Sure, we’ll have a few lively BoD battles, as both the established activist investors and a few newer upstarts get involved.

And, some ongoing activism and corporate governance efforts will continue.

Yet, we think that significant action, regulatory and otherwise, will likely wait until 2014. But, shareholder votes in 2013 will matter more than ever, because of changes in proxy advisor policies.

Some Budding Activist Situations

While no one can predict with much accuracy which activist investors will target which companies, we already know of a few situations worth following:

1. ❖Best Buy, whose founder wants to take the struggling retailer private.
   

2. ❖Trian Partners’ Nelson Peltz disclosed a significant stake in Danone, the French yogurt maker, at the Invest For Kids conference in November 2012.
   

3. ❖Carl Icahn owns about 10% of Netflix, and has started to agitate for a sale
   

4. ❖Bill Ackman’s Pershing Square still owns its $2 billion stake in Procter & Gamble.
   

Some Budding Activist Investors

A few newer, smaller, and feisty activist investors got some decent traction in 2012, so we expect them to continue their great work in the coming year

1. ❖Meson Capital: Ryan Morris became BoD Chair at two public companies in 2012, attracting attention from Bloomberg Businessweek and no doubt from potential LPs.
   

2. ❖Furlong Financial: Dan Rudewicz, financial analyst and also a law student, submitted some of the better proxy access proposals in 2012.
   

3. ❖Privet Fund: a newer fund, or at least newer to activist investing, run by Ryan Levenson, with at least four activist situations in 2012 that will continue this year.
   

Governance Improves Apace

Efforts to declassify BoDs will continue, as the Shareholder Rights Project under the able leadership of Harvard Law professor Lucian Bebchuk targets another few dozen companies. These efforts follow a successful start in 2012.

On the other hand, proxy access efforts will likely move much more slowly. Many investors continue to favor non-binding shareholder proposals, rather than binding bylaw amendments, that companies can easily circumvent or just ignore.

Regulatory Changes Will Wait, Though

Two significant regulatory efforts began in 2010 and 2011, but made no progress since then.

The SEC first solicited input on its “proxy plumbing” reforms in 2010. It received dozens of comment letters at the time, and has since sat on the project. And, in 2011 the SEC received a petition seeking changes in the shareholding disclosure rules and thresholds.

The SEC has some business to work out, including recruiting new leadership. But, with the 2012 election out of the way, we expect progress on these (and maybe other) initiatives in 2014, if not before.

Vote Now for Changes in 2014!

Yet, we note one potentially significant development in the coming year. Proxy advisor ISS will strengthen how it opposes directors and entire BoDs that fail to act on shareholder proposals that receive a majority of shareholder votes. Currently, ISS opposes directors pursuant to a relatively lax definition of “majority of shareholder votes”. Beginning in 2014, it will tighten this definition, so that it will oppose any BoD that fails to act on a proposal that receives a majority of votes cast in 2013. So, voting on shareholder proposals this year (2013) can have a significant impact on BoD elections next year (2014).

Dates and Events in 2013

Activist Investor Conference - January 22, New York City

Active-Passive Investor Summit - April 22, New York City

Value Investing Congress - May 6-7, Las Vegas; October in New York City

Invest For Kids - early November, Chicago

Activist Insight Launches

Finally, a new service and newsletter launched late in 2012, and should get underway in full in 2013. Activist Insight provides a comprehensive database of activist situations and activist investment funds, with the additional feature of estimates of fund performance based on disclosed holdings. They also have a monthly newsletter. Both are worth a look.

As always, we look forward to working with our friends and colleagues in what could become an interesting year.