Director Notes

The Activism of Carl Icahn and Bill Ackman

by Richard Lee and Jason D. Schloetzer

Activist hedge funds merit the attention of corporate directors, as the value of the assets
under management increases and activist funds’ targets expand well beyond small capitaliza-
tion companies. This report reviews the tactics used by two prominent activist hedge fund
managers to create change in 13 companies in their portfolio and highlights four perceived
governance failures at target companies that attracted activist funds’ attention. This release
also includes a review of characteristics of activist hedge funds, the incentives their managers
have to generate positive returns, and current research investigating whether and how hedge
fund activism affects target companies.

The value of assets managed by activist hedge funds has the boardroom.”3 By 2013, an estimated 100 hedge funds
increased dramatically in recent years. A study by eVest- had adopted activist tactics as part of their investment
ment documents a seven-fold increase in the assets man- strategies.4
aged by such funds from $23 billion in 2002 to an estimated
As such, it is increasingly important for directors to
$166 billion in early 2014. The momentum continues,
become knowledgeable of the tactics activists use
with total new capital inflows into activist funds reach-
to advance investor arguments for changes in target
ing $6 billion in the first quarter of 2014, which represents
companies. In particular, and as recommended by
approximately 30 percent of all inflows into event driven
The Conference Board and its Expert Committee on
funds. According to eVestment, activism continues to be
Shareholder Activism, directors should consider maintain-
among the best-performing primary fund strategies, post-
ing detailed profiles of hedge funds with material invest-
ing returns of nearly 10 percent since October 2013 and 18
ments in the company’s securities.5
percent for the year.1 The number of shareholder activist
events has also increased—from 97 events in 2001 to 219 This Director Notes adds to the store of knowledge avail-
events in 2012.2 Those trends have led some observers to able on how this class of hedge funds operates by focusing
characterize activist hedge funds as the “new sheriffs of on the tactics deployed by two prominent figures in the

No. DN-V6N10
May 2014
Subscribe for free at www.conference-board.org/directornotes
activist world: Carl Icahn of Icahn Enterprises and William as mutual and pension funds. As a result, hedge funds have
“Bill” Ackman of Pershing Square Capital Management. greater flexibility in trading than other institutions.
The discussion is particularly timely because Icahn and
Hedge funds also differ from pension funds and many
Ackman have recently agreed to end their prolonged feud,
other institutional investors because they are generally not
with Ackman suggesting that “[t]here is a much greater pos-
subject to heightened fiduciary standards, such as those
sibility that we are on the same side than the opposite.”6
embodied in ERISA.8 Another difference is that, unlike
pension funds, hedge funds are not subject to state or local
Hedge Fund Activism, in a Nutshell influence or political control. The majority of hedge fund
A few words on hedge funds While there is no generally investors tend to be wealthy individuals and large insti-
agreed-upon definition of a hedge fund (a Securities and tutions, and hedge funds typically raise capital through
Exchange Commission roundtable discussion on hedge private offerings that are not subject to extensive disclosure
funds considered 14 different definitions) hedge funds are requirements. Although hedge fund managers are bound
usually identified by four characteristics:7 by antifraud provisions, funds are not otherwise subject to
more extensive regulation. Finally, hedge fund managers
1 they are pooled, privately organized investment vehicles; typically suffer fewer conflicts of interest than managers at
2 they are administered by professional investment manag- other institutions. For example, unlike mutual funds that
ers with performance-based compensation and significant are affiliated with large financial institutions, hedge funds
investments in the fund; do not sell products to the companies whose shares they
hold.
3 they cater to a small number of sophisticated investors
and are not generally readily available to the retail invest- Hedge fund managers have powerful and independent
incentives to generate positive returns. Although many pri-
ment market; and
vate equity or venture capital funds also have these charac-
4 they mostly operate outside of securities regulation and teristics, they are distinguished from hedge funds because
registration requirements. of their focus on particular private capital markets. Private
equity investors typically target private companies or going
The typical hedge fund is a partnership entity managed by
private transactions, and they acquire larger percentage
a general partner; the investors are limited partners who
ownership stakes than activist hedge funds. Venture capital
have little or no say in the hedge fund’s business. Hedge
investors typically target private companies exclusively,
fund managers have strong incentives to generate positive
with a view to selling the company, merging, or going
returns because their pay depends primarily on perfor-
public, which means they invest at much earlier stages than
mance. A typical hedge fund charges its investors a fixed
both private equity and activist hedge funds. Nevertheless,
annual fee of 2 percent of its assets plus a 20 percent perfor-
the lines between these investors are often blurred, particu-
mance fee based on the fund’s annual return. Although
larly between some private equity firms and activist hedge
managers of other institutions can be awarded bonus
funds that pursue multiple strategies.
compensation based in part on their performance, their
incentives tend to be more muted because they capture a Trends in hedge-fund activism Hedge funds may adopt activ-
much smaller percentage of any returns and the Investment ist tactics as part of their investment strategies, and there
Company Act of 1940 limits performance fees. has been a significant increase in the value of assets man-
aged by such funds. Studies document a seven-fold increase
Unlike mutual funds, which are generally required by law
in the assets managed by such funds from 2002 ($23 billion)
to hold diversified portfolios and sell securities within one
to early 2014 ($166 billion) in activist fund assets under
day to satisfy investor redemptions, hedge funds are not
management (AUM), with total new investments by the top
subject to diversification and prudent investment require-
10 activist funds reaching $30 billion in 2013.9 The rising
ments. Hedge funds can also allocate large portions of their
AUM and increasingly bold activism have contributed to
capital to a few target companies, and they may require
the business press identifying activist hedge funds as the
that investors “lock-up” their funds for a period of two
“new sheriffs of the boardroom.”10
years or longer. Moreover, because hedge funds do not fall
under the Investment Company Act regulation, they are One particularly important channel through which activist
permitted to trade on margin and engage in derivatives hedge funds implement their strategies is by requesting that
trading, strategies that are not available to institutions such a certain matter be put to a vote at the target company’s

2 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
annual shareholder meeting. In 2013, hedge funds submit- of amassing a meaningful stake in such a target. Targets
ted 24 shareholder proposals (3 percent of all shareholder exhibit significantly higher institutional ownership and
proposals), up from 20 proposals in 2012 but below the 33 trading liquidity, making it somewhat easier for activists
proposals filed in 2009.11 Hedge funds waged the major- to acquire a significant stake quickly.14 However, as activ-
ity of proxy contests in 2013, accounting for 24 of the 35 ism evolves into an investment class of its own and attracts
contests at Russell 3000 companies. They have consistently more and more capital, the characteristics of their target
been the most active dissident type, constituting the larg- companies may be changing: in 2013, for the first time,
est percentage of contests waged (69 percent of the total almost one-third of shareholder activism took place in
in Russell 3000 in 2013, up from 39 percent in 2009). Most companies with market capitalizations of more than $2 bil-
important, they were highly likely to succeed in these lion.15 In addition, only 23 companies targeted by activist
contests, winning or earning partial victories in 19 of the 24 investors were larger than $10 billion in 2012; by 2013, that
contests waged.12 number jumped to 42 companies.16

Targets of hedge fund activism There are a limited number Does activism generate value? There is substantial debate
of systematic studies of hedge fund activism, but those about the extent to which activist events affect target
that are available provide important insights, both on company value. A study by Alon Brav, Wei Jiang, Randall
hedge-fund tactics and their effects on the target company. S. Thomas, and Frank Partnoy documents a 7 percent
Hedge-fund activists tend to target companies with low abnormal stock return around the filing of a Schedule 13D
market value relative to book value, although target com- (an indication of an activist fund’s investment in a target
panies are profitable with consistent operating cash flows company), suggesting that market participants view hedge
and positive return on assets. Dividend payout at target fund activism as value creating.17 Most important, the same
companies before an activist intervention is generally lower study finds that the favorable effect on stock price does
than that at comparable companies. Target companies also not reverse within the following year.18 According to these
have more takeover defenses and pay their CEOs consid- findings, it appears that promising returns depend on what
erably more than comparable companies.13 Historically, the activists demand. Activism that targets the sale of the
relatively few targeted companies are large-cap companies, company or changes in business strategy, such as refocus-
which is not surprising given the comparatively high cost ing and spinning-off noncore assets, is associated with the
largest positive abnormal partial effects. In contrast, there
is little evidence of a favorable market reaction to capital
structure-related activism—including debt restructuring,
This Director Notes includes recapitalization, dividends, and share repurchases— or
findings from Proxy Voting
Proxy Voting Analytics (2009–2013) to governance-related activism—including attempts to
rescind takeover defenses, oust CEOs, enhance board inde-
BASED ON SHAREHOLDER MEETINGS HELD AT

Analytics, a comprehensive
RUSSELL 3000 AND S&P 500 COMPANIES

analysis of proxy voting data pendence, and curtail CEO compensation.

for annual general meet-
ings (AGMs) held by Russell Chart 1
In collaboration with
3000 and S&P 500 compa- Number of large-cap companies targeted by
nies from January 1 to June activist investors (2010–2013)
30 during the last five years. The report, which is
42
published annually by The Conference Board in col-
laboration with FactSet, reviews data on shareholder
and management proposals organized by subject, 23
21
including volume, sponsorship, and voting results. It 17
also features data on proxy contests and an in-depth
look at the major issues during the most recent
proxy season. 2010 2011 2012 2013

For more information about Proxy Voting Analytics, visit www.conference- Source: “The Activist Insight Activist Investing Annual Review
board.org/data/corporatebenchmarking/ or contact Melissa Aguilar at 2014,” Activist Insight, 2014
[email protected]. (http://activistinsight.com/research/Activist%20Insight%20
Annual%20Review%202014-final%20web%20pdf.pdf).

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 3
 Chart 2
Buy-and-hold abnormal return around the filing of Schedule 13Ds
The solid line (left axis) plots the average buy-and-hold return around the Schedule 13D filing, in excess of the buy-and-hold
return of the value weighted market, from 20 days prior the 13D file date to 20 days afterwards. The bars (right axis) plot the
increase (in percentage points) in the share trading turnover during the same time window compared to the average turnover
rate during the preceding (-100, -40) event window.

