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Response to Wall Street Journal article of July 22, "Icahn Ends Feud with Yahoo, Setting up an Uneasy Truce."

Historians will marvel at why the press won’t write more about the egregious abuses and mismanagement at corporate boards in America and the Wall Street Journal article of July 22 is a good example of this abdication.

The article states that I often exert an "outsized influence" as a board member, implying that this is somehow reckless and counter to the best interests of stockholders.

In fact, just the opposite is true. Major shareholders, particularly those who serve on boards, should actively question decisions a company makes and not simply be a rubber stamp for corporate managements, as all too many are.

Many business journalists don’t seem to get this important point and I have never understood why, particularly in this post-Enron-Adelphia-WorldCom era. In my view, much of the nation’s business press fails in this important role. Disturbingly, many in the press don’t seem to care. 

Are they intimidated by legions of public relations executives who spend shareholder money to defend bad managers and bad management decisions? Are they worried their access to management will dry up if they give too much ink to corporate critics? Are they beholden to the corporate interests of their parent companies, the media conglomerates? Or is it just easier to toe the company line?

The article quotes one unnamed executive at a company I targeted as saying I am more successful at investing than “strategizing or managing” and executing moves that will "close the value gap."

Again, this misses an important point: I have never claimed to be a great manager, even though I run a very successful investment fund group that employs dozens of professionals. 

My job is not to micromanage the companies in which I invest, but to choose the right managers who can effectively design and execute a successful strategy and hold these managers accountable if they do not perform. This is what I have attempted to do at the companies I own outright and others in which I invest.  As many of you know, especially with the companies I control, these companies have turned out to be extremely successful and financially rewarding for all stockholders. 

All these companies have one thing in common: they were underperformers whose share price or asset value didn’t reflect their true value. Usually this is due to poor management. 

The fact that the manager quoted in this article chooses to remain unnamed is telling: why would this person call attention to an inability to strategize, manage or close the value gap at his or her own company?

The article cites Blockbuster as an example of how I may approach Yahoo as a board member. But instead of pointing out the successes at Blockbuster as a result of my own and others’ efforts, (or even talking to the company), it casts my management style in a negative light. 

I launched a successful proxy fight for board seats on Blockbuster at a time when the company was demonstrably failing – not only losing money but also losing customers to competitors like Netflix and video-on-demand. There was no reason why a competent management team could not change strategy to address these new business challenges. Since joining the board three years ago, I actively engaged management to reverse these disturbing trends. The results have been extremely promising. The article points out that some managers left, but why is this a bad thing as the article seems to suggest? If the horse can’t win, why put it in a race?   

At my urging a new top management team was brought in. The new management headed by CEO Jim Keyes, has saved approximately $100 million in operating costs over the past year, a laudable result. But this salient fact was left out of the article. It is interesting that the Wall Street Journal never even bothered to call Mr. Keyes.

In addition, I stopped the Blockbuster purchase of MovieLink, which was approved by management to be purchased for over $50 million. Just four months later, Blockbuster bought the same company for only $5 million.  Again, the newspaper didn’t point this out. 

Keyes joined just after Blockbuster posted a 2007 second quarter operating loss of $29.8 million. This year, the picture has dramatically changed, with the company produced adjusted EBITDA of $114.5 million in the first quarter and has guided that it expects 2008 adjusted EBITDA of $290 million to $310 million. The numbers speak for themselves. 

There are a number of major cost-saving moves that I initiated, including leading a campaign to block a $50 million-plus severance payment for the former CEO, which was really outrageous. But where is the outrage on the part of the media on this? 

There are many examples of this "pay for failure" mentality that pervades American business. One need look no further than Merrill Lynch or Home Depot for examples of this egregious trend. It is eroding our nation's economic hegemony and everyone – not just stockholders – should be up in arms to try to change this.

My agenda is simply this: I look to hold managements accountable. I don't micromanage or question every decision they make. I look to install the right manager and ensure they meet goals, whether I am on a board or simply a stockholder. There are too many boards who fail in this critical responsibility.

It was heartening that the Journal called me a genius at investing, but the truth is, many companies are so badly managed that it doesn’t take a genius to make money by going into them and cleaning them up.

Through my involvement in failing or lackluster companies over the years, shareholders have fared extremely well. These facts speak for themselves.

Not all of my investments work out, but my record demonstrates that shareholder activism is a viable – and essential – strategy. I applaud those who undertake it, providing it is done intelligently and not recklessly or irresponsibly. 

It will be a good day for the American media when activism at faltering companies is applauded and not misunderstood or cast in a negative light - as it all too often is.


I wholeheartedly agree with your assertion about the media casting shareholder activists in a negative light. The very fact that almost everytime you are mentioned in a news story you are introduced as "corporate raider Carl Icahn" pretty much says it all and shows the inherent bias of the media towards public companies. In light of the excessive greed and waste of corporate assets at the expense of shareholders that we have witnessed at the executive level in the past decade, it is a wonder to me that Carl Icahn and other notable activists are not depicted in the media as "shareholder value saviors."

