Activist Investors and politics have recently seen high-profile clashes with Presidential nominee Hillary Clinton, making Activist Investors a central point in her campaign. Recently she calls for an end to “quarterly capitalism” and “hit-and-run” activists.”
These criticisms resonate with the ideas of Lawrence Fink, chief executive at BlackRock, Inc., the world’s largest money manager. Fink, according to this article, is considered “as a potential Treasury Secretary nominee” and one of the most vocal opposers to activist investing.
Clinton, Fink, and corporate defense lawyer Martin Lipton argue that activist investors hurt a company in the long run: “They and others maintain that the typical activist wish list – buybacks, dividends, corporate breakups – sends money to short-term stock lifters while degrading the long-term health of companies.”
Clinton vs. Icahn
The position taken to the national stage by Clinton provokes a few questions for the future of activist investors. The most influential and experienced name is 78-year old Carl Icahn, who, with Daniel S. Loeb and Mr. Ackerman, set new precedents for investing and hedge funding.
In this article, the first question asked, “Will we soon be seeing Hillary Clinton vs. Carl Icahn?” The article continues to outline the Presidential nominee’s tax plan creating a “sliding scale” with new rates:
“The major adjustment would be on investments held for two to three years, though the exact rate hasn’t been established. It would be higher than the 28% President Barack Obama proposed earlier this year for the highest earners and could potentially be set as high 39.6% — the regular income-tax rate for which investments for less than a year are currently taxed among highest earners. The lowest rates would be reserved for investments held the longest.”
These changes would seriously hinder the ability of activist investors looking mostly to short-term investments as a way to capitalize.
Activist Investors React
Activists, on the other hand, contend many companies “have proven to be bad at investment decisions while stocks rise sharply on activist ideas.” The success of activism in recent years proves successful earning the trust of other investors and votes to the point where even Fink’s BlackRock, Inc. invested in short term activist investments.
Activist investors have arguments on both sides, and Clinton’s denouncement and elevation of the topic to the front and center of her campaign prelude the possibility of a huge battle in the coming months. How much continues a talking point leading to the 2016 election should prove worth watching.
Jonah Engler is a financial expert and an entrepreneur from NYC.
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