9% 200%
Abnormal Buy & Hold Abnormal Share
Return (Left) Turnover (Right)
8% 180%

Abnormal Share Turnover Relative to (t-100, t-40)

7% 160%
Abnormal Buy-and-Hold Return

6% 140%

5% 120%

4% 100%

3% 80%

2% 60%

1% 40%

0% 20%

-1% 0%
g

20
10

18
14
12

16
0

lin
8

8
4
6

6
2
t-6

t-4
t-8
t-2

t-2
t-1

t-1

t-1
t-1

t-1

t+
t+

t+

t+

t+

t+

t+

t+
t+

t+
Fi
D
13

Source: Alon Brav, Wei Jiang, Frank Partnoy and Randall S. Thomas, “Hedge Fund Activism, Corporate
Governance, and Firm Performance,” Journal of Finance, 63, no. 4, August 2008, p. 1756

A separate but related study by Robin Greenwood and In 2013, the 24 shareholder proposals submitted by activist
Michael Schor argues that the documented increase hedge funds were mostly concentrated on asset divestiture,
in stock returns is largely concentrated among activist capital distributions, the election of dissidents’ director
interventions that involve a subsequent takeover, suggest- nominees, and the removal of board members. Hedge funds
ing there is little relation between hedge fund activism and led the majority of contests seeking board representa-
returns when a takeover is not part of the activist strategy.19 tion last year, representing 14 proxy contests out of the 22
Aside from equity performance, other investigations reveal motivated by the election of a dissident’s nominee(s) to the
that activist interventions by hedge funds are associated board of directors.22
with improvements in the operating performance of the tar-
The following discussion provides detailed insights into the
get company, changes in corporate governance, lower CEO
tactics used by two prominent activist hedge fund manag-
compensation, higher sensitivity of CEO turnover to com-
ers—Carl Icahn of Icahn Enterprises and Bill Ackman of
pany performance, and higher rates of director turnover.20
Pershing Square Capital Management—to effect change in
Activist tactics While activists generally propose a wide 13 target companies from 2002 through 2014. The review
variety of changes to targeted companies, approximately highlights four perceived corporate governance failures at
45 percent seek changes in corporate governance and the target companies that attract the attention of activist funds.
remaining 55 percent pursue non-board-related proposals.21

4 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
Specifically, hedge fund activism is more likely when an practices of a Silicon Valley company is new and might
entrenched board fails to: signal an emerging trend in hedge fund activism.
1 establish a clear corporate strategy; Icahn actively uses various media channels to advance
his agenda. He frequently issues open letters to the share-
2 replace a CEO in a timely manner, impeding the execution
holders of his targets, appears on television, and makes
of the corporate strategy;
statements via social media and his Shareholders’ Square
3 seek alternative uses for the company’s valuable noncore Table website. As a result, corporate boards should have an
assets (for example, through divestiture) or fails to maxi- integrated, cross-platform response to the various types of
mize shareholder value when taking the company private; public messages that activist fund managers may employ
to reach a diverse shareholder base and communicate their
4 distribute “sufficient” levels of cash to shareholders message to market participants in general.
through dividend payouts and share repurchase programs.
In addition to these perceived governance failures, the Motorola (2007-2011)
analysis of Ackman’s hostile interaction at Herbalife, Inc. Tactics Proxy contest to gain board representation; public
and Allergan provide timely examples of potential emerg- statements and letter to shareholders; access to company
ing trends in hedge fund activism: the use of derivative records; threat of litigation
instruments to target companies with a perceived over-
valuation of equity given the company’s economic funda- Outcome Spin off and sale of company for a 63 percent
mentals (Herbalife) and combining efforts with a public premium over closing price
company to launch a hostile takeover bid of another public On January 30, 2007, Icahn revealed that he had accu-
company (Allergan). mulated 33.5 million shares of Motorola, representing 1.4
percent of the company prior to its split into Motorola
The Activism of Icahn Enterprises Mobility and Motorola Solutions.24 Icahn met with
Motorola CEO Ed Zander to discuss Icahn’s proposal for
Carl Icahn is chairman of Icahn Enterprises, a diversified
the company to buyback $12 billion in company stock.25
holding company which trades on the NASDAQ and has a
Motorola was struggling as sales of the KRZR mobile
market capitalization of $12 billion.
phone were below expectations. By April 2007, Icahn had
Icahn recently stated that “[t]here are lots of good CEOs launched a proxy contest to gain a seat on the board. He
in this country, but the management in many companies faulted Motorola’s directors as a “passive and reactive
leaves a lot to be desired. What we do is bring accountabil- board, which failed to timely steer management in the right
ity to these underperforming CEOs when we get elected to direction.”26 However, on May 7, 2007, the preliminary
the boards.”23 Icahn’s statement highlights one of his main results of a shareholder vote revealed that the activist had
activist strategies: identifying companies with perceived failed to win a seat on the board, despite increasing his
managerial deficiencies and attempting to gain a board ownership stake to 2.9 percent.27
seat(s) to discipline boards that fail to remove poorly per-
In 2008, Icahn changed his tactics. On March 24, he
forming managers.
announced that he was suing Motorola to be granted
The case studies reinforce his image as an activist inves- access to documents related to its mobile device business
tor who buys large stakes in companies he believes to be that would be critical for assessing whether the board of
undervalued and then seeks to change the business. The directors had failed to protect Motorola’s shareholders.28 In
studies reveal that Icahn’s primary activist tactic is to iden- a heated letter to shareholders, he nominated his own can-
tify boards whose directors are unable to deftly navigate didates for the board and said, “It is essential to the future
fundamental issues with corporate strategy, perhaps due to of Motorola that its directors realize that the BOARD,
a failed acquisition (Yahoo!) or multiple strategic setbacks especially at this precarious time, is NOT A COUNTRY
(Netflix, Dell). In addition, Icahn targets boards whose CLUB OR A FRATERNITY, and that truly ‘qualified’
directors do not adequately identify profitable uses of the people whose interests are truly aligned with stockhold-
company’s assets, whether the assets are patent portfolios ers are needed on the board in order to save Motorola.”29
(Motorola), cash reserves (Apple), or a division (eBay). His By that time, Icahn had further increased his stake in
recent effort at eBay to target the corporate governance Motorola to 6.3 percent (or 142 million shares).30 Two

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 5
days later, the board gave in to the pressure resulting from Bartz’s tenure was controversial, and she was terminated,
Icahn’s public campaign and announced that Motorola reportedly by phone, in early September 2009.41 In October
would split into two entities, a mobile phone unit and a set- 2009, Icahn resigned from the board and his departure
top box and communications equipment unit.31 By April was reported to be on amicable terms.42 When he resigned,
8, 2008, Motorola had agreed to appoint two of Icahn’s Icahn stated that it was no longer “necessary at this time
nominees to the board in exchange for the dismissal of his to have an activist on the board.”43 From October 2009
litigation against the company.32 through May 2010, Icahn slowly exited his position.44 He
reportedly lost an estimated $320 million on his investment.
Icahn continued to increase his Motorola holdings, and he
owned 10.4 percent (247.1 million shares) by August 2010.33
Netflix (2012-present)
After a delay due to the economic crisis, Motorola finally
split into Motorola Mobility and Motorola Solutions on Tactics Public statement on value resulting from sale of the
January 3, 2011.34 On August 15, 2011, Google announced company
that it would buy Motorola Mobility for $12.5 billion, Outcome $825 million earnings in 14 months, despite lim-
representing a 63 percent premium over its previous closing ited or no action against company; reduced position
price.35 The acquisition was spurred in part by Icahn who,
in July of that year, had encouraged Motorola to sell its On October 31, 2012, Icahn disclosed a 9.98 percent stake
lucrative portfolio of mobile phone patents.36 in Netflix.45 Icahn accumulated his position at a time when
Netflix was reeling from a failed attempt to raise con-
Yahoo! Inc. (2008-2010) sumer-subscription prices and split the company into two
separate businesses while simultaneously implementing a
Tactics Proxy contest to gain board representation or
cash-draining effort to expand overseas and develop origi-
control
nal content.46 Icahn used the announcement of the strategy
Outcome $320 million loss in two years; Icahn and two redirection as an opportunity to tell shareholders that the
directors appointed to board; failed CEO succession; exited company would have “significant strategic value” if it were
position acquired by a larger company.47 On November 5, 2012, the
board of directors adopted a shareholder rights plan that
In May 2008, Icahn purchased 50 million shares of Yahoo would come into effect if any investor acquired more than
and launched a proxy contest to gain control of its board 10 percent of the company.48
of directors. Yahoo was losing ground to Google and
Microsoft in the core search market, and there was grow- Between November 2012 and October 2013, Netflix contin-
ing disappointment with Yahoo’s management team, which ued to execute its strategy of growing international markets
nixed Microsoft’s offer to buy the company for a 35 percent and developing original content. During this time, there
premium.37 Icahn stepped up his rhetoric and accused CEO were no public statements from Icahn about his interac-
and cofounder Jerry Yang and the Yahoo board of being tions with Netflix management. While it is conceivable
entrenched and unwilling to truly consider an acquisition that private interactions did occur, it appears that Icahn
offer.38 By August 2008, Yahoo’s board agreed to provide supported the company’s management team during the
Icahn a board seat and expand the board to 11 directors, strategic transition, with an Icahn associate stating that
allowing Icahn to appoint two directors himself.39 Icahn the company’s management team was “exceedingly compe-
sought to replace Yang, who had assumed the CEO post at tent.”49 In October 2013, Icahn reduced his holdings to 4.5
the board’s request in June 2007. percent, earning $825 million on his Netflix investment in
only 14 months.50
Yang relinquished the CEO position in November 2008,
and Carol Bartz became chief executive three months later. Although Icahn’s original intent at time the he acquired
Upon her appointment, Bartz was praised for her technol- his position appeared to be to press management to sell
ogy sector experience and her status as an outsider who the company quickly, it seems that his appreciation for the
could bring a fresh perspective to both the board and the company’s strategy and confidence in the management
company’s strategy.40 While Icahn was critical of Yang, team led him to maintain a more passive role in the com-
and he and his two affiliated directors were Yahoo board pany’s transformation.
members when Bartz was appointed as CEO, the extent of
Icahn’s involvement in selecting Bartz is unclear.

