Shareholder Activism as Value Strategy

Value investing is a challenging but simple endeavor based on two key principles: 1) We view shares in a public company as fractional ownership of the business, and 2) we focus on the business’ long-term prospects, and try to buy shares at a discount to fair value, with a margin of safety against risks inherent in any enterprise. When you execute this strategy well, you will find that the biggest risk to your investment does not derive from a weakness in your business analysis, or a deficiency in your ability to predict future cash flows. The biggest risk does not come from macroeconomic conditions or the seductive cries and cheers of a volatile Mr. Market. No -- when a good investment process yields a lousy outcome, the culprit is often bad corporate oversight. The inverse of this equation is equally important. The best investments, the ones that compound value over many years, don’t arise simply from buying at a bargain price. They benefit from a board and management team that know how to drive shareholder value. This course is about shareholder activism and corporate governance, taught from the perspective of value investors, but filled with lessons for anyone who wants to learn how public companies work. We believe that most young investment analysts do not have a deep enough understanding of the complicated interactions between public company CEOs, boards of directors, and shareholders. The best way to learn about corporate oversight is to study the fault line where these three constituencies meet. Without this knowledge, it is difficult to evaluate the prospects of a poorly-governed company that must change course to create value. It is even harder to use your position as a shareholder to be an agent for positive change. Shareholder activism can be put to good use and bad. It challenges corporations to utilize their assets efficiently, but can also foster destructive and destabilizing short-term strategic decisions. It is our goal to teach you to differentiate between good and bad interventions, and to give you the tools to lead activist campaigns of your own. This will be a fast-paced course with a significant workload, as we examine historical and current activist situations. At the end of this course, the students will pitch their own activist engagement – a valuable opportunity to gain hands-on experience crafting a real campaign. The winning team will have their work presented to their target public company. After the end of the course, we will follow up with students about how their recommendations were received by management and the Board of Directors.