The media bias has engrained it in the minds of the public-at-large that shareholder activists are the bad guys. I saw firsthand a prime example of this when my doctor friend asked me at dinner one night, "Does representing corporate raiders make it hard for you to sleep at night?"

After I explained to him that we're not the bad guys and that it's my clients who are spending hundreds of thousands of their own dollars on behalf of all of the shareholders in order to hold corporate boards and senior management accountable for awarding excessive compensation packages, adopting poor corporate governance practices, etc. I explained that we give a voice to 'mom and pop' shareholders that would otherwise get brushed to the side and not be given the time of day by corporate i.r. departments if they were to wrtie letters or try to reach out to board members.

I think shareholder activists should team up and form a consortium with the goal of re-casting the image of activists in the eyes of the media. Shareholder activists as the "Robin Hoods of Wall Street that Fight Against Corporate Greed, Waste and Indifference To Protect the Investments of the Everyday Shareholder" as opposed to the "Corporate Raiders."

During the last 25 years, I've had 4 roles, FD,Venture Capitalist,Investment Banker and most recently CEO of a software group.The quality of management in public companies is a disgrace.Journalists have a great opportunity to ask the killer questions but instead they report history. There is no insight. How many times have you read a business article and thought, why didn't she ask this, challenge that.Taking a more diagnostic approach to reporting would uncover quite quickly the weakness of Board room performance. The billions that have been squandered through inept leadership is staggering. Operationally running a business well, is not complicated but it needs crystal clear analysis of the facts, a really smart strategy and impeccable execution of tactics. Activist hedge funds and journalists could achieve so much more, working together.

While I don't claim to represent all business journalists and agree that far too many of my fellow journalists tend to be less than skeptical, shall we say, particularly when it comes to earnings and senior management, there are a few bright spots.

I'd like to think that my site, footnoted. org, which looks at the things public companies bury in their routine filings, is one of them. The site will turn 5 years old next month and is an experiment in entrepreneurial journalism.

You should also know that this group, which is supported via the Donald W. Reynolds Foundation, is very focused on training business journalists to ask the tough questions.

I totally agree with your statement about journalists and media being afraid to hit corporations where it hurts, and tip toe around the CEO's and management because they are so afraid of losing a contact or trust.

The fact is that if something is going on, the public needs to know about it. It may cost some trust, but if the CEO or President or manager is really committing acts that people won't like, they probably wont be in their position for long anyway.

I would even say that it goes beyond business and journalists are afraid to take on and challenge important people in communities and politics as well.

As an aspiring journalist in college that has a summer internship at the paper in my hometown, I see my co-workers sit back and not challenge community figures from city councilmen to business owners to police.

The consequence is that the newspaper becomes a output for propaganda and not an outlet for news and reporting.

A goal for myself and my career is to challenge an important figure. It is the people who talk and listen to people like you who are ready to challenge figures in power that win the pulitzers, not the people who sit back and allow their newspapers to regurgitate PR and propaganda.

Mr. Ichan, thank you for creating this blog and committing quality time to it. Your passion and reasoning are clear, and the blog is educational for those of us interested in learning.

I truly applaud you, Mr. Icahn, in your efforts to maximize shareholder value. As a young hedge fund manager, I have seen all too well how incompetent lots of top level managers are at American companies- including many CEOs, COOs, and CFOs. I do agree with you when you say that many of these people have terrific social skills and are very likeable. However, being a pleasant person does not automatically qualify one to serve as a top executive at a public company. These are posts intended for the most eligible and intelligent among us- not merely for nice guys. Furthermore, I would like to point out that a board of directors has a very specific purpose: to serve as fiduciaries on behalf of the real owners of the company- the STOCKHOLDERS. I am most appreciative of your efforts, Mr. Icahn, to point this fact out to all those boards that are too "mushy" with the CEOs and are there just to rubber stamp their decisions and collect directors' fees. Additionally, the outrageous instances of CEOs who fail and yet still receive massive payments upon leaving the company which they pummeled to the ground- along with its stock price- will, in time, cease. I am hopeful that investors, the media, politicians, and everyone else will see just how disgustingly wrong this is and we will together rise up and get rid of pay for failure once and for all.

I feel your rally cry.
I feel your point about the media casting activist in a negative light. I can relate about Articles making statements that implies your movements are reckless and counter to the best interests of America...when it is the exact opposite. Just imagine your dilemma a million times fold.

The media conglomerates can make the victim look like the convict and the convict look like the victim... when words with negative connotations are relentlessly placed adjacent to your cause. Instead of pointing out the positive, which far outweighs the negative, they egregiously choose the latter.

It is a pleasure to see someone afforded to use their time and resources to fight back.

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