6 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
Dell Inc. (2013) their own legal moves, Dell’s board was able to change the
Tactics Effort to gain board representation or control; pub- company’s voting rules to ignore shareholder abstentions
lic statements on undervaluation resulting from taking the instead of counting them as “no” votes, and to change the
company private via letters to shareholders, media inter- record date for stockholders to determine eligibility to vote
views, and social media on the proposed takeover, limiting the rights of share-
holders who purchased their shares recently.60 Icahn also
Outcome Estimated $200 million earnings in seven months; revealed that his unnamed CEO-in-waiting backed out at
failed effort to gain board representation or control; exited the last minute.61
position
In the end, these setbacks prompted Icahn to end his
In February 2013, Michael Dell and Silver Lake Partners opposition to Michael Dell’s bid in September 2013, writing
sought to take Dell private for $13.65 per share. This price that “The Dell board, like so many boards in this country,
valued the company at $24.4 billion, representing a 37 reminds me of Clark Gable’s last words in Gone with the
percent premium over the average share price at that time.51 Wind, they simply ‘don’t give a damn.’”62
Michael Dell sought to take the company private to enable
him to transform the company free from public scrutiny Apple Co. (2013-present)
from a maker of personal computers into a provider of Tactics Public statements on need for company to distribute
enterprise computing services.52 However, several large cash to shareholders
shareholders, including Southeastern Asset Management
and T. Rowe Price, opposed the deal, believing that Dell’s Outcome More aggressive share buyback plan; maintains
bid undervalued the company.53 Icahn entered the fray in position
March 2013, announcing that he had accumulated a 9 per-
In April 2013, Apple bowed to Wall Street pressure and
cent stake in the company. He began a lengthy and public
said it would return $100 billion to shareholders by the end
campaign against Michael Dell and the company’s board to
of 2015, double the amount previously set aside.63 The cash
either prevent Dell from going private or to force Michael
distributions would include a $60 billion stock repurchase
Dell and Silver Lake to increase their bid.
program.64
Icahn used a series of letters to shareholders, combined
By August 2013, Icahn began to accumulate a position in
with relatively newer tactics via media interviews and
Apple, and he started to push for the company to complete
social media, to communicate with Dell’s shareholders
a $150 billion buyback by taking advantage of low inter-
and market participants in general. He called Dell’s board
est rates to borrow funds, a move that Icahn argued could
entrenched and pushed for Michael Dell to be fired and
push the company’s share price back to the $700 level it
for the entire board to be replaced.54 Using rather extreme
reached briefly in September 2012.65 The following month,
language, Icahn even appealed for shareholders to consider
he met with Apple CEO Tim Cook to discuss the potential
“What is the difference between Dell and a dictatorship?”55
for a large share buyback program.
Icahn also used legal action against the company. He tried
In January 2014, Icahn purchased an additional $500
to get the courts to force Dell to hold its shareholder meet-
million of the company’s shares, raising his total owner-
ing at the same time as the special vote on the decision
ship stake to $3.6 billion.66 On February 10, 2014, Icahn
to go private, thereby giving Icahn a chance to propose a
announced that he was backing down from his nonbinding
slate of directors to replace the current board.56 However,
proposal to force the company to return cash to share-
in August 2013, a judge refused to fast track this lawsuit,
holders due to opposition by proxy advisory firm ISS and
which stopped Icahn’s legal efforts on that front.57 In a
the company’s announcement of a more aggressive share
separate effort, Icahn encouraged Dell shareholders to
buyback plan.67
exercise their right to an appraisal of the transaction, which
would allow shareholders to demand a court hearing on While not entirely successful, Icahn’s actions did appear to
the value of their holdings, a process that would likely have affect the company’s capital return program. In April 2014,
taken months to navigate the court system.58 the company increased its share repurchase authorization
to $90 billion from the $60 billion announced in 2013. The
By July 2013, Michael Dell and the board had restruc-
company also increased its quarterly dividend by 8 percent
tured their proposal by increasing their bid to $13.75 per
and said it will split its stock seven-for-one in June 2014.68
share plus a one-time dividend of $0.13 per share.59 Using

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 7
In addition, the company announced that it would boost billion.79 eBay retaliated by rejecting Icahn’s nominees for
the overall size of its capital return program to more than its board and renominating all current directors up for re-
$130 billion by the end of 2015, up from its previous $100 election, including Andreessen and Cook.80 In addition to
billion plan.69 To demonstrate his use of social media, publishing open letters on his Shareholders’ Square Table
Icahn tweeted that he “agree[s] completely” with Apple’s website, Icahn used other forms of media including twitter
plans to boost its buyback plan.70 and TV appearances.

On April 10, 2014, Icahn and eBay agreed to settle their

eBay Inc. (2014-present)
months-long debate after Icahn failed to garner support for
Tactics Public statements via letters to shareholders, media a spin-off of eBay’s PayPal unit from the company’s major
interviews, and social media on need for company to shareholders.81 Under the agreement, Icahn withdrew his
revamp corporate governance practices and to spin off a two nominees for board seats and his demands for a PayPal
division; effort to gain board representation or control spin-off, while eBay added an additional, mutually agreed-
Outcome One mutually agreed-upon independent director upon independent director, David Dorman.82
added to board; failed attempt to spin off division; main-
tains position The Activism of Pershing Square
In January 2014, Icahn disclosed that he had taken a William “Bill” Ackman is CEO of Pershing Square
nearly 2 percent stake in eBay, nominated two candidates Capital Management, which, according to a Form 13F
to eBay’s board of directors, and submitted a proposal to filed December 31, 2013, has $8.23 billion in assets under
spin-off eBay’s PayPal business.71 Icahn stated that he was management.
prepared for a proxy contest, if necessary.72
Ackman has a reputation as a brazen activist investor who
On February 24, Icahn released an open letter to eBay buys large stakes in companies he believes are undervalued.
shareholders, stating that eBay’s lapses in corporate gov- The case studies—notably, his joint hostile takeover effort
ernance were the “most blatant we have ever seen.”73 In with Valeant Pharmaceuticals at Allergan—reinforce that
particular, Icahn believed there were conflicts of interest image and highlight several differences between his activist
among its board. Icahn highlighted eBay director Marc approach and that of Icahn.
Andreessen, who has investments in seven startups that
In particular, Ackman’s primary tactic appears to be his
compete with eBay’s PayPal unit and was part of an inves-
hands-on efforts to completely transform a company, often
tor group that acquired a controlling interest in Skype from
through substantial changes in both board representation
eBay in 2009. Icahn questioned Andreessen’s knowledge of
and top management, as evidenced by his actions at J.C.
the Skype deal and what information was withheld from
Penney, Canadian Pacific Railways, and Air Products and
eBay shareholders. In addition, Icahn claimed that eBay
Chemicals. Similar to Icahn, Ackman targets boards he
director Scott Cook has material conflicts of interest; Cook
feels have not adequately identified profitable uses of the
is the founder of Intuit, a PayPal competitor.74
company’s assets, such as his efforts at Target to revamp
eBay’s board responded to Icahn’s claims, citing Icahn’s the company’s credit card holdings and real estate assets.
“mudslinging attacks.”75 Icahn subsequently released eight
In contrast to Icahn, Ackman is perhaps best known for his
additional open letters to eBay shareholders from late
high-profile campaigns to bring down his target compa-
February to early March.76 Icahn was, “growing a bit tired
nies through detailed and often overwhelming arguments
of reading eBay’s repetitive evasive responses” and stated
designed to move a target’s share price. The MBIA and
that he was “demanding an inspection of eBay’s relevant
Herbalife cases demonstrate how Ackman targets compa-
books and records pursuant to his right as a stockholder
nies that he believes are overvalued given their current eco-
under Delaware corporate law.”77 eBay’s board replied by
nomic fundamentals, and the extreme measures he will take
stating that Icahn should “stick to the facts” and challenged
to make the case against the target company’s valuation.
him to an “honest, accurate debate.”78 In his fifth open
His heavily publicized presentations, often held with little
letter to eBay shareholders, Icahn escalated his criticism by
advance notice, highlight the need for boards of directors
accusing eBay CEO John Donahoe for “inexcusable incom-
to have the ability to quickly respond to such an attack.
petence” over the Skype deal, costing shareholders over $4

8 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
MBIA (2002-2008) company that eventually held a 9.97 percent stake through
Tactics Public statements and presentations challenging the a combination of options and stock purchases.89 Ackman
company’s credit rating had made further bets on the company through options
and derivatives called total return swaps. Although these
Outcome Over $1 billion earnings in six years; exited position total return swaps did not confer voting power, Ackman
claimed that the swaps brought his total economic expo-
In 2002, Ackman’s first hedge fund, Gotham Partners,
sure to 12.6 percent of Target’s shares.90
began to scrutinize MBIA, challenging the company’s
AAA credit rating. Ackman released a lengthy report Ackman argued that Target could unlock shareholder
titled, “Is MBIA Triple A?” that criticized MBIA as value through the sale of its credit card business and the
too highly leveraged to hold a AAA credit rating, cit- reduction of its real estate holdings. Target was one of the
ing the firm’s high outstanding guarantee liabilities and few retailers that still managed its own credit card opera-
a heavy use of off-balance sheet vehicles for fund-raising tions, while Ackman noted that similar retailers had sold
purposes.83 their portfolios.91 In September 2007, under pressure from
Ackman, Target announced it was exploring strategic
Ackman’s bets against MBIA eventually paid off in 2007,
options for its credit card portfolio. In March 2008, the
when reports surfaced of potential trouble resulting from
company said it engaged in talks to divest 50 percent of
MBIA’s guarantee of collateralized debt obligations
its credit portfolio for approximately $4 billion.92 In May
(CDOs). As of March 31, 2007, MBIA had insured $5.4
2008, the company announced the sale of an undivided
billion in subprime mortgage-backed securities, which
interest that represented 47 percent of its credit card portfo-
reportedly presented “negligible” risk because the insurer
lio for $3.6 billion. Target said the proceeds would fund
generally insured higher-rated classes of mortgage-backed
store expansion, debt repayment, and share repurchases.93
securities.84 MBIA, however, had increased its exposure
to CDOs. MBIA disclosed that, as of the end of 2006, $2.4 In October 2008, Ackman pushed for a second strate-
billion of the $7.7 billion in mortgage CDOs it had insured gic change at the company—the creation of a separate
were backed by subprime mortgages.85 company that would own the land on which its stores
are located, aimed at unlocking the value of a real estate
As the economy began to falter in 2007, Ackman released a
portfolio with an estimated value of $40 billion.94 However,
presentation provocatively titled “Who’s Holding the Bag?”
Ackman quickly backed down from this proposal and
that contended MBIA had guarantees on some $5 billion
pushed instead for the company to spin off its real estate
worth of potentially low-quality securitizations of sub-
assets via a real estate investment trust (REIT) with only
prime-mortgages and other types of asset-backed debt that
20 percent of the land under its stores, instead of the 100
could ultimately damage the company’s balance sheet.86 By
percent he originally suggested only one month earlier.
October 2007, MBIA’s shares had dropped 40 percent on
Ackman, who claimed that an IPO of the new REIT would
rising concerns that losses from the mortgage-related secu-
raise about $5.1 billion, said he would invest $250 million in
rities the company insured would deplete the capital reserve
the new company.95
required to maintain its AAA credit rating.87 Ackman
profited handsomely from his position in MBIA as the Ackman’s vision for the company’s real estate assets proved
company’s business eroded during the financial crisis, con- untenable. In November, 2008, the company publically
tributing to his returns of nearly 26 percent during a period rejected his proposal to create a real estate investment
of economic instability and significant market losses.88 trust, saying the potential value it would create was “highly
speculative.”96 The investment fund that held Ackman’s
Target Corp. (2007-2011) position in Target fell 40 percent in the month of January
Tactics Proxy contest to gain board representation or con- 2009 alone.97 By February 2009, Ackman had reduced
trol; public statements on need for company to spin off a his position in the company to 7.8 percent.98 Undeterred,
division and sell non-core assets Ackman entered into a prolonged proxy contest in an
attempt to gain five board seats, including one for him-
Outcome Partially successful sale of noncore assets; failed self.99 Ackman lost the proxy contest with 70 percent of
proxy contest; exited position votes cast in favor of management’s proposed board. He
estimated that his hedge fund had spent more than $10
In April 2007, Ackman began to accumulate a position in
million on the failed proxy fight.100 After this failed attempt
Target Corp., establishing a special fund to invest in the

