6 Tips to Protect You from Hedge Fund Predators

Last Updated Apr 30, 2008 12:41 PM EDT

shark.JPGFeel terrorized by hedge fund activists? The Conference Board can help.

The group's Governance Center is in the final stages of issuing a report explaining the threats and offering CEOs and directors ways to avoid unwanted takeovers. About 9,000 hedge funds controlling $1.8 trillion in assets are serving as corporate predators in their hunt for ever larger returns. While they represent only 5 percent of all U.S. assets under management, they make up 30 per cent of total equity tradining in The U.S.

The report quotes New York corporate lawyer Martin Lipton as stating that "attacks by activists hedge funds constitute the number-one key issue for directors." Indeed, the list of attacks this proxy season is impressive, including The New York Times Company, CNET Networks,Inc., AutoZone, Inc., Wendy's International, and Applebee's International, among dozens of others.What can be done? The Conference Board's preliminary report, Hedge Fund Activism, recommends the following:

  1. Keep abreast of hedge funds as they take positions in your company. Don't relay exclusively on SEC findings since stock buying can be hidden.
  2. Become knowledgeable about hedge fund tactics.
  3. Know your corporate weaknesses and keep an open mind about change.
  4. Prepare responses to the hedge funds and make certain they are implemented
  5. Keep an open dialogue with investors
  6. Maintain transparency by giving plenty of warning of threats and the date of annual meetings.
The Conference Board will be accepting comments until April 30. A final report is due in June.

(Image courtesy Wolfgang Kopp via Flickr, C.C. 2.0)