Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism
Places Icahn's own letters in the century-long activist tradition.
Summary
Gramm, who runs a fund and teaches at Columbia, structures the book around eight shareholder letters spanning nearly a century, reproducing each and explaining the situation that produced it.
The cases include Benjamin Graham's 1927 campaign against Northern Pipeline, which held railroad bonds worth more than its market capitalisation and refused to distribute them; Robert Young's proxy fight for the New York Central; Warren Buffett's letter to American Express during the salad oil scandal and his early activist positions; Ross Perot's conflict with General Motors after the Electronic Data Systems acquisition; Carl Icahn's letter to Phillips Petroleum; Karla Scherer's fight against her own father's company; Daniel Loeb's public letters at Third Point; and BKF Capital, where activism destroyed the firm it targeted.
Gramm's analytical thread is the changing balance between managers and shareholders. He shows that the arguments have not changed in a century, that the tactics have, and that the results depend heavily on the specific facts rather than on any general principle about which side is right. His treatment of the BKF case is the most useful because it shows activism producing destruction rather than value, which the activist literature generally omits.
Gramm is an investor and writes sympathetically toward well-conducted activism while being direct about its failures. The book is short and each case is compressed. The reproduction of the primary letters is what distinguishes it, since the reasoning is available in the participants' own words rather than through summary.
Key takeaways 8
- Graham's 1927 campaign against Northern Pipeline established the template of a shareholder demanding that excess assets be distributed.
- The arguments between managers and shareholders have not changed in a century, while the tactics available to each side have.
- Activism succeeds or fails on the specific facts rather than on any general principle about which side has the better case.
- A public letter is a tactic for reaching other shareholders rather than for persuading the board, which has already refused privately.
- Activism can destroy the target, which the BKF case demonstrates and which the activist literature generally omits.
- Boards and managers have consistently resisted returning capital that a business cannot deploy at adequate returns.
- Reading the primary letters shows the reasoning in the participants' own words, which summaries systematically distort.
- The balance of power between managers and shareholders has shifted repeatedly rather than moving in one direction.
Who should read it
Investors and directors who want the primary documents of shareholder activism across a century, including a case where it destroyed the target.
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