Activist Hedge Funds are increasingly pushing former CEOs onto Boards

Date: Friday, April 16, 2010
Author: Hedgetracker.com

2009 saw a noticeable increase in the number of experienced executives appointed to company boards by activist shareholders. According to the Wall Street Journal, approximately 24% of the 213 dissident nominees had previously occupied top management positions in public companies. In 2004, only 22% of the 73 dissident nominations fit the description. The strategy increases the pressure on under-performing company leaders and may end in a higher percentage of activists’ board victories in proxy battles.

A striking example is activist hedge fund manager Steel Partners LP’s proxy battle for small technology company Ataptec Inc. that began in 2007. John Mutch, CEO of BeyondTrust Software Inc. and former CEO of Peregrine Systems Inc., were appointed to Adaptec’s board in the fall of that year, along with two Steel Partners officials John Quicke and Jack Howard. Mr. Howard became chairman in 2008, supported by Mr. Mutch and his valuable experience as CEO of a technology company.

According to the WSJ article, former corporate executives who have forced their way onto boards recently include: Eric Rowinsky, former Chief medical officer at ImClone Systems, who joined the Biogen Idec board this year; Lloyd Hill, former Chairman and CEO of Applebee’s International, who joined the Red Robin Gourmet Burgers board this year; Kenneth H. Traub, former VP at JDS Uniphase, who joined the iPhase board in 2009 and Gary Pechota, former CEO of Giant Cement Holding who joined the Texas Industries board in 2009; and Frank Biondi, former CEO of Viacom who joined the Yahoo board in 2008.

Notably, Mr. Traub is also currently seeking a seat on the Bitstream board with the help of Bill Martin’s Raging Capital Management, LLC.