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 9
to gain control of the board and convert company-owned company to sustainable, profitable growth.” In the letter,
property into a real-estate investment trust, Ackman con- the company’s chairman called Ackman’s actions “disrup-
tinued to draw down his Target position to 4.4 percent by tive and counterproductive.”106
August 2009. By 2011, Ackman had closed his position in
On August 12, 2013, Ackman resigned from the board.107
Target.101
By August 27, he had sold his entire stake in the company
(some 39 million shares) to Citigroup for $12.90 per share.
J.C. Penney (2010-2013)
In total, Ackman lost approximately $712 million on his
Tactics Appointed to board; public statements calling for stock ownership and swaps tied to the company’s share
the resignation of the CEO and board chairman price.108
Outcome $712 million losses in 23 months; resigned from
the board; failed CEO succession; exited position Canadian Pacific Railway (2011-present)
Tactics Proxy contest to gain board representation or
In October 2010, Ackman began to accumulate a position control
in J.C. Penney for approximately $25 per share. Steven
Roth of Vornado Realty Trust also started to accumulate a Outcome Successful proxy contest; board control; success-
position, and Ackman/Roth eventually held 26 percent of ful CEO succession; reduced position after 300 percent
outstanding shares.102 Ackman joined the company’s board increase in share price
in February 2011 and promptly pressed for the replacement
In late 2011, Ackman acquired a 14 percent stake in
of the sitting CEO Myron Ullman. On June 14, 2011, the
Canadian Pacific Railway, making Pershing Square Capital
company’s board announced that Ackman’s preferred CEO
Management the company’s largest shareholder. Ackman
candidate, Ron Johnson, would replace Ullman as CEO. At
quickly pushed for changes to transform the company,
the time, Johnson was senior vice president of retail opera-
including the ouster of its CEO.109 When the board rejected
tions of Apple. He assumed the role of CEO in November
his plan, Ackman launched a proxy contest and received
2011.103
overwhelming support from shareholders. Hours before
Following Ackman’s plan for transforming J.C. Penney, the company’s annual meeting in 2012, CEO Fred Green
Johnson revealed a strategy to reinvent the company by and four other directors resigned, giving Ackman a major
converting its department stores into smaller boutiques victory.110
and eliminating coupon discounts.104 However, the trans-
Ackman’s victory was soon tested, as the Teamsters
formation was not an immediate success, and the strategy
Canada Rail Conference, a union that represented some
required significant cash outflows to remodel stores. By
4,800 Canadian Pacific rail workers, began a week-long
February 2013, Johnson admitted that his turnaround
strike shortly after Ackman won his drawn-out proxy
effort was not working as planned, and J.C. Penney
battle.111 The strike was due in part to stalled union con-
reported a much larger than expected fourth-quarter loss.
tract talks that started in October 2011, and Ackman’s
The strategic shift not only alienated existing customers but
involvement in the company became the tipping point. In
it also failed to attract new customers. Revenues declined
particular, union employees were concerned about possible
as much as 25 percent during Johnson’s tenure.105 In early
cuts to pension funding by an estimated 40 percent; the
April 2013, the company’s board announced Ron Johnson’s
issue of work rules was also highly contentious.112
departure and reinstated Myron Ullman as CEO.
By early July 2012, E. Hunter Harrison, Ackman’s pick for
In August 2013, a public dispute arose between Ackman
the company’s new CEO and a railroad veteran, began to
and the other directors over the company’s leadership. In
implement a turnaround strategy. Within days, Harrison
a letter sent to fellow directors that was publicly disclosed,
replaced most of Green’s senior management team with his
Ackman called for the departures of Ullman and the com-
contacts from Canadian National Railway Corporation.113
pany’s chairman of the board. The board responded in an
Harrison and his new management team boosted the com-
August 8 letter, stating, “The company has made signifi-
pany’s operating performance to record levels of operating
cant progress since Myron E. (Mike) Ullman III returned
efficiency.114 Harrison also achieved his original three-year
as CEO four months ago, under unusually difficult circum-
plan within two years, which sent share prices up 300 per-
stances. Since then, Mike has led significant actions to cor-
cent, a result that prompted Ackman to sell one-third of his
rect the errors of previous management and to return the
holdings in late 2013.115

10 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
However, the company’s longer-term outlook is unclear. nominee. 125 However, by the end of April 2014, roughly
Harrison has cut a net 4,800 jobs (from a total of 19,500 seven months after announcing McGlade’s departure, the
when he took over as CEO) and initiated disciplinary company had yet to name a new CEO, increasing con-
actions against employees that reportedly caused many to cern among Wall Street analysts about the lack of an heir
resign.116 His actions have revived an image of a “culture apparent.126
of fear and discipline” similar to that during his tenure at
Canadian National.117 Prominent union organizers have Herbalife Ltd.: A Confluence of Activist Conflict
publicly criticized his cost-cutting strategy contending that (2012-present)
it will leave his hand-picked successor, Keith Creel, who Tactics Public statements and presentations challenging
is slated to take the reigns as CEO in 2016, with a hostile that the company’s business model; stirred investigations of
workforce and a management team that “lacks experi- the company by multiple US regulatory agencies; attempts
ence and independent thought.”118 Ackman’s actions after to motivate investigations by foreign governments
Harrison’s departure remain to be seen.
Outcome Ongoing; restructured position due to $500 mil-
Air Products and Chemicals (2013-present) lion loss in 10 months
Tactics Public statements regarding “ideas on how to add There is perhaps no better example of the public tumult
value” that activists can cause than the ongoing interventions
Outcome Ongoing; maintains position at Herbalife Ltd., a nutrition and weight management
company.
In July 2013, Ackman circulated a letter to his investors
seeking up to $1 billion for a new investment fund that In December 2012, Ackman disclosed that he had taken a
would target a single company, quickly stirring speculation $1 billion short position in Herbalife. His detailed, lengthy,
about the target company’s identity.119 On July 31, 2013, and widely publicized presentation titled, “Who Wants to
Ackman announced he had acquired a 9.8 percent stake in be a Millionaire?” portrayed the company as a pyramid
Air Products, a producer of industrial gases. This invest- scheme that lacked any true retail customers. Herbalife
ment, valued at $2.2 billion, represented Ackman’s largest shares declined nearly 40 percent following Ackman’s
investment at that time.120 statements.127

Ackman stated publically that his company had “some Ackman’s presentation, however, did not persuade all
ideas on how to add value.”121 Pershing Square indicated investors. In January 2013, Icahn and Ackman engaged in a
that it intended to engage in talks with the company’s heated televised debate regarding Herbalife’s business pros-
board, top management, and other major shareholders pects.128 Other hedge funds disclosed that they accumulated
about the company’s current management and its strategic significant positions in Herbalife: George Soros’s Soros
plans. The firm also announced it might pursue a proxy Fund Management disclosed a 4.9 percent stake, Icahn
solicitation.122 accumulated a 16.5 percent stake, and Dan Loeb’s Third
Point reported an 8.2 percent stake (Third Point has since
The company’s board, noting unusual trading in the com- exited its position.129) In addition, Bill Stiritz disclosed a 6.5
pany’s shares a week prior to Ackman’s announcement, percent stake as of late 2013.130 Stiritz stated his intention to
adopted a shareholder rights plan to foil any potential advise Herbalife’s board on “potential strategies for con-
takeover attempts.123 Shortly after Ackman announced fronting the speculative short position that currently exists
his stake, he reportedly had a phone call with the com- in the company’s stock and its attendant negative publicity
pany’s sitting CEO, John McGlade, to discuss the situa- campaign.”131
tion. Several meetings followed, and Ackman presented his
proposal to improve shareholder value to the board in late On October 29, 2013, Ackman, with momen-
August 2013, which included a search for a new CEO.124 tum building against him, sent a 52-page letter to
PricewaterhouseCoopers (PwC), Herbalife’s auditor. The
Within one month, the company announced that McGlade letter warned that “PwC may incur substantial liabilities
would depart the company in 2014 and that the board in the event of the company’s failure.”132 In response, an
would appoint three new independent directors—two direc- Herbalife spokeswoman told CNBC, “As Mr. Ackman
tors proposed by Ackman and one mutually agreed-upon continues to lose his investors’ money on a reckless $1

