Icahn regulatory role gives activist investors strong Washington voice

Fri Dec 23, 2016 8:17am EST
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By Michael Flaherty, Sarah N. Lynch and Ross Kerber

NEW YORK/WASHINGTON/BOSTON (Reuters) - U.S. chief executives, already wrestling with a steady flow of activist investors in their board rooms, face a newly challenging landscape now that the loudest voice of the bunch will have the ear of the next president and his securities' rule makers.

The advisory role granted to billionaire investor Carl Icahn by President-elect Donald Trump is a potential blow to CEOs and board directors who hoped the new Securities and Exchange Commission would favor corporate management teams over shareholder proposals that they deem too friendly to shareholders.

Icahn's appointment, announced on Wednesday, spans all regulatory matters. That includes vetting SEC candidates, a significant boost to shareholder activists who want commissioners to keep corporate governance initiatives on the front burner.

While Icahn has spent four decades antagonizing CEOs and boards, the extent of his Washington influence and where he will lean on shareholder issues remains to be seen. Still, it is clear that holding the feet of executives and directors to the fire of activists is high on his list of priorities.

"We don't hold our managements or boards accountable enough," he said Thursday in a CNBC interview following his appointment.

Icahn's strong support of the "universal" proxy card, a major initiative that activists feared would die in a Trump administration, may help it survive its current SEC review. In a contested shareholder vote on board membership, universal proxy cards allow investors to pick and choose among all nominees, rather than just being able to vote for an entire slate.

But Icahn has thrown cold water on other governance proposals and has yet to voice an opinion on another key initiative: the SEC's adoption of a rule requiring public companies to disclose the ratio of the compensation of their CEOs to the median employee compensation.

"The question I have is, Which Carl Icahn do we see in this role? Icahn the activist, or Icahn the businessman, advocating for the business community?" said Keith Gottfried, a Washington D.C.-based partner at law firm Morgan Lewis, who specializes in activist defense. "We will probably see more of the latter."   Continued...

Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York, U.S. on February 11, 2014.  REUTERS/Brendan McDermid/File Photo