“Shareholder Activism” Has Gone Too Far at General Motors

We used to call them “greenmailers.” Guys like Carl Icahn. They would take positions in companies and then agitate for changes in management that would quickly make them more money. Then they would sell out. They were parasites.

These days, the greenmailers have embraced the terminology of the shareholder activist movement. They talk about “unlocking value” for all shareholders, but the name of the game is the same: they’re looking for quick profits.

Greenlight Capital is playing this game at General Motors, which has its annual meeting on June 6 when shareholders will vote yea or nay on Greenlight’s proposal. Greenlight is suggesting that GM create a new class of stock called “dividend shares.” Holders of these shares would enjoy a fixed dividend paid to them in perpetuity but holders of common stock would not receive dividends. There is no logical reason for such a major company to invent a new class of shares, as CEO Mary Barra argues in the company’s proxy statement. “The key risks your Board found in the proposal include: no positive effect on the Company’s underlying business or cash flows and, therefore, entirely speculative valuation impact.” In other words, it’s pure financial manipulation to benefit Greenlight.

To add insult to injury, the rules have now changed so that GM has to include Greenlight’s proposals in its proxy and on ballots that shareholders use to vote. It used to be that a company did not have to do that, but now the rules have shifted to the point that a company has to pay to inform its own shareholders about stupid ideas from the barbarians at the gate.

This stuff has gone way too far. ┬áIt’s time for common sense to take hold. GM has fought back from bankruptcy and is now trying to navigate the highly complex waters of autonomous driving, ride-sharing services and new energy-efficient power trains. They don’t need the distraction of dealing with the Greenlights of the world.


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