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 11
billion bet against Herbalife, he has become increasingly that the agencies investigate Herbalife as a possible pyra-
desperate.”133 At least part of this statement was true, as, by mid scheme.144 Markey also sent a letter to the company’s
October 2013, Ackman had lost an estimated $500 million CEO Michael Johnson that questioned the company’s
on his position.134 compensation and sales data. To support his request for
an investigation, he cited a single instance in which a
On November 22, 2013, Ackman renewed pressure on Massachusetts family reportedly lost $130,000 by investing
the company with a new 62-slide presentation at the in Herbalife. The company’s shares declined more than 10
Robin Hood Investors Conference that questioned where percent on the day Senator Markey’s letters were filed.
Herbalife was getting all of its sales and offered to pay for
the collection and audit by an independent company of On March 11, 2014, Pershing Square presented the results
all retail data from Herbalife’s distributors. 135 Ackman of an independent investigation it funded into Herbalife’s
claimed that the company targeted vulnerable, low-income business practices in China.145 Pershing Square alleged that
minorities. In an interview with Bloomberg, Ackman stated Herbalife violated China’s direct selling and pyramid sales
that he would take his efforts against Herbalife to “the end laws. Legal experts in China say that the laws are unclear,
of the earth.”136 making it a “regulatory grey area.”146 In addition, even
though “the law in China says one thing, if it’s actually
On December 16, 2013, Herbalife announced the comple- enforced is a completely different thing.” 147 Thus, many do
tion of PwC’s review of the company’s financial state-
not expect regulators to take strong action against China.
ments, which failed to identify any significant issues.137 In
response, Ackman circulated a letter to his investors on However, on March 12, 2014, Herbalife disclosed that the
December 23 that said he would release further informa- US Federal Trade Commission was initiating an investiga-
tion in 2014 about the company’s violations of multi-level tion into the company.148 Herbalife management indicated
market restrictions in China.138 He stated, “Herbalife is not that the company “welcomes the inquiry given the tre-
an accounting fraud; it is a business opportunity fraud that mendous amount of misinformation in the marketplace …
relies on deception.”139 We are confident that Herbalife is in compliance with all
applicable laws and regulations.”149 On April 11, 2014, the
An investigation by the New York Times showed the Financial Times reported that that the US attorney’s office
“unprecedented” scale and depth of Ackman’s behind-the- in Manhattan and the FBI were investigating Herbalife.
scene efforts to bring down Herbalife.140 Ackman’s team Before news of the criminal probe was reported, Herbalife’s
used a wide reaching lobbying and public image strategy shares were down just over 2 percent, and ended the day
that included organizing protests, setting up news confer- 14 percent lower at $51.48.150 On April 17, 2014, the Illinois
ences, orchestrating letter writing campaigns, and lobbying Attorney General joined the fight, announcing its own
members of Congress. His team also paid over $130,000 investigation into Herbalife.151 Ackman’s campaign high-
to civil rights organizations, notably several large Latino lights a relatively unique strategy of leveraging political
organizations, to support his message or collect names of pressure against a company’s business practices. Whether
victims.141 This has not been without controversy, as several
or not Ackman will succeed has yet to be determined, but
of the supposed victims did not recall writing letters to it is clear that he will go to “the end of the earth” in his
complain about Herbalife and there are instances of let-
tactics against Herbalife.152
ters being nearly identical.142 There is also evidence of ties
between Ackman and several members of Congress. The
support of congressmen and congresswomen will be instru-
Allergan (2014-current)
mental in pushing regulators to investigate Herbalife, a Tactics Partnered with corporate acquirer to pursue a joint
catalyst that could drive the stock price down significantly. bid for a public company
Meanwhile, Herbalife has not been idle; they have hired an Outcome Ongoing
entire lobby team, including the Glover Park Group and
the Podesta Group, to counter Ackman’s lobby.143 They In March and April 2014, Ackman began accumulating a
have also increased donations to various organizations to position in Allergan, the maker of Botox and other cos-
neutralize Ackman’s payments. metic drugs, amassing a 9.7 stake in the company that was
reportedly valued at more than $4 billion.153 In an unusual
On January 23, 2014, Senator Edward Markey of move, Ackman teamed up with Canadian-based health
Massachusetts filed letters with Securities and Exchange care company Valeant, which contributed $76 million to
Commission and the Federal Trade Commission requesting

12 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
support Ackman’s acquisitions and agreed to pursue a joint Conclusion
bid for Allergan with Ackman’s assistance.154 If success-
By 2013, an estimated 100 hedge funds had adopted activist
ful, the joint bid—which exemplifies Ackman’s penchant
tactics as part of their investment strategies.165 To increase
for bold activist tactics—could provide a new template
firm value, activist hedge fund managers often attempt to
for the structure of acquisitions.155 Critics have questioned
gain seats on boards, replace underperforming executives,
the ethics of Ackman’s use of options to obtain $4 bil-
seek alternative uses for the target company’s resources,
lion worth of Allergan stock to circumvent disclosure
and return cash to shareholders. Carl Icahn and Bill
rules.156 The Allergan deal represents Ackman’s largest ever
Ackman are two notable activist fund managers whose
investment.157
tactics put the spotlight on target company directors to
Ackman’s strategy was reportedly months in the mak- respond quickly and capably to activist strategies. The case
ing, beginning when Ackman hired his former Harvard studies examined in this Director Notes are provided to
classmate William F. Doyle, who was also friends with J. contextualize the strategies activist fund managers employ
Michael Pearson, Valeant’s CEO.158 When Pearson and and detail the tactics activists use to advance investor argu-
Ackman met to discuss potential partnerships, Pearson ments for changes in target companies.
confided that he had sought to acquire Allergan for over
a year. Ackman agreed to help make the acquisition a
reality.159 Endnotes
1 “Hedge Fund Asset Flows: Monthly Summary Report March & Q1
After Ackman acquired the position in Allergan with 2014,” eVestment, April 17, 2014. (www.evestment.com/resources/
Valeant’s financial assistance, Valeant’s board met to settle research-reports/2014-research-reports/global-hedge-fund-asset-
flows-report---march-2014).
on an exact offer price. A regulatory filing disclosed that
2 David Welch and Serena Saitto, “Hedge Funds Find That Activism
Ackman planned to offer a cash component of $15 bil- Pays,” BloombergBusinessweek, January 17, 2013 (www.
lion as part of the offer. If the deal succeeds, Ackman will businessweek.com/articles/2013-01-17/hedge-funds-find-that-
activism-pays).
retain a significant stake in the combined drug maker and
3 Alan Murray, “Hedge Funds Are New Sheriffs of Boardroom,” Wall
would be contractually obligated to hold $1.5-billion of Street Journal, December 14, 2005 (http://online.wsj.com/news/
Valeant shares for one year following the merger.160 In the articles/SB113451884230621753).
wake of the hostile bid, Allergan announced that it adopted 4 Michael Useem and Dennis Carey, “What Smart Boards Do When
a shareholder rights plan to allow its board more time to Investors Knock,” Harvard Business Review Blog Network, December
16, 2013 (http://blogs.hbr.org/2013/12/what-smart-boards-do-
craft a response. The rights plan is designed to last one when-investors-knock/).
year, and it will become active if one or more shareholders 5 Matteo Tonello and Damien J. Park, The Shareholder Activism Report:
acquire 10 percent or more of its shares.161 Best Practices and Engagement Tools for Public Companies, The
Conference Board, March 2010.
Within days of the Ackman/Valeant move, in a bid to 6 Susan Pulliam and David Benoit, “Icahn, Ackman Make Peace; Activist
thwart Ackman’s hostile tactics, Allergan reportedly began Investors Call End to Feud,” Wall Street Journal, April 29, 2014.
preparing its own acquisition bid, targeting Shire PLC 7 Alon Brav, Wei Jiang, Frank Partnoy, and Randall S. Thomas, “Hedge
Fund Activism, Corporate Governance, and Firm Performance,”
for a second time within a year.162 On May 13, a day after Journal of Finance, 63, no. 4, August 2008, p. 1734-1736, and
Allergan rejected its bid, Valeant said it would improve its “Comments for the US Securities and Exchange Commission
Roundtable on Hedge Funds May 14-15, 2003, submitted by David
unsolicited $47 billion takeover offer.163 Valeant is expected A. Vaughan,” May 13, 2003 (www.sec.gov/spotlight/hedgefunds/
to unveil the improved offer at an open meeting to discuss hedge-vaughn.htm).
the merger with shareholders of both companies scheduled 8 29 US Code § 1104-Fiduciary duties (http://www.law.cornell.edu/
for May 28.164 uscode/text/29/1104).
9 “Hedge Fund Asset Flows: Monthly Summary Report March & Q1
2014”; Blair, “Swashbucklers Hit the Wall”; and “The Activist Insight
Activist Investing Review 2014.”
10 Murray, “Hedge Funds Are New Sheriffs.”
11 Matteo Tonello, Melissa Aguilar, and Thomas Singer, Proxy Voting
Analytics (2009–2013), The Conference Board, Research Report 1532-
13, October 2013, p. 21.
12 Tonello, Aguilar, and Singer, Proxy Voting Analytics (2009–2013), p. 124.
13 Brav, Jiang, Partnoy, and Thomas, “Hedge Fund Activism, Corporate
Governance, and Firm Performance.”

