In military terminology, ‘asymmetric warfare’ occurs when a small band of insurgents are able to hamstring a much larger force by employing radically different tactics and weapons.
In recent months, activist hedge fund managers have been employing asymmetric warfare in their campaigns against what they view as entrenched management.
Their weapons are words: barbed advertisements and confrontational open letters to shareholders, sarcastic 13D filings and biting television interviews. And in virtually every instance, those being attacked – usually Ceos, but sometimes IR professionals – find themselves unable to respond in kind.
As part of his campaign to gain a board seat at Motorola, Carl Icahn, the septuagenarian former corporate raider turned hedge fund manager and shareholder activist, took out a full-page advertisement in the Wall Street Journal, headlined: ‘Motorola has stumbled, and stumbled badly.’
Lamenting a ‘critical failure in oversight and leadership that must be addressed,’ Icahn characterized some of Ceo Ed Zander’s remarks as sounding ‘like something straight out of Alice in Wonderland.’
Daniel Loeb, the hedge fund manager whom novelist Tom Wolfe recently dubbed ‘the Dante of the 13D’, is similarly known for his acid-dipped pen. Attacking one Ceo as ‘one of the most dangerous and incompetent executives in America,’ he suggested that the unfortunate target should ‘step down as Ceo and director so that you can do what you do best: retreat to your waterfront mansion in the Hamptons where you can play tennis and hobnob with your fellow socialites.’
In asymmetric warfare, targets are frequently inhibited from fighting fire with fire. The likelihood of a chief executive officer or an investor relations professional engaging in ad hominem attacks or sarcasm is very low. It simply isn’t done. After all, a different set of standards applies to officers of publicly held companies.
Accountable to a range of stakeholders – shareholders, employees, directors, regulators, the media – they are expected to act as statesmen and stateswomen. By contrast, hedge fund managers, who are accountable only to a small number of private investors, are frequently celebrated for being rabble-rousers.
Sure, the media used to eat up Jack Welch’s tough talk in the 1990s, and for a brief period ‘Chainsaw’ Al Dunlap won plaudits for his take-no-prisoners style. By and large, however, we like our Ceos and IR professionals to measure their words carefully and to be kind, gentle and courteous.
When they veer from the straight and narrow, it’s usually a sign that something has gone horribly wrong. The beginning of the end for Enron may have come when then-Ceo Jeffrey Skilling, speaking on a conference call, called an analyst a two-syllable synonym for rear end.
Should corporate executives who interact with tough-talking investors take a lesson from Skilling? Certainly not. But as they face today’s feisty band of insurgents, they’ll have to develop some new rhetorical tactics.
