Last week we noted how governance expectations are changing with the resignation of Home Depot CEO Robert Nardelli. A prime reason was the growing pressure from an institutional shareholder who wouldn’t take no for an answer.
Now we see a further example of how things are changing. AP’s Rachel Beck reports that the gadfly-like Evelyn Davis may be supplanted by a more potentially raptor-like species. The example given is one Ken Bertsch:
Last month, he was named an executive director and head of corporate governance at Morgan Stanley Investment Management, which has $448 billion in assets under management. His move may signal the mutual funds managed by the investment firm are planning a more aggressive stance on governance issues – a big change given that mutual funds almost always passively allow management to govern the way they want.
That’s probably 448 million reasons why a phone call from Mr. Bertsch gets returned promptly.
To a significant extent, many public companies have enjoyed an almost free pass when it comes to shareholder input over the years. Mutual funds have been involved to some extent; maybe now they will get more active in corporate performance and governance matters. Why? Competition for investors from private equity and hedge funds may be part of the answer.
These newer money managers are not as patient, because their investors expect high returns for the significant fees and upside participation opportunities that these funds enjoy.
All this is a reminder to public company managers that they are stewards, not owners.
This increasing pressure may also tempt more companies to go private, as this New York Times article illustrates today. It also notes that we ought not to feel too sorry for Mr. Nardelli. His phone is already ringing from private equity headhunters.
And for visual types out there; here’s a view of what it looks like when a Raptor is locked on to your company (thanks to Lockheed Martin).