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 13
14 Tonello and Park, The Shareholder Activism Report; Murray, “Hedge 37 Gregory Zuckerman and Jessica E. Vascellaro, “Icahn Says He Aims
Funds Are New Sheriffs;” and Alon Brav, Wei Jiang, and Hyunseob for Yang’s Removal at Yahoo,” Wall Street Journal, June 4, 2008
Kim, “Hedge Fund Activism: A Review,” Foundations and Trends in (http://online.wsj.com/news/articles/SB121251736489942015).
Finance, 4, no. 3, 2009, pp 185-246.
38 Zuckerman and Vascellaro, “Icahn Says He Aims for Yang’s Removal
15 “The Activist Insight Activist Investing Annual Review 2014,” p.5. at Yahoo.”
16 “The Activist Insight Activist Investing Annual Review 2014,” p. 24. 39 Jessica E. Vascellaro and Matthew Karnitschnig, “Yahoo Will Add
Icahn to Its Board,” Wall Street Journal, July 22, 2008 (http://online.
17 Brav, Jiang, Partnoy, and Thomas, “Hedge Fund Activism, Corporate wsj.com/news/articles/SB121664028755469981).
Governance, and Firm Performance.”
40 Jessica Vascellaro and Joann Lublin, “Yahoo Names Bartz as CEO;
18 Brav, Jiang, Partnoy, and Thomas, “Hedge Fund Activism, Corporate Decker Resigns,” Wall Street Journal, January 14, 2009 (http://online.
Governance, and Firm Performance.” wsj.com/news/articles/SB123186912962877807).
19 Robin Greenwood and Michael Schor, “Investor Activism and 41 Jason D. Schloetzer, Matteo Tonello, and Melissa Aguilar, CEO
Takeovers,” Journal of Financial Economics, 92, no. 3, June 2009, Succession Practices: 2012 Edition, The Conference Board Research
pp. 362–375 (www.sciencedirect.com/science/article/pii/ Report 1492-12, April 2012, p. 41.
S0304405X09000397?via=ihub).
42 Michael Liedtke, “Carl Icahn Quits Yahoo’s Board, Praises CEO
20 See, for example, Ian D. Gow, Sa-Pyung Sean Shin, and Suraj Carol Bartz,” Associated Press, October 23, 2009 (http://www.
Srinivasan, “Consequences to Directors of Shareholder Activism,” huffingtonpost.com/2009/10/23/carl-icahn-quits-yahoos-
Harvard Business School working paper 14-071, March 2014. b_n_332357.html).
21 Gow, Shin, and Srinivasan, “Consequences to Directors of 43 Liedtke, “Carl Icahn Quits Yahoo’s Board, Praises CEO Carol Bartz.”
Shareholder Activism.”
44 John Letzing. “Icahn Sharply Reduces Stake in Yahoo,” MarketWatch,
22 Tonello, Aguilar, and Singer, Proxy Voting Analytics, p. 126. May 17, 2010 (http://www.marketwatch.com/story/icahn-sharply-
23 “The Activist Insight Activist Investing Annual Review 2014.” reduces-stake-in-yahoo-2010-05-17?siteid=nbsh).
24 Olga Kharif, “Icahn Sets His Sights on Motorola,” Bloomberg 45 Greg Bensinger and Ian Sherr,”Icahn Takes Stake in Netflix,” Wall
Businessweek, January 31, 2007 (www.businessweek.com/ Street Journal, November 1, 2012 (http://online.wsj.com/news/
stories/2007-01-31/icahn-sets-his-sights-on-motorolabusinessweek- articles/SB10001424052970203707604578091032309599550).
business-news-stock-market-and-financial-advice). 46 Greg Bensinger and Anupreeta Das, “Icahn vs. Hastings: The Fight for
25 Shawn Tully, “The Hottest Investor in America,” Fortune Magazine, the Future of Netflix,” Wall Street Journal (http://online.wsj.com/news/
May 30 2007 (http://cnnfn.cnn.com/magazines/fortune/fortune_ articles/SB10001424127887324073504578115172668804546).
archive/2007/06/11/100060832/). 47 Stacy Cowley and Julianne Pepitone, “Netflix Shares Surge as Icahn
26 “Motorola and Icahn Raise Voices in Proxy Fight,” New York Times, Takes 10% Stake,” CNNMoney, October 31, 2012 (http://money.cnn.
April 19, 2007 (http://dealbook.nytimes.com/2007/04/19/motorola- com/2012/10/31/technology/netflix-icahn/index.html?iid=EL).
and-icahn-raise-voices-in-proxy-fight/?_r=0). 48 “Netflix Adopts Poison Pill,” New York Times, November 5, 2012
27 Keith Regan, “Icahn’s Fight for Motorola Board Seat Fizzles,” (http://dealbook.nytimes.com/2012/11/05/netflix-adopts-poison-
E-Commerce Times, May 8, 2007 (www.ecommercetimes.com/ pill/?_r=0).
story/57285.html). 49 Excerpt from J. Mintzmyer, “Sell Netflix: The Icahn Thesis Is Flawed,”
28 Sinead Carew and Robert MacMillan, “Icahn Sues Motorola for SeekingAlpha, January 14, 2014 (http://seekingalpha.com/
Access to Documents,” Reuters, March 24, 2008 (www.reuters.com/ article/1945031-sell-netflix-the-icahn-thesis-is-flawed).
article/2008/03/25/us-motorola-icahn-idUSN2432514920080325). 50 Steve Schaefer, “Icahn Cashes In on Netflix For $825M Profit, Still
29 Schedule 14A filed March 24, 2008 (www.sec.gov/Archives/edgar/ Has 4.5% Stake,” Forbes, October 22, 2013 (http://www.forbes.com/
data/68505/000095012308003235/y51341ddfan14a.htm). sites/steveschaefer/2013/10/22/carl-icahn-cashes-in-on-netflix-
cuts-stake-to-take-profits/).
30 Carew and MacMillan, “Icahn Sues Motorola.”
51 “Dell Enters Into Agreement to Be Acquired By Michael Dell and
31 Laura M. Holson, “Motorola Moves to Split Itself Into Two,” New Silver Lake,” Dell Financial News, February 5, 2013 (www.dell.com/
York Times, March 26, 2008 (www.nytimes.com/2008/03/26/ learn/us/en/uscorp1/secure/2013-02-04-michael-dell-silverlake-
technology/26cnd-motorola.html?pagewanted=print). acquisition?c=us&l=en&s=corp).
32 “Motorola, Icahn End Proxy Battle,” Associated Press, April 8, 2008 52 Nicola Leske and Poornima Gupta, “Icahn Ends Battle for
(http://articles.latimes.com/2008/apr/08/business/fi-icahn8). Control of Dell; Vote Due on Thursday,” Reuters, September 9,
33 Kathy Shwiff, “Icahn Increases Motorola Stake to 10.4%,” Wall Street 2013 (www.reuters.com/article/2013/09/09/us-dell-icahn-
Journal, August 27, 2010 (http://online.wsj.com/news/articles/SB10 idUSBRE9880M720130909).
001424052748703959704575454532358987318?mod=WSJ_Tech_ 53 Greg Roumeliotis and Jessica Toonkel, “Blackstone, Icahn Set
LEFTTopNews). up Three-way Battle to Buy Out Dell,” Reuters, March 23, 2013
34 Dana Wollman, “Motorola To Split Into 2 Companies: Motorola (www.reuters.com/article/2013/03/23/us-blackstone-dell-
Mobility, Motorola Solutions,” Associated Press, January 3, 2011 idUSBRE92M08520130323).
(www.huffingtonpost.com/2011/01/03/motorola-spit-motorola- 54 Connie Gugleilmo, “Dell Officially Goes Private: Inside the Nastiest
mobility_n_803847.html). Tech Buyout Ever,” Forbes, November 18, 2013 (www.forbes.com/
35 Evelyn M. Rusli and Claire Cain Miller, “Google to Buy Motorola sites/connieguglielmo/2013/10/30/you-wont-have-michael-dell-to-
Mobility for $12.5 Billion,” New York Times, August 15, 2011 (http:// kick-around-anymore/3/).
dealbook.nytimes.com/2011/08/15/google-to-buy-motorola- 55 Schedule 14A, filed September 9, 2013 (www.sec.gov/Archives/
mobility/). edgar/data/826083/000092166913000031/delldfan14a9913.htm).
36 Michael J. de la Merced, “In Google’s Motorola Deal, Icahn Gets His 56 Leske and Gupta, “Icahn Ends Battle for Control of Dell.”
Wish (Again),” New York Times, August 15, 2011 (http://dealbook.
nytimes.com/2011/08/15/in-googles-motorola-deal-icahn-gets-his- 57 Leske and Gupta, “Icahn Ends Battle for Control of Dell.”
wish-again/).

14 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
58 Leske and Gupta, “Icahn Ends Battle for Control of Dell.” 77 Schedule 14A filed March 24, 2008 (www.sec.gov/Archives/edgar/
data/68505/000095012308003235/y51341ddfan14a.htm) and
59 Dan Primack, “Icahn: I’ve lost to Michael Dell,” Fortune, September 9, Everdeen Mason, “Icahn Seeks Inspection of eBay’s Books,” Wall
2013 (http://finance.fortune.cnn.com/2013/09/09/icahn-lost-dell/). Street Journal, March 3, 2014 (http://online.wsj.com/news/articles/
60 Leske and Gupta, “Icahn Ends Battle for Control of Dell.” SB10001424052702304360704579416940628752098?mod=W
SJ_hp_LEFTWhatsNewsCollection&mg=reno64-wsj).
61 Leske and Gupta, “Icahn Ends Battle for Control of Dell.”
78 “Stick to the Facts, Carl: eBay Inc. Responds to Carl Icahn,” eBay
62 Leske and Gupta, “Icahn Ends Battle for Control of Dell.” Inc. website, February 26, 2014 (http://investor.ebayinc.com/
63 David Benoit, “Icahn Raises Apple Stake, Urges $150 Billion releasedetail.cfm?ReleaseID=828555).
Buyback,” Wall Street Journal, October 24, 2013 (http://online.wsj. 79 “We Believe Based on Evidence We Have Newly Uncovered That
com/news/articles/SB10001424052702304069604579155383400 Donahoe’s Inexcusable Incompetence Cost Ebay Stockholders Over
289124). $4 Billion,” Shareholders’ Square Table.
64 Rex Crum, “Icahn Declares Truce With Apple in Buyback Debate; 80 Michael J. de la Merced, “EBay Rejects Icahn’s Nominees for Its
Activist Investor Says He Will End Efforts to Convince Apple to Board,” New York Times, March 10, 2014 (http://dealbook.nytimes.
Repurchase More Stock,” MarketWatch, February 10, 2014 (www. com/2014/03/10/ebay-rejects-icahns-nominees-for-its-board/?_
marketwatch.com/story/icahn-declares-truce-with-apple-in- php=true&_type=blogs&_php=true&_type=blogs&hp&_r=1).
buyback-debate-2014-02-10).
81 Deepa Seetharaman, Phil Wahba, and Nadia Damouni, “Icahn Backs
65 Edwin Chan, “Icahn Plans Dinner Meeting with Apple’s Cook on Down From Demand That eBay Spin Off PayPal,” Reuters, April 10,
Buyback Size,” Reuters, August 22, 2013 (www.reuters.com/ 2014 (http://www.reuters.com/article/2014/04/10/us-ebay-icahn-
article/2013/08/22/us-apple-icahn-idUSBRE97L10720130822). idUSBREA390UR20140410).
66 Anna Prior, “Icahn Keeps Adding to Apple Stake; Investor Buys an 82 Seetharaman, Wahba, and Damouni, “Icahn Backs Down From
Added $500 Million in Shares, Bringing Stake to $3.6 Billion,” Wall Demand That Ebay Spin Off PayPal.”
Street Journal, January 23, 2014 (http://online.wsj.com/news/
articles/SB10001424052702303448204579338993978480108). 83 Michael Mackenzie, “Fitch Seeks Clearer View of Default Protection
Sellers,” Dow Jones Capital Markets Report, December 12, 2002.
67 Carl Icahn, “Carl C. Icahn Issues Open Letter to Apple
Shareholders,” Shareholders’ Square Table, February 10, 2014 (www. 84 Jonathan Laing, “A Mortgage Meltdown for MBIA?” Barron’s,
hareholderssquaretable.com/our-letter-to-apple-shareholders/). June 25 2007 (http://online.barrons.com/news/articles/
SB118256093145045455?tesla=y).
68 Steven Russolillo, “Carl Icahn: ‘Agree Completely’ With Apple’s Bigger
Buyback,” Wall Street Journal, April 23, 2014 (http://blogs.wsj.com/ 85 “Bond Insurer MBIA at Risk in Subprime Meltdown,” Reuters, June 24,
moneybeat/2014/04/23/carl-icahn-agree-completely-with-apples- 2007, and Laing, “A Mortgage Meltdown for MBIA?”
bigger-buyback). 86 Laing, “A Mortgage Meltdown for MBIA?”
69 Russolillo, “Carl Icahn: ‘Agree Completely’ With Apple’s Bigger 87 Alistair Barr, “Ackman’s Bets Against MBIA, Ambac Paid Off in
Buyback.” Oct; Gains from Shorting Bond Insurers Going to Charity, Hedge
70 Russolillo, “Carl Icahn: ‘Agree Completely’ With Apple’s Bigger Fund Manager Says,” MarketWatch, November 28, 2007 (www.
Buyback.” marketwatch.com/story/ackmans-winning-bets-against-mbia-
ambac-to-go-to-charity).
71 Nadia Damouni and Phil Wahba, “Report: Carl Icahn’s eBay Stake Is
Close To 2%,” Reuters, January 24, 2014 (www.businessinsider.com/ 88 Alistair Barr, “Bond Insurer MBIA Posts $2.3 Billion Loss; New
icahn-ebay-stake-2-percent-2014-1). Business Drops, But Warburg Deal Closes; Ratings Still a Concern,”
MarketWatch, January 31, 2008 (www.marketwatch.com/story/bond-
72 Greg Bensinger, “Icahn Says He is Prepared for eBay Proxy Fight,” insurer-mbia-posts-fourth-quarter-loss-of-23-billion).
Wall Street Journal, January 23, 2014 (http://online.wsj.com/news/
articles/SB10001424052702303947904579339640166773728). 89 “Pershing Square Upgrades Target Stake To 9.97%, Discloses
Options,” Hedge Fund Trades, December 31, 2007.
73 Schedule 14A, filed February 24, 2014 (www.sec.gov/Archives/
edgar/data/921669/000092846414000016/ebaydfan14a022414. 90 “Pershing Square Upgrades Target Stake To 9.97%, Discloses
htm). Options.”
74 Kharif, “Icahn Sets His Sights on Motorola.” 91 Andria Cheng, “Analysts See Merit in Target’s Proposed Credit-Card
Deal,” MarketWatch, March 13, 2008 (www.telseygroup.com/files/
75 “eBay Inc. Responds to Carl Icahn’s Feb. 24 Open Letter to news/MarketWatch-031308.pdf).
Stockholders,” eBay Inc. website, February 24, 2014 (www.ebayinc.
com/in_the_news/story/ebay-inc-responds-carl-icahn%E2%80%99s- 92 “Target: Credit Card Portfolio Could Sell For $4B,” Dow Jones, March
feb-24-open-letter-stockholders). 12, 2008.
76 Schedule 14A, filed February 26, 2014 (www.sec.gov/Archives/ 93 Ann Zimmerman, “Target to Sell Part of Credit-Card Arm,” Wall
edgar/data/921669/000092846414000018/ebaydfan14a022614. Street Journal, May 6, 2008 (http://online.wsj.com/news/articles/
htm); Schedule 14A, filed February 27, 2014 (www.sec.gov/Archives/ SB121002172162968681).
edgar/data/921669/000092846414000020/ebaydfan14a022714. 94 Nicole Maestri, “Update 3-Ackman Urges Target to Spin
htm); Schedule 14A, filed February 28, 2014 (www.sec.gov/ Off Real Estate Assets,” Reuters, October 29, 2008 (www.
Archives/edgar/data/921669/000092846414000022/ reuters.com/article/2008/10/29/target-pershing-spinoff-
ebaydfan14a022814.htm); “Carl Icahn on Ebay: ‘We Have Not Yet idUSN2948780120081029).
Begun to Fight,’” Shareholders’ Square Table, March 6, 2014 (www.
shareholderssquaretable.com/carl-icahn-on-ebay-we-have-not-yet- 95 Joseph Checkler, “Ackman Unveils Revised Plan for Target REIT IPO,”
begun-to-fight/) and “We Believe Based on Evidence We Have Newly Dow Jones, November 19, 2008.
Uncovered That Donahoe’s Inexcusable Incompetence Cost Ebay
96 “Target Decides Not to Pursue Pershing Square Spin-Off, Says Any
Stockholders Over $4 Billion,” Shareholders’ Square Table, March
Potential Value Is Speculative,” Associated Press, November 21,
10, 2014 (www.shareholderssquaretable.com/we-believe-based-
2008.
on-evidence-we-have-newly-uncovered-that-donahoes-inexcusable-
incompetence-cost-ebay-stockholders-over-4-billion/).

