Over the years, activism has changed quite a bit, and even today, every activist firm has gained a reputation for itself, whether as a strong opponent or a collaborative group or something else. Starboard is a well-known activist firm which has earned a positive place in the activist community.
In an interview with Jim Cramer onstage at The Deal’s Corporate Governance 2019 conference, Peter Feld of Starboard described how their activist strategies have evolved over time, starting 15 years ago when the fund was just started. He said much of the change has been driven by the firm’s reputation.
When Starboard began
"It was a point in time [15 years ago] where we had to convince companies, we had to convince shareholders, that we wanted good things to happen and there would potentially be good outcomes if we could get involved," he said. "And in many cases, companies didn't want help, didn't think they needed help or know who we were."
Because companies didn't know who Feld and the other Starboard team members were, he said there was "a certain level of aggression or contentiousness required to get change." According to Feld, more of their activist campaigns went all the way to a vote, which he added isn't winning and today is uncommon.
"Winning is driving success and getting results," he added.
At the time Starboard began, they had to take their campaigns all the way to a vote to get companies to listen to them, but that has changed dramatically. Feld said over the last five years, the firm has not taken a single election contest to a vote. He added that it isn't that they have gotten softer, kinder or gentler. It's that companies are listening to what they have done in the past. He believes Starboard has driven more change in corporate boardrooms in the last five years than in the previous 10 years.
He added that companies now have the benefit of being able to reach out to others they have been involved in previously to ask what it was like to work with them. Companies are generally told that Starboard is very collaborative and that they had a great experience, even though they had concerns in the beginning.
Starboard's Tessera campaign
Cramer asked Feld about Tessera, a company Starboard pursued several years ago. He said something happened in the boardroom that he'd never seen before, calling it "a remarkable situation."
Feld said Tessera had been making a lot of transactions that didn't make sense and pumping all the profits from its one good business into other bad businesses. The tech company was losing so much money on the other businesses that it was unprofitable overall. Starboard tried to get involved, but the company pushed them out.
A year went by, and Tessera missed all of its commitments, so Starboard tried to get involved again. After an "interesting back and forth," Feld said they ended up in an election process. However, shareholders "were so fed up" with Tessera management that Starboard won the election "by a landslide" to replace the entire board and take a majority slate of directors.
The "remarkable" situation Cramer asked about referred to what happened after the ballots had been cast and counted and Starboard had won the election. The firm decided it wasn't the right decision to replace the entire board. Instead, the Starboard team decided some continuity made sense, so they agreed to a settlement with the company even though they had already won the vote. They ended up taking Tessera through a multi-year turnaround, he added.
Starboard and Symantec
Cramer also asked about Symantec, and Feld said they bought a 7% stake in the company. He spoke highly of the tech firm despite its past accounting problems and whistleblower allegation.
"There aren't that many opportunities to buy companies that are the largest of scale in the universe they compete, in an industry that is rapidly growing, with best-in-class products as demonstrated by their rankings in a whole bunch of industry and customer-driven surveys where they're spending more than many of their competitors combined in research and development to drive the best product development," Feld said.
He said at the time they got involved in Symantec, they saw "a market leader" with huge R&D budgets with a strong consumer business and opportunities in enterprise. The tech company eventually welcomed Starboard's assistance.
This article first appeared on ValueWalk Premium