Boardrooms Berated For A Half-Century
An aggressive, innovative investor takes on the obstinate boss of a big retailer; publicity campaigns are organised to win the hearts, minds and proxy votes of shareholders and employees; each side hurls a battery of accusations; and, of course, the trigger for the dispute is a stock that seems to be going nowhere.
It sounds like the latest in a series of headline-grabbing instances of hedge-fund activism in Europe and the US in the past year. But this proxy battle - between Louis Wolfson, a Florida-based investor, and Montgomery Ward, the mail-order company run by the octogenarian Sewell Avery - was joined more than half a century ago.
The affair was part of a deluge of challenges to US boardrooms in the 1950s by the original corporate raiders - men such as Wolfson, Thomas Mellon Evans and Leopold Silberstein, household names in their day - who recognised the potential to unlock shareholder value after two decades of listless performance and were prepared to agitate to achieve those ends.
"There's been a heavy influence by certain wealthy investors for a long time - the 19th century railroad raiders, power brokers like J.P. Morgan - but the first real activism came with these men in the late 1940s and 1950s," says Richard Sylla, a market historian at New York University.
From the end of the second world war to 1954, Avery ran Montgomery Ward as if another depression were imminent - hoarding cash, closing stores and firing nine vice-presidents who questioned his strategy. Profits rose a mere 21 per cent in a decade, compared with 230 per cent growth at Sears, Roebuck & Co. Declaring the company "a glaring and notorious example of private enterprise in reverse gear", Wolfson bought 6.5m shares and launched a proxy fight.
...
Montgomery Ward was hardly alone in the agitation of the 1950s. Bosses at Pratt & Whitney and Alleghany came under fire. So did Twentieth Century Fox - where pampered executives had unworthy nephews on the payroll and steam rooms and masseuses in the boardroom on the company dime.
The protesting investors were accused of raiding and "proxyteering".
...
Indeed, Wall Street in 1954 finally regained its 1929 peak, beginning a bull run that lasted until the late 1960s. But the original agitators were forgotten by the early 1980s, when Carl Icahn, T. Boone Pickens and a new breed of voluble investor came along. Nonetheless, knowingly or not, today's activists are still borrowing heavily from the playbook written by Wolfson and his ilk.
It sounds like the latest in a series of headline-grabbing instances of hedge-fund activism in Europe and the US in the past year. But this proxy battle - between Louis Wolfson, a Florida-based investor, and Montgomery Ward, the mail-order company run by the octogenarian Sewell Avery - was joined more than half a century ago.
The affair was part of a deluge of challenges to US boardrooms in the 1950s by the original corporate raiders - men such as Wolfson, Thomas Mellon Evans and Leopold Silberstein, household names in their day - who recognised the potential to unlock shareholder value after two decades of listless performance and were prepared to agitate to achieve those ends.
"There's been a heavy influence by certain wealthy investors for a long time - the 19th century railroad raiders, power brokers like J.P. Morgan - but the first real activism came with these men in the late 1940s and 1950s," says Richard Sylla, a market historian at New York University.
From the end of the second world war to 1954, Avery ran Montgomery Ward as if another depression were imminent - hoarding cash, closing stores and firing nine vice-presidents who questioned his strategy. Profits rose a mere 21 per cent in a decade, compared with 230 per cent growth at Sears, Roebuck & Co. Declaring the company "a glaring and notorious example of private enterprise in reverse gear", Wolfson bought 6.5m shares and launched a proxy fight.
...
Montgomery Ward was hardly alone in the agitation of the 1950s. Bosses at Pratt & Whitney and Alleghany came under fire. So did Twentieth Century Fox - where pampered executives had unworthy nephews on the payroll and steam rooms and masseuses in the boardroom on the company dime.
The protesting investors were accused of raiding and "proxyteering".
...
Indeed, Wall Street in 1954 finally regained its 1929 peak, beginning a bull run that lasted until the late 1960s. But the original agitators were forgotten by the early 1980s, when Carl Icahn, T. Boone Pickens and a new breed of voluble investor came along. Nonetheless, knowingly or not, today's activists are still borrowing heavily from the playbook written by Wolfson and his ilk.