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 15
97 Katherine Burton, “Ackman’s Target Fund Falls 40.1 Percent in 119 Emily Glazer, “Ackman’s Pershing Square to Announce Largest-Ever
January,” Bloomberg, February 6, 2009 (www.bloomberg.com/apps/ Investment,” Wall Street Journal, July 31, 2013 (http://online.wsj.com/
news?pid=newsarchive&sid=al01Y68dX7zU&refer=home). news/articles/SB100014241278873241700045786384703843390
86).
98 “Update 1-Ackman’s Pershing Pushing for Target Board Seats,”
Reuters, February 26, 2009 (www.reuters.com/article/2009/02/26/ 120 William Alden, “Ackman Acquires 9.8% Stake in Air Products,”
target-pershing-idINN2643710420090226). New York Times, July 31, 2013 (http://dealbook.nytimes.
com/2013/07/31/ackman-acquires-9-8-stake-in-air-products/?_
99 Rich Kirchen, “Target Wins Proxy Fight With Ackman, Pershing php=true&_type=blogs&_r=0).
Square,” Business Journal of Milwaukee, May 28, 2009 (www.
bizjournals.com/twincities/stories/2009/05/25/daily23. 121 Maneet Ahuja and Becky Quick, “Activist Investor Ackman Makes
html?page=all). His Biggest Bet Ever,” CNBC, July 31, 2013 (www.cnbc.com/
id/100927114).
100 “Target Corp Announces Final Voting Results For 2009 Annual
Meeting of Holders,” Dow Jones, June 18, 2009. 122 Alden, “Ackman Acquires 9.8% Stake in Air Products.”
101 “Update: Ackman’s Pershing Square Cuts Stake in Target To 4.4%,” 123 “Activist Investor Ackman Builds Nearly 10 Percent Stake in Air
Reuters, August 11, 2009 (www.reuters.com/article/2009/08/11/ Products and Chemicals,” Associated Press, July 31, 2013 (www.wfaa.
target-pershingsquare-idUSBNG6516020090811). com/news/business/217759941.html).
102 Kim Bhasin, “Bill Ackman’s Costly Defeat Marks End of an Era for J.C. 124 David Benoit, “Ackman Returns to Victory With Air Products
Penney,” Huffington Post, August 26, 2013 (www.huffingtonpost. Settlement,” Wall Street Journal, September 26, 2013 (http://blogs.
com/2013/08/26/bill-ackman-jcpenney-stake_n_3818817.html). wsj.com/moneybeat/2013/09/26/ackman-returns-to-victory-with-
air-products-settlement).
103 Joann S. Lublin and Dana Mattioli, “Penney CEO Out, Old Boss Back
In,” Wall Street Journal, April 8, 2013 (http://online.wsj.com/news/ 125 Benoit, “Ackman Returns to Victory With Air Products Settlement.”
articles/SB10001424127887324504704578411031708241800).
126 Sam Kennedy, “Air Products CEO Search Drags On,” The Morning Call,
104 Jeff Macke, “Ron Johnson’s J.C. Penney: Anatomy of a Retail Failure,” April 23, 2014 (http://articles.mcall.com/2014-04-23/business/
Yahoo! Finance, April 9, 2013 (http://finance.yahoo.com/blogs/ mc-air-products-earnings-20140423_1_air-products-electronics-and-
breakout/ron-johnson-jcpenney-anatomy-retail-failure-114635276. performance-materials-mcglade).
html).
127 Hibah Yousuf, “Bill Ackman Scales Back Bearish Herbalife Bet,”
105 Lublin and Mattioli, “Penney CEO Out.” CNNMoney, October 3, 2013 (http://money.cnn.com/2013/10/03/
investing/bill-ackman-herbalife/index.html).
106 Jason D. Schloetzer, Matteo Tonello, and Melissa Aguilar, CEO
Succession Practices: 2014 Edition, The Conference Board, Research 128 Julia La Roche, “Bill Ackman and Carl Icahn Just Brawled on CNBC
Report 1544-14, April 2014. in the Greatest Moment in Financial TV History,” Business Insider,
January 25, 2013 (www.businessinsider.com/bill-ackman-on-
107 Matt Townsend and Lauren S. Murphy, “Ackman With $700 Million cnbc-2013-1).
Loss Quits J.C. Penney’s Board,” Bloomberg, August 13, 2013 (www.
bloomberg.com/news/2013-08-13/j-c-penney-says-ackman- 129 Schedule 13G, filed January 9, 2013 (www.sec.gov/Archives/edgar/
resigned-from-company-s-board.html). data/1180262/000089914013000014/0000899140-13-000014-
index.htm); Schedule 13D filed May 7, 2013 (www.sec.gov/Archives/
108 Hibah Yousuf, “Bill Ackman Takes Huge Loss on J.C. Penney,” edgar/data/921669/000092846413000103/hlfsch13damd4050713.
CNNMoney, August 27, 2013 (http://money.cnn.com/2013/08/26/ htm); and Form 13F, filed August 14, 2013 (www.sec.gov/Archives/
investing/bill-ackman-sells-jcpenney/index.html) and Townsend and edgar/data/1029160/000114036113032845/0001140361-13-
Murphy, “Ackman With $700 Million Loss Quits.” 032845-index.htm).
109 Ian Austen, “Canadian Pacific Railway Clashes With Ackman,” 130 Schedule 13G, filed August 26, 2013 (www.sec.gov/Archives/edgar/
New York Times, January 23, 2012 (http://dealbook.nytimes. data/1052058/000119312513355172/d592779dsc13g.htm).
com/2012/01/03/canadian-pacific-railway-rebukes-ackman/).
131 Schedule 13D, filed November 18, 2013 (www.sec.gov/Archives/
110 Ian Austen, “Ackman Wins Proxy Fight at Canadian Pacific,” New York edgar/data/1052058/000119312513446954/d630205dsc13d.htm).
Times, May 17, 2012 (http://dealbook.nytimes.com/2012/05/17/
canadian-pacific-c-e-o-and-five-directors-step-down/). 132 Lawrence Delevingne, “Ackman to PwC: Herbalife May Get You in
Trouble,” CNBC, September 11, 2013 (www.cnbc.com/id/101026213).
111 Susan Taylor, “Analysis-CP Rail Back-To-Work Order May Hurt
Efficiency Push,” Reuters, May 25, 2012 133 Delevingne, “Ackman to PwC: Herbalife May Get You in Trouble.”
112 Taylor, “Analysis-CP Rail Back-To-Work Order May Hurt Efficiency 134 Julia La Roche, “Bill Ackman Has Altered 40% of His $1 Billion
Push.” Bet Against Herbalife,” Business Insider, October 3, 2013 (www.
businessinsider.com/bill-ackman-repositions-herbalife-short-2013-
113 Gordon Pitts, “Turnaround Ace: Inside the Hunter Harrison Era at CP 10#ixzz2yzgxFSv1).
Railway,” The Globe and Mail, April 24 2014.
135 “Facts About Herbalife Compiled and Hosted by Pershing Square
114 Pitts, “Turnaround Ace.” Capital Management, L.P.: Robin Hood in Reverse,” November 22,
115 Alexandra Stevenson, “Ackman to Sell Part of His Stake in Canadian 2013 (http://factsaboutherbalife.com/robin-hood-in-reverse/).
Pacific,” New York Times, October 24, 2013 (http://dealbook.nytimes. 136 “Bill Ackman on Herbalife, Fannie, Air Products,” Bloomberg TV,
com/2013/10/24/ackman-to-sell-part-of-his-stake-in-canadian- November 22, 2013 (www.bloomberg.com/video/bill-ackman-on-
pacific/). herbalife-fannie-air-products-LfJk3cWuQSyBnWXb5Ttfqg.html).
116 Pitts, “Turnaround Ace.” 137 “Herbalife Ltd. Announces Completion of Re-Audit for Fiscal 2010,
117 Pitts, “Turnaround Ace.” 2011 and 2012 and Filing of Amended Form 10-K/A for Fiscal 2012
and Amended 10-Q/A for the First, Second and Third Fiscal Quarters
118 Pitts, “Turnaround Ace.” of 2013,” Herbalife Ltd. press release, December 16, 2013 (http://
ir.herbalife.com/releasedetail.cfm?ReleaseID=814139).

