Brian Rogan had good reason to be upset. He awoke at his home on Long Island on July 24 to discover that a group of animal rights activists had been hard at work on his sailboat during the night. With 20 holes drilled in the side, the 30-footer had been cut loose and pushed out to sea.
What had Rogan done to deserve the pirate attack? As president of the capital markets division at the Bank of New York, he was just one more victim targeted for his association with Huntingdon Life Sciences. The Bank of New York acts as the depositary bank for the British-based contract research laboratory and, despite continual pressure from activists, remains steadfast in its resolve to continue handling the company’s ADR program.
Testing times
Huntingdon is back in the headlines as the company finds itself under renewed pressure in the US market. At the time of going to press it was in the process of delisting its shares in the UK and restructuring itself under a new US parent, Life Sciences Research.
Huntingdon first hit the headlines in 1997 when a Channel 4 TV documentary in the UK revealed tales of test animal abuse. Taken to court and heavily fined, the company claims to have cleaned up its act but it remains firmly in the sights of the Stop Huntingdon Animal Cruelty (SHAC) campaign. Few admire SHAC’s tactics but there’s little doubt its campaign has been effective. Aided by the internet, it has gone global to target the company’s finances as a means of achieving its ultimate goal: closing Huntingdon down. And it nearly succeeded. The pressure became so intense last January that Huntingdon was only a couple of days away from bankruptcy as the Royal Bank of Scotland refused to renew a £22 mn loan that had expired the previous August. An anonymous investor – later revealed as US-based Stephens Inc – stepped in at the last minute to extend credit to the company.
The activists responded with a baseball bat attack on Huntingdon’s managing director, Brian Cass, outside his home.
Many other institutions have not been so resolute as Stephens and the Bank of New York. With employees and directors targeted by demonstrators at home and work, the list of companies ‘choosing’ to sever links with Huntingdon has grown apace. Phillips & Drew was a major shareholder but sold its stake when bomb threats were made. HSBC and Barclays stopped holding nominee accounts for Huntingdon investors after receiving threatening letters. To be fair, Winterflood Securities, a small UK-based market-maker, stuck it out longer than most but when directors and traders were threatened with violence in their own homes, they withdrew their services in April last year. Dresdner Kleinwort Wasserstein and Charles Schwab Europe rapidly followed and now the stock has collapsed from a high of 27.5p in early 2000 to around 3.5p today.
Yours, disgusted
Andrew Hawkins, director general of the UK’s Investor Relations Society, is disgusted with the ease with which Huntingdon was dropped by so many City institutions. ‘The thing that concerned me was that nobody seemed to be standing up to what looked like a burgeoning move to try and bring business to a halt. It is entirely appropriate for the IR Society to speak up where investors are being attacked.’ Hawkins was moved to write to the Financial Times voicing his concern and notes that if activists can nearly succeed in shutting down one listed company because they don’t like its activities, what’s to stop them moving on to another target for different reasons? ‘It might be Huntingdon today, GlaxoSmithKline tomorrow and then onto the supermarkets on the grounds that they sell meat.’
The unfortunate truth is that had it been a large blue chip then institutions would have been less likely to run scared quite so quickly. A Huntingdon spokesman, who requests his name remains out of print, points out that activists usually target much bigger companies which have the resources and backing to weather the storm. ‘I believe it’s the first time that a smaller, mid-size company has been targeted in this way,’ he says, recognizing that there was little financial incentive for City institutions to stay on side once the threats became personal.
‘I don’t blame them in some respects. Believe me, it’s tough, especially with the death threats. The two institutions that have been the most resilient have not been British. Let’s just say that some of the responses were disappointing.’ Senior directors of Stephens Inc and the Bank of New York were somewhat protected on the other side of the Atlantic. But London employees were in the firing line and, as Brian Rogan discovered, the SHAC intimidation campaign is global. Neither institution would talk on the record but sources suggest that both feel there is a need to show a stronger resolve in the face of such protests. The Bank of New York has resorted to the courts and recently gained a legal injunction to shut down SHAC’s www.bonykills.com site.
Protected parties
US institutions and private investors have more legal and regulatory protection than their UK counterparts, which might explain why the bulk of Huntingdon’s institutional ownership is now in the US.
The spokesman also points out that it is much more difficult for the activists to gain access to the home addresses of individual investors in the US, yet in the UK all it took was a visit to the company registrars. In March 2000 SHAC sent a letter threatening picket lines to Huntingdon’s 1,700 UK private investors. Hundreds sold out of the stock immediately. David Braybook, a 70-year-old pensioner who chose not to sell, found protesters outside his home near the Huntingdon HQ holding up pictures of beagle puppies.
After the campaign the UK government strengthened the Criminal Justice Act, allowing police to respond to intimidating mail and e-mail to staff, investors and banks; and bringing UK law more into line with the US. Initially the UK government was reluctant to get involved but it later took the unprecedented step of providing Huntingdon with an account at the Bank of England when other banks withdrew their services.
A debate continues to rage over the best means of protecting companies or shareholders from activists while ensuring transparency and freedom of information. In early October the UK Department of Trade and Industry (DTI) announced proposals that would allow company directors to keep their addresses secret if they can show they are ‘at serious risk of violence or intimidation.’ Greg Avery, press spokesman for SHAC, is scathing about the attempts to keep directors’ addresses secret. ‘Anyone who has spent any time at Companies House [the UK registry for companies] will realize that most directors don’t give their proper addresses in any case. Most of the information we work on isn’t listed anywhere and the campaign has been incredibly successful.’
Despite such comments, the DTI’s proposals have been welcomed by the BioIndustry Association, which has been actively campaigning for such protection. Still, the protection of shareholder privacy and keeping other institutions under wraps is a more thorny issue. Early last year it seemed the UK’s Financial Services Authority had agreed to let Huntingdon set up a corporate nominee service itself with a similar plan to protect brokers. A source at the FSA denies such an arrangement, noting that it was up to the regulator to change its rules to approve or deny such a scheme. ‘It doesn’t fall within our remit and would be up to each company to work out with their lawyers.’
Privacy & transparency
The Huntingdon spokesman confirms that situation and says the company is continuing its discussions with the FSA, the exchanges and other interested parties to improve the situation without reducing transparency. Brian Mairs, head of information at the Association of Private Client Investment Managers, says, ‘The solution has to be one that is transferable to other situations as well. There is a will to get it sorted quickly but there are very complex issues involved. These groups are well structured and incredibly well advised.’
Author of Managing Activism (2001) Denise Deegan, agrees. She suggests activist organizations such as SHAC are a growing threat to all companies and that crisis management plans need to be in place early. ‘SHAC has been most effective at targeting a company financially,’ says Deegan. ‘Activists learn from each other and are beginning to use the same techniques. Communication with these groups has to be at an early stage.’ Unfortunately, Deegan believes it may be too late for Huntingdon to fully rescue the situation. Not surprisingly, the Huntingdon spokesman does not agree but does warn other companies: ‘These tactics could be rolled out against anybody.’
