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Companies impose new disclosure rules on activists
by Tina Kells | September 5, 2008 at 01:04 pm | 97 views | add comment | 0 recommendations
Several key corpoartions announced today that they would require more detailed disclosure from politically or socially active shareholders. Citing insufficient securities laws, the move was made amidst speculation that conflict of interest could motivate some shareholders to actually drive the value of a stock down.
U.S. companies are demanding new disclosures from activist shareholders in an effort to better defend themselves against investors waging high-pressure campaigns for corporate change.
The moves by JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), Sara Lee Corp (SLE.N: Quote, Profile, Research, Stock Buzz), Juniper Networks Inc (JNPR.O: Quote, Profile, Research, Stock Buzz) and others come as Corporate America faces growing challenges from shareholder agitators seeking to shake up boards of directors and put forward ballot resolutions on how businesses are run.
The new rules are meant to unmask the true size of dissident investors' interests in publicly traded companies.
Complicated financial instruments such as derivatives, short positions or hedging transactions can drastically impact stock value. When the actions of a block of shareholders are politically motivated it can mean inaccurate manipulation of a company's market value.
"It's an issue which has been getting an increasingly high profile," said Claudia Allen, a partner at law firm Neal Gerber Eisenberg LLP who advises companies on corporate governance matters. "We are now in a situation where hedge funds and others can obtain the right to vote when they don't have the same economic interests as other stockholders."
Though they can not pass legislation, corporations do have the power to manage the behaviour of shareholders through bylaws and rules. Experts expect that it is just a matter of time before these new rules will be challenged in the courts.
September 5, 2008 at 01:04 pm by Tina Kells, 97 views, add comment
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