16 Director Notes The Activism of Carl Icahn and Bill Ackman www.conferenceboard.org
138 Svea Herbst-Bayliss, “Ackman Sticks With Herbalife Short 151 Patrick T. Fallon, “Illinois Attorney General Investigating Herbalife,”
Sale, Promises New Information in 2014,” Reuters, December CNBC, April 17, 2014 (http://www.cnbc.com/id/101593027).
23, 2013 (http://www.reuters.com/article/2013/12/23/
152 “Bill Ackman on Herbalife, Fannie, Air Products,” Bloomberg TV.
us-hedgefunds-ackman-idUSBRE9BJ1B320131223www.
reuters.com/article/2013/12/23/us-hedgefunds-ackman- 153 David Gelles, Michael J. de la Merced, and Alexandra Stevenson,
idUSBRE9BJ1B320131223); and Pershing Square December 23, 2013 “Ackman and Valeant Prepare Unusual Hostile Bid for Maker of
Investor Letter (www.scribd.com/doc/193312081/Pershing-Square- Botox,” New York Times, April 21, 2014 (http://dealbook.nytimes.
December-2013-Investor-Letter). com/2014/04/21/william-ackman-and-drug-maker-prepare-bid-for-
botox-maker/?_php=true&_type=blogs&_r=0).
139 “Pershing Square December 23, 2013 Investor Letter” (www.scribd.
com/doc/193312081/Pershing-Square-December-2013-Investor- 154 Gelles, de la Merced, and Stevenson, “Ackman and Valeant Prepare
Letter). Unusual Hostile Bid for Maker of Botox.”
140 Michael S. Schmidt, Eric Lipton, and Alexandra Stevenson, “Staking 155 Gelles, de la Merced, and Stevenson, “Ackman and Valeant Prepare
$1 Billion That Herbalife Will Fail Then Lobbying to Bring It Down,” Unusual Hostile Bid for Maker of Botox.”
New York Times, March 9, 2014 (www.nytimes.com/2014/03/10/
business/staking-1-billion-that-herbalife-will-fail-then-ackman- 156 Nicolas Van Praet, “Why Bill Ackman’s Cross-Border Crush on Valeant
lobbying-to-bring-it-down.html?hp&_r=0). Isn’t Sitting Well With Investors,” Financial Post, April 23, 2014
(http://business.financialpost.com/2014/04/23/why-bill-ackmans-
141 Schmidt, Lipton, and Stevenson, “Staking $1 Billion That Herbalife cross-border-crush-on-valeant-isnt-sitting-well-with-investors/).
Will Fail Then Lobbying to Bring it Down.”
157 Gelles, de la Merced, and Stevenson, “Ackman and Valeant Prepare
142 Schmidt, Lipton, and Stevenson, “Staking $1 Billion That Herbalife Unusual Hostile Bid for Maker of Botox.”
Will Fail Then Lobbying to Bring it Down.”
158 Gelles, de la Merced, and Stevenson, “Ackman and Valeant Prepare
143 Schmidt, Lipton, and Stevenson, “Staking $1 Billion That Herbalife Unusual Hostile Bid for Maker of Botox.”
Will Fail Then Lobbying to Bring it Down.”
159 Gelles, de la Merced, and Stevenson, “Ackman and Valeant Prepare
144 “Markey Calls for Investigation into Herbalife Business Practices,” Unusual Hostile Bid for Maker of Botox.”
press release, website of Sen. Ed Markey (D-Mass.) January 23, 2014
(www.markey.senate.gov/news/press-releases/markey-calls-for- 160 Van Praet, “Why Bill Ackman’s Cross-Border Crush on Valeant Isn’t
investigation-into-herbalife-business-practices). Sitting Well With Investors.”

145 “Herbalife in China Event,” Facts About Herbalife Compiled and 161 Van Praet, “Why Bill Ackman’s Cross-Border Crush on Valeant Isn’t
hosted by Pershing Square Capital Management, L.P. website, March Sitting Well With Investors.”
11, 2014 (http://factsaboutherbalife.com/webcast/). 162 Anjuli Davies, Sophie Sassard, and Olivia Oran, “Exclusive-Allergan
146 Svea Herbst-Bayliss, “Ackman Accuses Herbalife of Eyes New Takeover Bid for Shire –Sources,” Reuters, April 28, 2014
Breaking Laws in China,” Reuters, March 12, 2014 (www. (www.reuters.com/article/2014/04/29/us-shire-allergan-exclusive-
reuters.com/article/2014/03/12/us-herbalife-ackman- idUSBREA3R16Y20140429).
idUSBREA2A1VC20140312). 163 Rod Nickel and Caroline Hummer, “UPDATE 2-Valeant to Boost
147 Herbst-Bayliss, “Ackman Accuses Herbalife of Breaking Laws in Allergan Bid in Move to Crack Top Drugmaker Ranks,” Reuters, May
China.” 13, 2014 (www.reuters.com/article/2014/05/13/allergan-offer-
idUSL3N0NZ4EU20140513).
148 Sara Germano and Brent Kendall, “Federal Trade Commission Starts
Herbalife Probe,” Wall Street Journal, March 12, 2014 (http://online. 164 Valeant to Discuss Allergan Proposal at Investor Meeting and
wsj.com/news/articles/SB10001424052702303730804579435303 Webcast on May 28, 2014 at 8:00 A.M. ET,” Valeant press release,
342418222?KEYWORDS=herbalife&mg=reno64-wsj). May 20, 2014 (http://valeant.q4web.com/investor-relations/2014/
default.aspx).
149 “Herbalife Comments on FTC Inquiry,” Herbalife press release
March 12, 2014 (http://ir.herbalife.com/releasedetail. 165 Useem and Carey, “What Smart Boards Do When Investors Knock.”
cfm?ReleaseID=832283).
150 Dan McCrum and Kara Scannell, “Criminal Probe Launched into
Herbalife,” Financial Times, April 11, 2014.

www.conferenceboard.org Director Notes The Activism of Carl Icahn and Bill Ackman 17
About the Authors About th Series Director
Richard Lee is a research assistant for the Center for Financial Matteo Tonello is managing director of corporate leadership at
Markets and Policy at Georgetown University’s McDonough School The Conference Board in New York. In his role, Tonello advises
of Business. The center fosters discussion on critical policy and members of The Conference Board on issues of corporate
regulatory issues related to global financial markets. The center governance, regulatory compliance, and risk management. He
works to host dialogues, conferences, and events involving industry, regularly participates as a speaker and moderator in educational
academia, and policymakers; provide a non-partisan forum for programs on governance best practices and conducts analyses
informed discussion; sponsor relevant and impactful research on and research in collaboration with leading corporations, institutional
key global market issues; and engage students interested in finance. investors and professional firms. He is the author of several publica-
tions, including Corporate Governance Handbook: Legal Standards
Jason D. Schloetzer is an assistant professor of accounting at and Board Practices, the annual U.S. Directors’ Compensation
the McDonough School of Business, Georgetown University. His and Board Practices and Institutional Investment reports, and
research focuses on the monitoring and control mechanisms used Sustainability in the Boardrooom. Recently, he served as the co-chair
to manage the modern organization. He has published in leading of The Conference Board Expert Committee on Shareholder Activism
academic accounting journals, including Journal of Accounting and on the Technical Advisory Board to The Conference Board Task
Research and The Accounting Review, serves on the editorial Force on Executive Compensation. He is a member of the Network
board of The Accounting Review, and has been named a “Person for Sustainable Financial Markets. Prior to joining The Conference
to Watch” by the National Association of Corporate Directors. For Board, he practiced corporate law at Davis Polk & Wardwell. Tonello
The Conference Board, he has authored Global Trends in Board- is a graduate of Harvard Law School and the University of Bologna.
Shareholder Engagement, Preparing for a Succession Emergency:
Learning from Unexpected CEO Departures, Corporate Misconduct About the Executive Editor
and the Market for Directorships, Retaining Former CEOs on the
Melissa Aguilar is a researcher in the corporate leadership
Board, and co-authors with Matteo Tonello and Melissa Aguilar
department at The Conference Board in New York. Her research
the CEO Succession Practices annual research report. Schloetzer
focuses on corporate governance and risk issues, including
received his doctorate from the Joseph M. Katz Graduate School of
succession planning, enterprise risk management, and shareholder
Business, University of Pittsburgh.
activism. Aguilar serves as executive editor of Director Notes, a
bimonthly online publication published by The Conference Board
About Director Notes for corporate board members and business executives that
Director Notes is a series of online publications in which The covers issues such as governance, risk, and sustainability. She is
Conference Board engages experts from several disciplines also the author of The Conference Board Proxy Voting Fact Sheet
of business leadership, including corporate governance, risk and co-author of CEO Succession Practices. Prior to joining The
oversight, and sustainability, in an open dialogue about topical Conference Board, she reported on compliance and corporate
issues of concern to member companies. The opinions expressed governance issues as a contributor to Compliance Week and
in this report are those of the author(s) only and do not necessarily Bloomberg Brief Financial Regulation. Aguilar previously held a
reflect the views of The Conference Board. The Conference Board number of editorial positions at SourceMedia Inc.
makes no representation as to the accuracy and completeness
of the content. This report is not intended to provide legal advice About The Conference Board
with respect to any particular situation, and no legal or business The Conference Board is a global, independent business member-
decision should be based solely on its content. ship and research association working in the public interest. Our
mission is unique: to provide the world’s leading organizations with
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