It’s not every day that a Hollywood celebrity wades into a fight between a major corporation and an activist hedge fund mogul. When one does get involved in matters of finance, it’s usually to back an activist agenda aimed at remediating labor abuses, alleviating environmental harm, or ending contributions to geopolitical strife. Last week, however, George Clooney stepped up big time for Sony management in its battle against activist investor Daniel Loeb, who controls a seven percent stake in the company and wants it to sell its entertainment arm.
In an interview with Deadline Hollywood, Clooney lambasted Loeb and his plan, saying “Fortunately, this business is run by people who understand that the movie business ebbs and flows and the good news is they are ignoring his calls to spin off the entertainment assets. How any hedge fund guy can call for responsibility is beyond me because, if you look at these guys, there is no conscience at work. It is a business that is only about creating wealth where, when they fail, they get bailed out and where nobody gets fired. A guy from a hedge fund entity is the single least qualified person to be making these kinds of judgments, and he is dangerous to our industry.”
Clooney even threw in a “carpetbagger” reference for good measure.
It’s important to note that Clooney does not meet the strict definition of a disinterested third party. He is working with Sony on the production of his new film “The Monuments Men” and clearly has some skin in the game. And while his comments were likely coordinated to buttress the announcement that the Sony board and CEO Kazuo Hirai have formally rejected the break-up plan, there is no indication that Loeb is going away anytime soon. Despite the company’s best efforts – and those of its allies – Loeb may still succeed in convincing shareholders that the “One Sony” strategy isn’t what’s best for their investments.
All that said, last week’s salvo still bears examination – as it begs a question that should be on the mind of every IR professional in this era of unprecedented shareholder activism. Why is it that corporations only break out the big guns when they come under attack? At a time when David Einhorn can hound the likes of Apple, Carl Ichan can pressure Dell, and Starboard can go toe-to-toe with a giant like Smithfield Foods, why aren’t public companies doing more to ensure activists don’t come calling in the first place?
Add the fact that proxy firms such as ISS and Glass Lewis now routinely vote against management when fights arise, and one has to wonder why public companies aren’t using peacetime more wisely.
When even the Sonys, Apples, and Dells of the world are no longer safe, IR programs need to do more to win public battles and proxy fights before they ever materialize. They need to recruit and publicize influential third party support for their long and short-term value strategies. They need to keep shareholders consistently engaged and on board – perhaps by taking advantage of the SEC’s new rules approving the use of social media for material disclosures. They need to anticipate issues that could foment shareholder dissent. And they need to keep the focus on growth, even at times when returns are robust.
For today’s director’s, the foremost goal in any proxy fight is to ensure that it never comes to fruition – because, these days, not even a Hollywood a-lister is enough to ensure victory.
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Richard Levick, Esq., Chairman and CEO of LEVICK, represents countries and companies in the highest-stakes financial communications matters — from the Wall Street crisis and the Gulf oil spill to Guantanamo Bay and the Catholic Church. Mr. Levick was honored for the past four years on NACD Directorship’s list of “The 100 Most Influential People in the Boardroom,” and has been named to multiple professional Halls of Fame for lifetime achievement. He is the co-author of three books, including The Communicators: Leadership in the Age of Crisis, and is a regular commentator on television, in print, and on the most widely read business blogs.