Wednesday, October 31, 2007

Cabbage Night

The morning before Halloween -- usually a good day to see toilet paper hanging from trees, since it's the morning after what we used to call "cabbage night."

I took a bit of a walk this morning, and saw only a couple examples of such youthful enterprise. As my brother and walking partner explained, the great thing about TP is that it dissolves with a couple of rains or even a couple of frosts. The vandals get to feel they've gotten away with something, and the homeowners don't have to work very hard at a clean-up.

All of this is by analogy pertinent to the matter I've been discussing all week, the rebuff by BEA Systems of Oracle's effort to buy their equity, and Icahn's unhappiness at that.

For when a large shareholder is unhappy, one of the more amusing ways in which he can vent that unhappiness is with a letter to the board of directors, and the required 13d filing of that letter with the SEC. The point of these letters isn't that the directors should read it -- but that the SEC will post it on its website and the rest of the world can read it. It's like the TP on that tree in your lawn: it isn't there for your benefit so much as for that of passers-by. And although it may signal coming struggles, the 13D is in itself harmless enough, disappearing after a couple of good rains.

Icahn's recent letter to the board of BEA, as you can discover for yourself from the SEC site (or just read it here -- I'll mine that site so you don't have to) takes a stern tone:

"You should have no doubt that I intend to hold each of you personally
responsible to act on behalf of BEA's shareholders in full compliance with the
high standards that your fiduciary duties require, especially in light of your
past record. Responsibility means that SHAREHOLDERS SHOULD HAVE THE CHOICE
whether or not to sell BEA. BEA belongs to its shareholders not to you."

Caps in original.

I have to say: there are other activist investors who write this sort of letter with a good deal more panache. Robert Chapman has written some classics. He once wrote to the directors of one of the companies in his portfolio: "In essence, you should live and breathe under the cloud that your past failures have subjugated you into a state of perpetual audit."

That's the spirit!

1 comment:

Leo Wong said...

We used to drive by a TP tree on our way to our daughter's school. My daughter thought she was clever by calling it a "toilet tree", but I thought I was more clever by calling it a "wiping willow". Anyway, Proxy Partisans as well as Pragmatism Refreshed now have links in your Barzun tribute.