, Harvard's Shareholder Rights Project Is Still Wrong, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Nov. 30, 2012, 8:55 AM), http://blogs.law.harvard.edu/ corpgov/2012/11/30/harvards-shareholder-rights-project-is-still-wrong (on file with the Columbia Law Review) (characterizing work contributing to eliminating staggered boards as an "exercise in corporate deconstruction . . . detrimental to the economy and society at large")
146. Martin Lipton & William Savitt, The Many Myths of Lucian Bebchuk, 93 Va. L. Rev. 733, 747 (2007).
147. For opposing views on the question of proxy access, compare Martin Lipton & Steven A. Rosenblum, Election Contests in the Company's Proxy: An Idea Whose Time Has Not Come, 59 Bus. Law. 67, 78-79 (2003).
148. Lucian Arye Bebchuk, The Case for Shareholder Access to the Ballot, 59 Bus. Law. 43, 43-46 (2003).
149. See, e.g., Letter from Alexander M. Cutler, Chair, Corporate Leadership Initiative, Bus. Roundtable, to Elizabeth Murphy, Sec'y, SEC 14-17 (Aug. 17, 2009), available at http://www.sec.gov/comments/s7-10-09/s71009-267.pdf (on file with the Columbia Law Review) (arguing proposed proxy access rules would promote unhealthy emphasis on short-termism and encourage election of "special interest" directors)
150. Letter from David T. Hirschmann, President & Chief Exec. Officer, Ctr. for Capital Mkts. Competitiveness, U.S. Chamber of Commerce, to Elizabeth Murphy, Sec'y, SEC 3-4 (Jan. 19, 2010), available at http://www.sec.gov/comments/s7-10-09/s71009-618.pdf (on file with the Columbia Law Review) (same)
151. Letter from Samuel J. Palmisano, Chairman, President & Chief Exec. Officer, IBM Corp., to Mary L. Schapiro, Chairman, SEC 1-2 (Aug. 20, 2010), available at http://www.sec.gov/comments/s7-10-09/s71009-692.pdf (on file with the Columbia Law Review) (urging SEC to reject proxy access rule because it may be used by certain shareholders to leverage single concern such as payment of dividends)
152. Letter from Gloria Santona, Exec. Vice President, Gen. Counsel & Sec'y, McDonald's Corp., to Elizabeth M. Murphy, Sec'y, SEC 4 (Aug. 24, 2009), available at http://www.sec. gov/comments/s7-10-09/s71009-504.pdf (on file with the Columbia Law Review) (expressing concern proxy access rule would be used by short-term holders for their own gain)
153. Martin Lipton & Steven A. Rosenblum, Election Contests in the Company's Proxy: An Idea Whose Time Has Not Come, 59 Bus. Law. 67, 78-79 (2003).
154. Justin Fox & Jay W. Lorsch, What Good Are Shareholders?, Harv. Bus. Rev., July 2012, available at https://hbr.org/2012/07/whatgood- are-shareholders (on file with the Columbia Law Review)
155. Leo E. Strine, Jr., One Fundamental Corporate Governance Question We Face: Can Corporations Be Managed for the Long Term Unless Their Powerful Electorates Also Act and Think Long Term?, 66 Bus. Law. 1, 7-9, 26 (2010) [hereinafter Strine, Fundamental Question] ("[T]here is a danger that activist shareholders will make proposals motivated by interests other than maximizing the long-term, sustainable profitability of the corporation.").
156. Bus. Roundtable v. SEC, 647 F.3d 1144, 1148 (D.C. Cir. 2011).
157. See Facilitating Shareholder Director Nominations, 75 Fed. Reg. 56,668, 56,697- 99 (Sept. 16, 2010) [hereinafter Director Nominations] (discussing rationale behind adopting three-year holding requirement).
158. Martin Lipton & Steven A. Rosenblum, Election Contests in the Company's Proxy: An Idea Whose Time Has Not Come, 59 Bus. Law. 67, 78-79 (2003).
159. Barry B. Burr, Mercer Seeks Long-Term Shareholder Rewards Program from Corporations, Pensions & Investments (Dec. 6, 2012, 12:53 PM), http://www.pionline. com/article/20121206/DAILYREG/121209930 (on file with the Columbia Law Review).
160. See Letter from Wachtell, Lipton, Rosen & Katz to Elizabeth M. Murphy, Sec'y, SEC 3-7 (Mar. 7, 2011), http://www.sec.gov/rules/petitions/2011/petn4-624.pdf (on file with the Columbia Law Review) (urging SEC to shorten 13D reporting deadlines)
161. see also Adam O. Emmerich, Theodore N. Mirvis, Eric S. Robinson & William Savitt, Fair Markets and Fair Disclosure: Some Thoughts on the Law and Economics of Blockholder Disclosure, and the Use and Abuse of Shareholder Power, 3 Harv. Bus. L. Rev. 135, 137- 140 (2013) (same).
162. See Lucian A. Bebchuk & Robert J. Jackson, Jr., The Law and Economics of Blockholder Disclosure, 2 Harv. Bus. L. Rev. 39, 47-51 (2012) (explaining tightening rules can be expected to reduce incidence of activist engagements)
163. Lucian A. Bebchuk, Alon Brav, Robert J. Jackson Jr. & Wei Jiang, Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy, 39 J. Corp. L. 1, 7-14 (2013) [hereinafter Bebchuk et al., Pre-Disclosure Accumulations] (discussing data used).
164. See, e.g., Martin Lipton, Steven A. Rosenblum & Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz, Current Thoughts About Activism, Revisited, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Apr. 8, 2013, 9:19 AM) http://blogs.law.harvard.edu/corpgov/2014/04/08/current-thoughts-about-activismrevisited/ (on file with the Columbia Law Review) (arguing that short-termism concerns justify such tightening).
165. For example, a recent blueprint for dealing with activists issued by Wachtell Lipton uses the term "attack" and variations on it about twenty times. See Martin Lipton & Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz, Dealing with Activist Hedge Funds, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Nov. 21, 2013, 12:24 PM), http://blogs.law.harvard.edu/corpgov/2013/11/21/dealing-with-activist-hedge -funds-2/ [hereinafter Wachtell Memorandum, Dealing with Activist Hedge Funds] (on file with the Columbia Law Review).
166. Simpson Thacher & Bartlett LLP, Shareholder Activism in M&A Transactions, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Feb. 26, 2014, 9:06 AM) http://blogs.law.harvard.edu/ corpgov/2014/02/26/shareholder-activism-in-ma-transactions/ (on file with the Columbia Law Review).
167. For example, a recent blueprint for dealing with activists issued by Wachtell Lipton uses the term "attack" and variations on it about twenty times. See Martin Lipton & Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz, Dealing with Activist Hedge Funds, Harvard Law Sch. Forum on Corporate Governance & Fin. Regulation (Nov. 21, 2013, 12:24 PM), http://blogs.law.harvard.edu/corpgov/2013/11/21/dealing-with-activist-hedge -funds-2/ [hereinafter Wachtell Memorandum, Dealing with Activist Hedge Funds] (on file with the Columbia Law Review).